Unemployment has hit record lows, and South Africa is facing its worst recession in 90 years according to Finance Minister Tito Mboweni’s revised budget speech on Wednesday, 24 June 2020

So it comes as no surprise to hear that South Africans believe the lockdown period (from level 5 to level 3) has had more of a devastating impact on their finances than the coronavirus itself.

DebtSafe’s South Africans’ Financial Reality During Lockdown survey revealed where consumers are cutting costs (daycare fees, TV subscriptions), and what their financial priorities are (food, water, electricity).

According to DebtSafe, of the 1 240 consumers who took part in the survey, 74,72% said the lockdown had had a negative impact on their finances, while 53% said it had impacted their emotional well-being, and 48,41% said it had increased their stress levels.

Carla Oberholzer, debt adviser at DebtSafe says consumers viewed the lockdown period as more detrimental to their finances than the Covid-19 pandemic itself.

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However, in contrast, “a greater percentage of respondents (employed or not) consider the Covid-19 pandemic to be more damaging to their state of mind than the national lockdown period.”

Tighten your belts: We could be paying as much as 30% more for food thanks to lockdown

Consumers rated the following 5 items as their top financial priorities:

(NOTE: Consumers were offered an extensive list of options, but the overwhelming majority chose these 5 issues)

  1. Food (94,06%),
  2. Water & electricity (61,63%),
  3. Rent (55,45%)
  4. Data/internet (30,69%) and,
  5. Medical aid (26,49%).

Making drastic cuts

A number of respondents indicated that they had made tough financial decisions over lockdown, and some have stopped paying their:

  • Savings/investments (22,03%),
  • Retail credit/accounts, for example, a clothing account, store card or furniture account (20,7%),
  • Daycare/school fees (18,56%),
  • Credit agreements, such as a credit card, overdraft or personal loan (18,32%), and
  • Pay television/streaming television subscriptions (18,07%).

Do note: 27,23% respondents indicate that their payments are in fact up to date.

More concern for economy than for health

Stats SA’s recent survey, Behavioural and health impacts of the COVID-19 pandemic in South Africa shows that more individuals (93,2%) are concerned about the economy’s downfall while a lower percentage (88,9%) are worried about the health of vulnerable individuals.

This concern was echoed in Mboweni’s budget presentation where he highlighted the burden of debt that was being placed on future generations due to the pandemic. “It could take South Africa to the brink of a sovereign debt crisis if left unchecked,” he said.

“Debt is our weakness,” he noted, adding that out of every tax rand, 21 cents would now go towards servicing debt.

“So today, with an eye on the future, we set out a strategy to build a bridge to recovery. It is eating our children’s inheritance. We need to stop it now!”

“The storm is not over”

“The storm is not over,” warned Mboweni. “But, if we follow the health guidelines and make the right decisions to prepare for a new global reality then, soon enough, the days will grow calmer.”

Mboweni said building a bridge to a future beyond the current lockdown imposed to curb transmissions of Covid-19 would require building “high quality physical bridges, roads, railways, ports and other infrastructure.”

“Infrastructure will be the fly wheel by which we grow the economy,” the finance minister said.

“Just as we have toiled together to manage the pandemic, let us harness this same unity of purpose and build the infrastructure our nation needs. Our efforts to reduce consumption expenditure will also change the composition of spending in the direction of investment.”

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