SA households were less resilient at the start of 2023, as they contended with inflation, high interest rates and load-shedding, than when the Covid-19 pandemic started to spread across the globe.
This is according to the latest Altron FinTech household resilience index (Afhri), which came in at a score of 108.1 in the first quarter of 2023, lower than in the same period in 2020. The index was down 2.6 points quarter on quarter and 1.9 year on year.
The base period of the index is the first quarter of 2014, with a score of 100. This means that the score of the first quarter of 2023 showed that the resilience of the average household improved by only 8.1% in real terms over the past nine years.
The average annual improvement of less than 1% is a sign that SA’s economy is misfiring, while the Reserve Bank has raised interest rates several times to fight inflation. But the sharp rise in the cost of credit compounded the pressure on consumers, businesses and homeowners.
As a result, total household credit extension, which provides insight into consumer confidence and spending as it shows how comfortable consumers are to borrow and spend, declined 3.4% since the first quarter of 2014.
“It is simply not possible for the SA economy to grow at meaningful and sustained rates in the absence of real growth in household credit extension,” said economist Roelof Botha, who compiled the index.
The index is weighed according to the demand side of the short-term lending industry. Its 20 indicators relate to sources of income or asset values, including private and public sector employment, insurance surrenders, and household income and expenditure.
There was a strong recovery in the index as the pandemic eased, reaching a record high in the final quarter of 2020 and remaining stable until the Bank started hiking interest rates at the end of 2021.
Botha told Business Day on Thursday it is “as if the index is just waiting for lower interest rates to start taking off again”.
One of the few bright spots of the latest data was the increase in employment in the private and public sectors.
However, greater employment was not matched by an uptick in total remuneration levels, with the average monthly pay declining 4.4% year on year in nominal terms to R15,473 and 10.7% in real terms, which is deflated by the consumer price index.
Botha told Business Day this was because salaries and wages have not recovered since they were lowered during the Covid-19 pandemic as businesses tried to avoid closing their doors or cutting jobs, while some job seekers are willing to work for less with SA’s high unemployment rate.
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