The impact of Covid-19 on households

The pandemic is forcing consumers to relook their finances.
The virus crisis may leave you indebted, but now is not the time to be emotional. You need to take charge of your finances more than ever. Image: Shutterstock

If you really want to feel the anguish of a consumer who has experienced the economic impact of the national lockdown, ask Chumani Sigcau [name changed].

“I don’t know if I’ll even afford petrol for the commute to work when the lockdown is over,” she says.

Sigcau is a media practitioner in Johannesburg whose salary has been slashed by 45% because business operations in SA have been halted.

“My life has changed drastically,” Sigcau says.

Prior to the pandemic, she could afford a middle-class, decent lifestyle and was able to pay off her debt – now that is a far-fetched dream.

“I could pay for my bills and spoil myself here and there; now I can’t. It all goes to bills.”

She says with her new salary, she can only afford to pay off some bills. Some debit orders are just left to bounce in her account.

As a result, she had to “think on her feet” for an alternative to fill the financial gap she is now faced with.

“I can’t ask a friend or a family member to help me pay my bills, it’s [financially] rough on everyone,” Sigcau says.

She decided to start selling home-cooked meals such as curry mince rotis, panini with beef stir-fry and beef or chicken stew around her complex, as well as for friends and family. While the money she earns this way is still not enough to pay for her rent and vehicle, she is hoping it will be enough to at least help her survive until things get back to ‘normal’.

Not alone

She is not the only one who is finding herself cash-strapped during this pandemic. Taxi drivers were without commuters for over a month; now they can only have a limited number of people in their taxis to transport.

“Right now my six taxis make about R150 a day,” said one taxi driver in Midrand who is a breadwinner with two children.

Read: How can employees get paid during South Africa’s Covid-19 lockdown?

There are many who have not worked at all during lockdown, and grants and Unemployement Insurance Fund (UIF) payments – if one qualifies to receive them – only go so far.

One thing that’s common among most South Africans is that paying off existing bills will become problematic and it’s even worse for those who were already struggling prior to the country going into lockdown.

It’s going to get worse

Johann van Tonder, economist and researcher of financial wellness at Momentum, says the economic impact of Covid-19 is already being felt and it’s only going to get worse from here on as the economy drastically loses momentum during the lockdown.

“The reality is, household financial wellness is closely connected to economic growth, so [even] a recession takes an unquestionable toll on our financial wellness as well as our financial success. But if we make the right adjustments, we can recover,” Van Tonder says.

According to the Momentum/Unisa Household Financial Wellness Index, only 25% of South African households are classified as financially well.

Van Tonder says the pandemic is going to affect consumers through their assets, income, personal empowerment and also how people view their education status.

“Assets will be the first to feel the impact,” he says. “This specifically relates to the value of financial assets invested on the stock exchange and fixed securities as many households scramble to cash out their investments.”

He adds that as the spread of the virus slows and is brought under control, the losses will be erased gradually. “However, it will take time to bounce back.”

Van Tonder says that as businesses close, households will struggle to earn an income, spend and save.

“The full impact of this is yet to make its way through the economy and will only truly be felt within the next three to six months. However, thanks to government’s measures and the assistance of companies, the impact will be softer than initially feared.”

Move up retirement age

He advises that employers consider moving the retirement age of their employees up by at least a year, to give households the time to recover “from the effects of the coming market crash on their retirement investments”.

He emphasises the need for households to understand that their long-term goals will be affected by the pandemic.

“In these unprecedented and unpredictable times, don’t let your anxiety rule your decision making,” Van Tonder says.

Now is not the time to be emotional

Carla Oberholzer, debt advisor at DebtSafe, agrees that people need to step away from loaded emotion and know that this pandemic and its financial implications are out of their control.

“They should not be so hard on themselves. The burden is already hard enough out there – no need to be their own worst supporter.”

She advises households to become innovative, creative and proactive when it comes to their finances, financial situation or debt.

Oberholzer says those who are currently receiving their full salary should avoid luxury purchases.

“Tuck savings away in your emergency fund – for example, a few rands that would have normally been used for fuel or transport … . Keep the entire household up to date with the financial situation so that everybody can work together to deal with or play their part during the situation.”

She says those who are receiving part of their salary should ensure that they are in regular communication with their employer or human resource department to see if the organisation has applied for the UIF Ters (Temporary Employer/Employee Relief Scheme) benefit.

Read:

Employers ‘angry, frustrated, horrified’ by Ters process

‘Significant’ improvement to UIF relief scheme

Payment holidays

Oberholzer says “experts” may recommend payment holidays for those who are in a crisis and need a short-term solution. However, this requires careful consideration.

Read:

“If this is a case for a consumer, I would suggest that they still do their homework well, [asking themselves] ‘What are the terms and conditions?’, ‘Will I incur interest in the long run?’” she says.

Consumers should pay bills where they can and ask creditors if there is another alternative if they are struggling, before opting for a payment holiday.

“All options should be explored before consumers try and just jump in to take on payment holidays from, for example the bank, as the only solution to be considered,” Oberholzer says.

Personal finance journalist Maya Fisher-French shares these sentiments.

“They are not free and will extend the term of your loan. Rather tighten your belts than extend your debts.”

She emphasises the importance of having a ‘Covid-19 budget’.

“You can’t manage your expenses if you don’t know what they are. The upside is that with lockdown there are many things we are not spending money on – especially non-essentials.”

AUTHOR PROFILE

COMMENTS   15

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.

SIGN IN SIGN UP

Out goes the vanity industry.

So why on earth are we doing this? It’s not saving lives, it’s ruining them

The ‘government’ is on a power play. They have to show us they have big pieper mannetjies. They have never done anything right since they came into power but they do know how to do a proper lock down.

One of the positives to come from this is that the myth of a “fixed income” and “Job Security” has been blown right out the water. I have never seen so many people who already have got a side-hustle going or are busy starting one or are just looking for one.
Unfortunately, there will always be people who will get scammed into a hustle but for the larger part it is refreshing to see how many people refuse to lie down and wait for the inevitable. They would rather get out from in front of the train and fight for their survival. Suddenly everybody is or wants to be an entrepreneur and the hero in their family and their community. Sorry for SARS as they won’t be able to get their hands on this money specifically the cash based hustles and those that pay from offshore. My heart pumps custard for SARS, the political fat cats will have to borrow their money elsewhere.
While these may not be the type of entrepreneurs that economists talk about when they refer to what drives an economy, personally I don’t really care I wish the new hustling nation all the best. May they thrive and succeed and live to see every new day for what it is – A GIFT and AN OPPORTUNITY.

More importantly it may put an end to frantic consumerism.

Our government is actually only doing what the rest of the word is doing.

Yes , we are a little “stricter” and we have made some really questionable regulations (cigarettes, flip flops ect).

This whole thing has become very political and everyone is not happy with government (worldwide).

I just don’t understand why we are not changing our game plan and going the Sweden/herd immunity route.

We can not afford this as a country , yet we preserveer.

Something doesn’t add up

With most of my comments being banned to the bin I guess I suffer from lockdown fatigue now.

In particular rights being taken away by idiots that try and decide what you should and should not do. If they had the ability that’s fine. Problem is they don’t.

Please read this in the context of this article. I sympathize with all the families of those who lost their lives to COVID-19, but the reality is, currently 0,00048% of our population succumbed to this virus. What will the percentage of the people in terms of our population be if we could calculate exactly how many people lost their jobs, job losses to come, businesses closed as well as the overall economic recession, which will take years to fix. Ads on radio and TV speak about increases in the number of cases of domestic violence.
I need to ask if the effort is worth the reward? 319,000 fatalities globally, against a total population of 8 billion, do we really need to have meetings and discussions around this? It is time to face reality and end this absurd situation in South Africa. We simply cannot afford this anymore. Stop turning a blind-eye to reality

What I find Interesting is how this Lockdown has highlighted that the majority of the population are completely Financially Insecure and Illiterate : (as equally evidenced by their Voting habits )
The vast majority live on Credit or rely on Grants /Handouts etc etc and have no conception of having a Reserve Pot for the rainy day , which has arrived.
They may be right however as the Govt via Raiding Savers and Pensioners savings , simply bail them out and the Prudent lose out:

Wow, you figured out all that by yourself?

Now, figure out why the majority of the population are financially Insecure and Illiterate : (as equally evidenced by their Voting habits) and live on Credit or rely on Grants /Handouts etc and have no conception of having a Reserve Pot for the rainy day?

But don’t stress, the day cometh for you ‘wise’ ones.

I stumbled across an article yesterday on LinkedIn that made for interesting reading. SO while I am not excusing people living credit, not everybody living on credit does so because they are financially illiterate – “According to Prof Steve Hanke (Johns Hopkins University) South Africa has one of the strictest Lockdowns in the world, yet the Peak may still be 2-3 months away. Meanwhile, the people have no way to earn. The bruises left by the Sledgehammer may be harder to recover from than the Virus. By his calculations as a world renowned applied economist, SA’s implied Inflation is 30.32%/yr.” If you check it out you will see there is an interesting graph attached to the article too. South Africans are under extreme pressure and if you are one of the fortunate ones that isn’t I suggest be thankful rather than condemning those that are not so fortunate. When you lose your job and your income it becomes very difficult not to trying and survive by any means possible for plate of food for your family.

As our favourite commentator Sensei said: “If China had just shut up and said nothing we would be none the wiser, it would simply pass as the annual flu”

Be very careful. I have been scammed twice in 2 weeks. One through my bank R4000.00 and then R740.00 trying to buy illicit cigarettes although a law abiding citizen of 68 years old. Thanks to the Stupid prohibition. My fault entirely.

WJS

I would like to gain more information on receiving TERS as a result of reduced salary by my company. I have read that there is a ‘Top Up’ available to employees that have NOT been temporary laid off, but had to take a salary cut.
Thank you.

The knock on effect is those domestic workers that have to be let go, the madam and master have NO job, then there are those who have found out that they do the job better and quicker than their domestic or gardener. They also go with maybe employment once a week for heavy lifting.

How many are they supporting? The math is horrific don’t go there if you can afford it keep them employed.

The powers that be never thought of this…..

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

NEWSLETTERS WEB APP SHOP PORTFOLIO TOOL TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: