These are tough economic times for the ordinary South African just getting by.
They are so tough that we've tightened our belts to the point of being unable to breathe as interest rates climb ever higher.
People earning less than R100 000 per annum are spending 50% more of their income on groceries than what they did in 2019, according to Visa and Discovery Bank, who earlier this year, released their SpendTrend23 report on data from over 350 million bank cards, $750 billion dollars of spend and more than 20 billion transactions across four countries.
Meanwhile, the Household Affordability Index released in February 2023 reported that the cost of the average household food basket increased by R572,64 or 13,1% more from R4 355,70 February last year to R4 928,34 February this year.
Things have only gotten worse since then.
The announcement of another interest rate hike in May to a 14-year high (8,25%) has made it harder for many consumers to meet debt commitments such as student loans, vehicle finance and housing bonds as interest rates shot up, with prime increasing to 11,75%
Prices of food and non-alcoholic beverages have decreased only slightly this year, according to Statistics SA which in May announced April’s annual consumer price inflation (CPI) had gone down to 6,8% (after reaching 7,1% in March) – the lowest CPI number since May 2022 (when the rate was 6,5%). And it seems to be on a steady decline. CPI is currently at 6,3% for May 2023, a 13-month low.
However, the prices of bread and cereals increased by 20,8% in the 12 months to April; prices in the milk, eggs and cheese category rose by 14,5%, and the average price of a two-litre carton of fresh full-cream milk increased from R30,14 to R35,88 over the past year.
Asked last month whether the monetary policy committee (MPC) would pause interest rate hikes at its July meeting, SARB Governor Lesetja Kganyago said it was too early to tell.
“If inflation declines to target and is sustained at target and thus inflation expectations become anchored then you would say that it is time to recalibrate policy,” the governor told Bloomberg.
If your salary is already not growing at the same rate as inflation, or you have no steady monthly income at all, you have probably cancelled many subscriptions and resorted to shopping at cheaper retailers or even changing your diet altogether so that you can subsist on the marked-down, no-longer-so-fresh produce at the supermarket.
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What next can you cut out of the monthly household budget when you're already surviving from month to month, depending on our credit cards to pay for petrol and groceries – and sometimes even other debts – just to stay afloat?
Financial experts offer Drum readers some tips to weather these tough economic times.
- Take advantage of those 3-for-2 specials and buy bulk
“We all have to check where we can turn our rands and cents around,” advises financial planner Adele Barnard.
If you are in a position to, she tells Drum readers, try buy your non-perishables in bulk rather than purchasing them as they run out to save money over time.
“I’m a huge fan of stockpiling. If you can, stockpile on your non-perishable items such as your toiletries and cleaning products. Per unit is cheaper,” Adele shares.
She does bulk-buying herself to pay less – over time – for items she needs to use for the next few months as their prices rise, she tells Drum.
“If you buy in bulk, you’ve got that peace of mind as, per month, you’re saving money because you don’t have to buy the Sunlight liquid, bleach, roll-ons and the toothpaste, because, in essence, if it’s stuff that you need, you can’t waste.”
- Stay prepared should the unforeseen happen
The one thing that you should not cancel, warns FNB's Lee Bromfield is insurance. While saving additional funds for your policies may be difficult in these economic times, he tells Drum, ensuring that you are adequately insured will help you protect your family should the unforeseen occur.
The past couple of months have been a financial uphill battle for many consumers as a result of the upward interest rate cycle, fuel price hikes and increased cost of living – and this might have led some consumers to consider cancelling their insurance policy commitments, the Chief Executive of FNB Insure concedes.
“One common behavioral trend that we’ve observed year-on-year is that when consumers are faced with immense financial pressure, they often either skip paying insurance premiums for certain months or cancel their policy, hoping to take it up later when their financial situation improves," Lee shares.
"If you have loved ones who count on you for financial support, your insurance cover should remain your priority, to protect yourself and your family should the unfortunate happen.”
- Revisit your policy
"If you had an increased premium on your policy as a result of health conditions or unhealthy lifestyle habits, you could approach your insurer to reconsider the premium if your health has improved significantly or you no longer take part in a high-risk habit such as smoking," Lee suggests.
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- Negotiate with your insurer
"Given the tough times," he advises that it is vital now more than ever to have "open communication with your insurer to discuss where and how to best keep yourself and loved ones insured".
"You can address options such as downgrading your policy and understanding the lapse rules."
- Consider consolidating your life insurance under one provider
This will require you to shop around a bit and not just rely on a broker or a website that compares insurance quotes for you.
Shopping around and approaching different insurers to see how they can save you money when it comes to your life policy is a smart money move because "consumers who hold several policies with multiple providers are inevitably going to pay more due to administrative costs", Lee explains.
"Consider covering your family under one policy to pay one premium."
