The impact of the Covid-19 pandemic is staggering with the long-term economic effects of the lockdown nowhere near quantified, and which will most likely play out for many months to come. To get some insight into how South Africans are coping with the financial impact on their lives and businesses, Consulta surveyed more than 850 South Africans who are part of its online research community - known as ConsultaPanel - between 30 April to 18 May 2020.
This is what they had to say:
Changes in household spending
While there have been many restrictions placed on the goods that can be purchased during the lockdown period, Consulta wanted to know how South Africans see their spending patterns changing over the next 12 months, given the expected decline in the economy and pressure on household discretionary spending. Respondents were asked what they expect to spend less of their money on in the next 12 months:
· 60% of the sample said they would spend less on food cooked away from home – which gives an indication that take-out and full-service restaurants are likely to feel more pain even when the lockdown is lifted on dining out,
· 51% are going to be spending less on clothing,
· 49% on travel,
· 45% on fuel,
· 38% on toys and hobbies,
· 34% on alcoholic beverages,
· 32% on media & entertainment,
· 29% on footwear & gym memberships,
· 28% on health & beauty products,
· 27% on books & magazines,
· 27% on consumer electronics,
· 26% on home improvement / DIY,
· 22% on non-alcoholic beverages, and
· 19% will spend less on tobacco / e-cigarettes.
While these categories are regarded as non-essential or discretionary expenses, essential items are also likely to see some downscaling:
· 11% will spend less on pets,
· 10% will spend less on utilities (water & electricity),
· 9% on groceries and food for cooking/preparation at home,
· 9% will spend less on education for themselves or their family, and
· 8% will spend less on healthcare (medicine and supplies).
Changes in Financial Services
· When it comes to financial services, the first place respondents will start looking to save is on their banking fees and loan repayments (20%).
· Respondents are marginally less likely to look for savings on their short-term insurance premiums (14%), home loan repayments (12%), life insurance premiums (9%) or medical scheme contributions (6%).
Respondents were also asked what they expect to spend more on in the coming year (compared to the preceding 12 months):
· 35% of participants expect they will be spending more on food for cooking at home,
· 26% expect the price of basic utilities (water and electricity) to increase,
· 22% will be spending more on mobile / cellular / internet services – likely as a result of doing more remote work from home,
· 21% are likely to spend more on medicine and other medical supplies,
· 19% plan to save more towards their retirement, and
· 16% will be spending more on household items that exclude food.
Concerns about the economy and social upheaval
From the results, it’s clear that respondents are definitely looking towards cutting back on expenses and discretionary spending. They also expressed what the key areas of concern are for them in the coming year – the higher the score out of 100, the higher the level of concern:
· The main concern is the state of the economy (89/100),
· This is followed very closely by the level of expected unemployment (86/100), and
· Respondents are also worried about their own income (76/100), their health and of those closest to them (72/100).
Concerns that are less personal, but still warrant concern include:
· Travel restrictions (66/100),
· The levels of anxiety and loneliness that individuals might experience in a continued low-touch culture (64/100),
· Fears that there might be more tension and conflict (64/100) or the availability of food (63/100), and
· Respondents are least concerned about access to education (55/100) and their ability to work from home (47/100), which shows that a lot of progress has been made as people settle into a new way of work which may very well continue for many.
The Impact on Small Businesses
One-third (33%) of respondents own their own businesses – of which 52% have an annual turnover of R1m or less (considered small businesses). The businesses surveyed belong to a variety of industries including financial, insurance, real estate and business services (22%), community or personal services (19%), wholesale and retail trade, vehicle repairs, personal goods and hospitality (16%) among others.
Of all the business owners that participated in the survey, 44% indicated that their business was fully closed and had been for the duration of the lockdown period.
Only 16% of businesses are functioning at full capacity currently, with the balance only partially operational offering limited services, in limited locations or working reduced hours.
Approximately half (53%) of business owners reported that they were applying new measures to cut down on operating costs, with reduced productivity (30%) and salary cuts (26%) being the most common methods applied.
20% of owners also reported that they had started to permanently or temporarily retrench some of their staff in order to save their companies.
One of the more concerning results is around the sustainability of these businesses – close to half (47%) of these owners reported that their business would not survive a lockdown period of longer than three months. If the economy and lockdown regulations do not return to anything resembling normality by mid-July, there will be many people out of work.
At the time of completing the survey, only 35% of business owners had applied for business relief. Of those that have started the process, 63% have applied to the government and 60% to their primary bank. Of those that applied to their bank, 29% had received support, 49% were still awaiting the outcome and 22% were denied.
When we compare this to those applying for support from the government, 19% had received support, 66% were still awaiting the outcome of their application and 16% were denied support.
Finally, we asked business owners what the impact of the pandemic would be on their businesses should it continue until the end of 2020:
· 17% reported that their business would not survive the pandemic,
· 52% are making significant changes in order to survive, and
· 4% are actually growing during this time.
How is the pandemic changing the way people work?
Consulta wanted to understand what respondents were doing to supplement their income during these times in order to survive.
· 45% reported that they had started pursuing other avenues to increase their income, with the main areas of focus being: expanding on an existing skill set or offering of a business (28%), working remotely or online (16%), investing while the markets are down (14%), starting a new business venture (10%) or looking for new employment (7%).
· An additional 5% are leveraging circumstances by making or providing items that are essential during the lockdown such as face masks and other protective clothing, hand sanitisers and other related materials.
“These are challenging times and there is an overwhelming high sense of uncertainty among South Africans on what the future holds. However, a strong theme that has continued from the first lockdown survey conducted by Consulta during April is that South Africans remain resilient and are trying hard to adapt to the circumstances. We asked respondents what their key lessons had been in the preceding seven weeks of lockdown – the main themes centred around remaining calm and focused, being grateful for what you have, a deep sense of Ubuntu to help those that are facing terrible hardship right now, and finally, the realisation that you can get by with a lot less than you thought you could, and the importance of saving for a rainy day has been amplified. From Consulta’s perspective, and that of the ConsultaPanel Community, it is also clear that as South Africans, we continue to view our circumstances as a collective, and that we are in this together. South Africans remain concerned about the disproportionate negative impact on vulnerable communities,” says Charlene van Niekerk, Project Director at Consulta.
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