The economic health of SA households is the focus of this edition of Business Day Spotlight.
Host Mudiwa Gavaza is joined by Dr Roelof Botha, economic adviser to Optimum Investment Group. This week, Altron FinTech released its latest Household Resilience Index (Afhri), which covers the third quarter of 2024.
The index provides insight into “the financial state of households by assessing the state of micro-lending from the perspective of the ability of borrowers to repay loans”.
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This most recent print shows improvement among household finances, helped by lower interest rates, reduced energy costs as load-shedding is largely a thing of the past, and the inception of the two-pot retirement system.
According to Botha, who compiles the index on behalf of Altron FinTech, the recent lowering of the repo rate and, consequently, the prime overdraft rate, has exerted a marginal positive impact on the Afhri, with the year-on-year increase of 2.1% being overshadowed by zero growth in the ratio of household income to debt.
Altron FinTech says its findings confirm the continued financial pressure on SA households, mainly due to the high interest rates over the past three years, which have kept the average debt cost burden of households at its highest level in 15 years.
“It is quite obvious that the restrictive monetary policy stance of the Reserve Bank’s monetary policy committee (MPC) has come at a substantial cost to the economy,” says Botha.
He sees the current high interest rate environment as the reason for suffering among consumers and households.
“Ever since the MPC embarked on an ill-conceived campaign to combat supply-side inflation via severely restricting demand in the economy, a host of key economic indicators and trends have turned negative,” he says.
Through the discussion, the economist highlights: Afhri index components and research methodology; key findings from the index results; impact of interest rates on the economy; and growth expectations for the year.
Business Day Spotlight is a MultimediaLIVE Production.
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