Millions of South Africans are drawing on their retirement savings just to get through the month even as inflation slows and despite the recent cut in interest rates, according to a recent report.
The SpendTrend25 report, compiled by Discovery Bank and Visa, found more than 1.9-million consumers withdrew a combined total of more than R35bn from their retirement savings in late 2024, most of it for essential financial needs rather than long-term investments.
According to the report, 24% of the funds withdrawn were used for home or car payments, 21% to pay short-term debt, 20% on education expenses, and 11% on daily expenses.
The withdrawals were made in 2024, when inflation decreased from 6% to 4.4%, but consumer spending remained flat, according to the report. The average spend per active card lagged inflation by five percentage points, it added. Despite stable prices, high interest rates — particularly the prime rate, which remained at 11.75% for most of the year — placed pressure on household finances.
“Consumer card spend growth trailed inflation by five percentage points, suggesting that factors beyond prices — like income constraints and rising expenses — affected spending habits. Bloemfontein, East London and Gqeberha had faster growth in spending, while Johannesburg, Cape Town, Durban and Pretoria experienced more muted growth in spend,” the report states.
The report also found not just lower-income earners are feeling the squeeze; high-income consumers with poor financial habits were four times more likely to withdraw retirement savings than low-income earners with better money management.
“This reveals how long-term savings are being used to cover immediate costs, even as inflation eases. While many South Africans are under financial strain, using retirement savings on short-term needs is a concerning trend. The unsustainability of this financial behaviour makes education on long-term financial management crucial across all income groups.”
The report also found consumers were increasingly turning to loyalty programmes and credit card rewards. Between 2023 and 2024, the percentage of consumers who reported buying more from stores where they held loyalty or store credit cards increased to 41% from 37%. More than 80% of consumers said they used card rewards more than the previous year.
Groceries were the top spending category, except for wealthy consumers.
In Bloemfontein, East London and Gqeberha, residents allocated more of their income to groceries and fuel, while spending less on travel and dining out than their counterparts in Johannesburg, Durban and Cape Town.
“SA consumers are undoubtedly feeling the impact of rising living costs, which is driving a significant change in spending habits,” said Visa SA country head, Lineshree Moodley.
“Our research, in collaboration with Discovery Bank, shows that people across all income levels are making spending decisions with careful planning and strategic use of financial tools.
“The rapid growth of accessible and affordable online and digital payment methods is particularly noteworthy, alongside these advancements there are numerous tools and strategies available to help them navigate these challenges.”
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