SA's household finances improved in the 2Q

Data from fintech group Altron has shown that the ability of South Africa's households to take on and service debt improved a little in the second quarter of 2023, with some encouraging signs for the rest of the year, notably a recent easing in load shedding.

The Altron Fintech Household Financial Resilience Index (Afhri), compiled by economist Roelof Botha, picked up 0.4 points to 109 in the three months to end-June, helped by an improved employment picture, but still remained unchanged year on year.

The index figure means that South Africa's household finances are 9% more healthy than the first quarter of 2014, which is used as a benchmark, with Botha telling News24 that while a "marginal" increase may happen for the rest of the year, it isn't all good news. There is still pressure on households and businesses from what he says are overly restrictive interest rates, while debt costs as a ratio of household income could hit double digits in the next few months.

The Afhri, developed by Altron Fintech, uses 20 indicators, all of which are directly or indirectly related to sources of income or asset values. The almost 60-year-old group provides the technology platform used by micro-lenders and is looking to provide its clients with additional insight into market dynamics.

In the second quarter, 11 of 20 indices registered a decline. But the overall index was lifted by a 1.2% quarter-on-quarter rise in public sector employment and 0.7% growth in private sector employment - more heavily weighted in the index - as well as 2% growth in unit trust assets.

Jobs

The upward trend in new job creation continued in the second quarter of 2023, with 154 000 new jobs having been created between April and June, according to the Quarterly Labour Force Statistics by Statistics SA.

But, while the average monthly remuneration was virtually unchanged over the past four quarters - at R15 863 in nominal terms - it declined by 5% in real terms, or when accounting for inflation, says Botha.

"This is a little story on its own, he said. "You have this increase in employment so far in this year, more than 400 000 new jobs, most of them formal sector jobs, but you have a year-on-year decline in salaries, so, people are prepared to work for less."

Botha said that it appears Covid-19 gave people a "hell of a fright". Job cuts in some cases would have also been less focused on lower-earning employees, while there have also been significant cost pressures on many companies, notably the mining and retail industries, he added.

Also concerning is the sharp increase in the ratio of debt costs to household income, he said, which has now risen to above pre-pandemic levels and could rise further.-Fin24