A survey conducted by Standard Bank, which analysed data from over 400 000 South African consumers, found that a significant number of consumers were cash-strapped before their next pay day.
The survey indicated that consumers who were paid during the middle of the month or towards the end of the month had a R1 000 balance or negative balance before the next pay day.
Kabelo Makeke, Head of Personal & Private Banking at Standard Bank South Africa, said that the survey analysed 402 000 individuals who receive their salaries on popular payment dates, including mid-month, the 25th and month-end.
“The day before pay day, 21% had R1 000 or less, while 28% had negative balances or were using overdrafts. Only half had more than R1 000 in their accounts.”
Makeke added that the findings highlighted the growing challenge of balancing income with lifestyle in today’s fast-paced world.
“Emerging middle-income earners had the highest percentage of customers with less than R1 000 or in the red, but private banking customers aren’t exempt either, with one in ten customers having a negative balance before pay day.”
Makeke said that Standard Bank's findings show high-income earners are also susceptible to negative balances.
“I advocate for small, consistent changes, such as tracking expenses and creating a budget aligned with future goals. These steps can free up funds for emergency savings or to pay off high-interest debt.”
Neil Roets, CEO of debt counselling company Debt Rescue, said many employed people were facing financial struggles.
“These statistics of how consumers are struggling directly before pay day are alarming and reflect a broader issue of financial insecurity that many South Africans are experiencing.”
Roets added that the main challenge consumers faced was keeping food on the table, and in many cases food was being bought on credit.
“This is made worse by the lingering effect of inflation and historically high interest rates. This has affected consumers in all income brackets.”
Roets said that he would advise consumers to create a budget and to track all income and expenses.
“Prioritise needs over wants: distinguish between essential expenses and discretionary spending. Plan your shopping as we head into the festive season; we know there will be a lot of ‘specials’ being advertised. Make sure you do your research on prices.”
Benay Sager, Executive Head of debt management company DebtBusters, said that the research done by Standard Bank was consistent with the data that they have seen.
“When we do assessments, we often find that many consumers are out of pocket almost immediately after their pay day because of the expenses that they have to incur.” Sager added that since 2016, real incomes in South Africa haven’t really grown.
“This has led to consumers supplementing their income with lots of personal loans and we certainly see the same behaviour, as many of the consumers who come to us are over-in-debted by a long margin.”
Sager said that consumers who are struggling with debt repayments should seek debt counselling.
“Most of the consumers we’re talking about here would be multi-banked, so they would have relationships with several banks and would probably have several loans or different credit cards. Debt counselling is a great way of getting all that outstanding debt restructured.” Economist Dawie Roodt said poor economic growth was resulting in South African consumers struggling financially.
“Salaries may not be growing at the same level as a person's living standard, and it makes it difficult to manage finances. The other issue is consumers might not be financially savvy, and we need to educate consumers early on to budget finances. Inflation is also a problem, and when it is close to 4 percent, it's still too high and impacts the consumers.”