Load-shedding, political instability and higher food prices shatter consumer finances according to the latest Momentum Consumer Financial Vulnerability Index

South African consumers continued to struggle with their finances in Q4 2022 according to the latest Momentum-Unisa Consumer Financial Vulnerability Index (CFVI). The CFVI decreased from 49.7 points in Q3 2022 to 47.0 points in Q4 2022, the lowest level in 18 months, as consumer spending increasingly exceeded income.

The Momentum-Unisa CFVI is a tool designed to measure the financial vulnerability of South African households, and its data provides an important insight into the country’s overall financial health. With the CFVI on the decline, it is clear that South African consumers are struggling to make ends meet, and further action is needed to alleviate the situation.

Johann van Tonder - Economist and Researcher at Momentum Metropolitan Group Strategy says, “It’s no surprise that South African are struggling with financial pressures as inflation, unemployment and weakening economic growth on a local and global scale take their toll.”

As part of Momentum's Science of Success campaign, the CFVI is produced in partnership with the Bureau of Market Research of Unisa. It is compiled quarterly from the views of key informants (researchers, bankers, insurers, retailers, government, economists, analysts, etc.) who all deal with consumers daily and/or study consumer finances on a continuous basis.

According to the Q4 2022 CFVI, South Africa is facing more risks to consumer finances than ever before, with load shedding, political instability and corruption posing the greatest threats. The political instability and corruption became more pronounced as the year progressed, and by Q4 2022 it had overtaken other high-risk factors such as rising food and fuel prices and increasing interest rates.

The behavioural side effects of a more financially vulnerable society were also noticeable, with consumers feeling less hopeful and more unhappy than in prior quarters. As a result, many consumers resorted to therapeutic behaviours like “retail therapy” to alleviate their worries and make themselves feel better – despite these being most unnecessary and impulsive purchases.

“The psychology of financial decline is one that we should all become more keenly aware of as we are forced to take a more cautious approach on our journeys to success. When expenditure exceeds income, this creates a domino effect that negatively affects saving and debt servicing abilities – aiding to general economic decline,” says Johann.

The Q4 2022 CFVI results indicate that South Africans remain pessimistic about Q1 2023 with more than 60% of key informants expecting more financial deterioration for consumers, higher levels of unemployment, and a continued rise in inflation.

“The top three high risk factors are expected to continue in 2023, however, it was found that consumers expect increased interest rates and municipal tariffs to play more dominant role in the financial challenges ahead. One thing is for sure, consumers will remain financial vulnerable for the foreseeable future,” Johann concludes.