South Africans with access to credit plan to save more
July 10, 2009
By SAMANTHA ENSLIN-PAYNE
Middle and upper income earners in South Africa plan to save more in the next six months as a precaution against uncertain economic times, and property investment is among the top priorities of their spending plans.
This is according to the MasterCard Worldwide Survey on Consumer Purchasing Priorities released this week.
The survey interviewed 9 211 consumers in 21 markets, including China, Hong Kong, Australia, India, Egypt, Qatar and Saudi Arabia.
The participants were men and women 18 years and older from middle and upper income groups. All respondents either had a credit card or had the economic means to get one.
In South Africa 600 people were interviewed during March and April.
The survey found 43 percent of South Africans planned to cut back on discretionary spending and 47 percent planned to save more in the next six months.
This is good news in light of South Africans' low level of savings and high level of household debt.
Deputy Finance Minister Nhlanhla Nene said recently that as a percentage of disposable income, household savings had fallen from about 5.4 percent in the 1980s to 0.28 percent between 2000 and last year.
As a consequence, household debt has risen steadily in recent years, and currently stands at 76.7 percent of disposable income.
The survey says of the 71 percent of South Africans planning to save more or as much as they did in the past six months, most said it was due to the uncertain economic outlook and the need to prepare for unforeseen expenses.
This behaviour was mirrored through the rest of south Asia, the Middle East and Africa region. But South Africa and Saudi Arabia were the only markets in which people intended to invest in their homes.
Rodger George, the consumer business industry leader at Deloitte South Africa, said many South Africans saw investing in property as a reliable form of long-term investing. "Since we are in a buyer's market, South Africans who can afford to will be looking to invest in property," he said.
Property in South Africa has consistently appreciated over the long term, which would support investing in it. But recent data shows house prices are still very subdued. According to Absa, house prices fell the most in 23 years last month, dropping by 4.4 percent from June last year.
Survey respondents said savings would also be put into other investments and retirement products.
Given that South Africa was in a recession, George said, it was hardly surprising South Africans planned to save more.
Of the spending that consumers did intend to make, fashion and accessories, and eating out and entertainment, were also among the priorities.
Anton van der Merwe, MasterCard Africa's vice-president of commerce development, said it seemed that the Reserve Bank's 4.5 basis point interest rate cut since December had given South African consumers additional purchasing power.
George said during tougher economic times consumers tended to buy downwards.
It was critical for merchants in South Africa to provide useful value-for-money products that would help to maintain margins and attract consumer spending, he said.
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