Vat hike: Struggling South Africans brace for greater financial strain

Source: Supplied. Standard Bank’s Executive Head: Middle Market, Motlatsi Mkalala.

The study, called The Majority Report shows that many households earning less than R8,000 per month often rely on relationships with neighbours and relatives, borrowing from them to bridge the gap before their next pay.

Approximately 17 million South Africans live in households earning less than R3,500 per month, relying heavily on social grants and another 19 million people live in households earning between R3,500 and R8,000.

The two income groups, often referred to as the “poor households” and "working poor" face severe financial strain, frequently making daily sacrifices like skipping meals. They struggle with financial instability, further exacerbated by the current cost of living crisis.

The struggle to make ends meet

“For these households, every spending decision is carefully planned and scrutinised. They plan their spending based on specials. The financial pressure is so intense that many households struggle to meet even the most basic nutritional needs,” says the study co-author, Paul Egan from the UCT Liberty Institute.

Standard Bank’s executive head of Middle Market, Motlatsi Mkalala, says most consumers in these households struggle to change their financial situation – many have not completed matric, and face unstable employment prospects. Scouting for food specials is a necessity. Those who have credit at spaza shops or borrow for food sometimes struggle to manage repayments.

During the study, one woman shared how she and her sister manage their finances by swapping salaries – one paid on the 15th, the other at month-end. This is a common solution for many, as people often rely on friends and family to close the gap. Sacrifice, especially maternal sacrifice where mothers skip meals for their children, is also significant,” explains Mkalala.

Delayed gratification is also a big reality, with many parents or older siblings delaying their plans to study, buy a house or travel, hoping that someday everything will improve when their children or younger siblings succeed. For many the focus is on providing a better future for their children or younger siblings to improve the whole family’s future financial prospects.

“But it’s tough to estimate how long they’ll wait for things to get better. With high unemployment and limited job opportunities, many are focused on survival and basic needs, like having enough food,” adds Mkalala.

Empowering vulnerable households

To help, Standard Bank has partnered with Shoprite to provide more value to customers through its UCount Rewards Programme. From April, UCount Rewards members can earn up to 30% back in Rewards Points at Shoprite and Checkers stores, and up to 40% back when using the Sixty60 delivery service.

They’ll also be able to redeem their Rewards Points for groceries both in-store and online, making it easier to manage grocery expenses and save on everyday essentials.