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’.
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.
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.
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.
“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.”