This week I was in Johannesburg and was amazed at how busy the shops were. I was told, although I have not confirmed this, that when fashion store Zara opened in Sandton City recently it did a turnover of R2 million in one day. Admittedly Sandton City is patronised by higher income earners, but it has its fair share of middle income earners as well.
Given the fact that credit extension figures show that South African consumers are not taking on more debt, where is the money coming from to shop ‘til you drop considering that we are being squeezed from all sides with higher petrol, food and electricity prices.
Then I received the following information from Absa Investments which shows that people are dipping into their savings.
Johan Gouws, an executive director at Absa Investments says people are starting to give up in the face of rising unemployment, higher food bills, burgeoning household expenses and the debt trap they are still entangled in.
“The growth of savings despair is one of the major insights from our end-of-year national roadshow to promote better retirement provision,” says Gouws who says financial advisers are telling them that people are simply giving up on long-term saving.
According to Absa, savings industry research confirms that South Africans feel increasingly embattled.
A recent study showed that 53% of canvassed households ascribe their lower savings provision to the high cost of living and rising inflation. They complain that ‘everything is more expensive’.
Another 22% find it tough to save because they’ve been retrenched or unemployed family members in the household put pressure on discretionary income or they now receive less commission, depleting the extra money they might have saved.
Some South Africans admit they dip into retirement savings in their working years. Others say they are so deep in debt that reducing their indebtedness comes first.
Official statistics show household debt to income is just below 80% after threatening to reach 84% at the credit extension peak in 2008. The level was close to 35% back in 1980.
Gouws says these pressures have forced a rethink within the South African family, with 51% of families planning on supporting parents in the years to come.
So are you supporting your material lifestyle by depleting your nest egg?