Where South African consumers spend and where they try to save

On average, South African consumers spend 68% of take-home pay to service debt. How they allocate the rest differs by income band, as does where they try to make savings to stretch their disposable income.

The insights are drawn from a DebtBusters’ study of spending patterns across five income groups of consumers who applied for debt counselling.

The study provides insights into consumer spending, excluding debt repayment, as the country prepares for the National Treasury’s budget speech on 12 March.

The take-home income groups are: under R5 000 a month, between R5 000 and R10 000, R10 000 and R20 000, R20 000 and R35 000 and more than R35 000.

Benay Sager, executive head of DebtBusters says the study provides interesting insights into how South Africans in different income bands prioritise their spending outside of debt repayments.

“For example, there is surprisingly consistent spending across all income groups on transport, utilities, and cellphones, but spend on accommodation differs significantly. Excluding debt repayments, people taking home less than R5 000 spend 9% while those earning between R10 000 and R20 000 allocate 31% for housing, more than any other income band.”

Grocery spend also differs markedly.

Households with less take-home pay spend a greater proportion on food.

The lowest earners spend more than half of their non debt-repayment disposable income on groceries.

This proportion declines across the income bands. For top earners, the comparable ratio is just under a quarter (23%).

Unsurprisingly, spend on insurance, including medical aid, is negligible in the two lower income bands but increases from 1% in the R10 000 to R20 000 band to 13% amongst top earners.

Higher electricity costs and food inflation have forced people in the lowest income band to pool their resources more effectively to cut back on housing expenses.

Over the past three years, the proportion of non debt-repayment take-home pay these consumers spend on accommodation has halved, from 20% to 9%.

This contrasts with people taking home between R10 000 and R20 000, the backbone of the country’s working population. Excluding debt repayments, they spend 31% of their take-home pay on housing, an increase of 7% in three years. To make ends meet, they are cutting back on groceries and spending on their children.

Sager said, “Unsurprisingly, but worryingly, spend on retirement is all but non-existent: only top two income bands allocate some money to retirement savings, which shows that with the recent changes made to the so-called two-pot retirement system, there is much work to be done to educate South Africans about long-term savings.”

The study found that while people earning R35 000 or more have the highest debt-service burden, they also have more stable budgets with the least fluctuation over the past three years.

BUSINESS REPORT