- A report compiled by ICT group Altron indicates that the financial resilience of SA households improved in the third quarter of 2022.
- Jobs growth and record exports have helped buoy SA’s economy, despite a series of shocks, including load shedding and flooding in KwaZulu-Natal.
- But while the economy has shown signs of resilience, continued load shedding and rising interest rates could start to bite in 2023.
- For more financial news, go to the News24 Business front page.
Data from fintech group Altron has shown that the ability of SA’s households to take on and service debt improved in the third quarter of 2022, with encouraging signs for the fourth quarter, an indication of the resilience of SA’s economy despite a series of shocks.
The Altron Fintech Household Financial Resilience Index (Afhri), compiled by economist Roelof Botha, rose 0.6% to 109.9 points in the third quarter of 2022, still down 0.2% year-on-year, but with encouraging signs from both employment figures, and in terms of disposable income. The index figure means that SA’s household finances were almost 10% more healthy than the first quarter of 2014, which is used as a benchmark.
“It’s not too bad considering what happened in the first three quarters of this year, with the increased load shedding,” Botha told News24.
“People tend to forget the April floods in KwaZulu-Natal. It was one of the ten worst natural disasters in the world in 2022 … dozens, hundreds of factories we closed some for a couple of days, some for a couple of weeks.
“The saving grace of the index was the employment figures, as far as I am concerned.” he said. The formal sector added more than one million during the first nine months of the year, and although muted when compared to the first two quarters of the year, another 235,000 new formal sector jobs were created between July and September 2022.
The Afhri, developed by Altron Fintech and which uses 20 indicators, is one of two indices looking at activity in the short-term credit industry. The second was developed by economist Keith Lockwood from the Gordon Institute of Business Science, with that survey measuring the pace of short-term credit extension and its effects on SA’s economy.
In the third quarter, the indicator for public sector employment fared best, rising 13.5% year on year, while civil debt defaults improved by 10%.
Disposable income in SA had also reached a record high in the third quarter, but the indicator for private sector salaries fell 2.2%, which Botha said could be an indication that Statistic SA is not fully capturing what is happening in the informal economy, particularly small businesses.
Altron’s Household Resilience Index
Altron, which provides the technology platform for microlenders, is looking to provide its clients with additional insight into market dynamics. It is also looking to shed some light on the short-term lending industry, which is often viewed negatively given the high interest rates short-term loans carry, but is regulated, and often relied upon by households and micro-businesses.
Altron helps customers to manage 2.2 million credit agreements by updating their payment profiles monthly, and also processes 2.6 million transactions, amounting to more than R2.5 billion in successful collections.
Read more: Short-term credit extension continues its recovery, but bumpy ride ahead, says Altron
Botha said the index is likely to reach a record high in the fourth quarter of 2022, given the effect of bonuses, but this may give a bit of a “false impression.” The first quarter of 2023 was likely to be tough, given the effects of load shedding, and hangover effect from the spike in household spending over Black Friday and the Christmas period.
“It’s going to be a very hard act to follow in 2023,” he said.
Altron said on Wednesday that SA’s economy seemingly remains in good shape, pointing to positive GDP growth in the third quarter, the resilience of the Afhri, the strengthening of the rand and record export earnings in 2022.
“It remains to be seen, however, whether government can succeed in reversing the general downbeat mood amongst consumers, due mainly to the escalation of electricity rationing, decaying roads, high fuel prices, and higher inflation and interest rates,” it said.