South African households face uphill battle as finances remain strained
Image: Ayanda Ndamane/ Independent Newspapers.
Household finances in South Africa are expected to remain strained on the back of accelerating unemployment rate and rising debt levels, resulting in slow expenditure trends.
According to the Quarterly Bulletin released by the South African Reserve Bank (Sarb) on Thursday, growth in real gross domestic expenditure (GDE) eased to 0.4% in the first quarter of 2025 following an increase of 0.2% in the fourth quarter of 2024.
Real final consumption expenditure by households increased at a slower pace in the first quarter of 2025 but nevertheless contributed most to growth in real GDP.
By contrast, real final consumption expenditure by the general government and gross fixed capital formation contracted further, alongside a further deaccumulation of real inventory holdings, albeit at a slower pace.
'Growth in real final consumption expenditure by households moderated notably in the first quarter of 2025, along with the slower pace of increase in the real disposable income of households and a sharp decline in consumer confidence,' said the Sarb.
'Real spending on durable and non-durable goods increased at a slower pace, while that on semi-durable goods remained unchanged and growth in real outlays on services accelerated.'
This comes as the Consumer Confidence Index rebounded from the significant drop in the first quarter of 2025 from -20 to -10 in the second quarter.
This was predominantly due to the resolution or improvement in earlier concerns including the reversal of the value-added tax (VAT) increase, lower stages of loadshedding, improved relations between the United States and South Africa, and the Government of National Unity (GNU) partners' commitment to working together.
Momentum Investments chief economist, Sanisha Packirisamy, maintained a positive view on the consumer outlook despite the headwinds facing consumers.
Packirisamy said this outlook was supported by the rebound in CCI following the sentiment shock in the first quarter.
'The rise in the unemployment rate in the first quarter, potential fuel price increases following the temporary spike in Brent crude oil prices due to the Israel-Iran conflict, and floods could weigh on consumer sentiment. However, reduced load shedding, a continuation in two-pot withdrawals, lower interest rates and a stable GNU, if it persists, could support consumer confidence,' she said.
'We forecast household consumption expenditure to grow by 1.8% in 2025. As the largest component of GDP, accounting for 67.7% in the first quarter, household consumption is central to our growth outlook and forms the cornerstone of our 1.2% GDP growth projection for 2025.'
Meanwhile, the Sarb said household debt as a percentage of nominal disposable income increased from 62.2% in the fourth quarter of 2024 to 62.7% in the first quarter of 2025 as household debt increased more than nominal disposable income.
Households' cost of servicing debt relative to disposable income edged slightly lower over the same period, reflecting lower interest payments following the further 25 basis point reduction in the prime lending rate in January 2025.
Households' net wealth increased in the first quarter of 2025 as the market value of total assets increased more than that of total liabilities.
The value of assets was boosted by a notable increase in domestic share prices as the FTSE/JSE All-Share Index outperformed share price indices in developed markets in the first quarter of 2025, while the value of housing stock also increased further.
Real gross fixed capital formation decreased by a further 1.7% in the first quarter of 2025, driven by reduced capital spending by private business enterprises, while capital outlays by public corporations and general government increased
'An increase in business confidence is imperative to drive investment and accordingly economic growth, with expectations for growth having eased notably this year to 0.9%,' said Investec economist, Lara Hodes.
Nedbank economist, Johannes Matimba Khosa, said household finances were expected to remain relatively healthy in 2025 despite the expected uptick in inflation off a low base.
Khosa said this, along with higher wage settlements in the public sector, will continue to support real personal disposable income.
He said lower interest rates and withdrawal from the Two-Pot retirement system will also help reduce debt service costs.
'However, the recovery in household finances will be partly contained by uncertain employment prospects. Given excess capacity and a volatile global environment, companies will hesitate to expand operations,' Khosa said.
'The US tariffs, weak global demand, and subdued commodity prices will impact job creation in exportoriented industries. At the same time, growth in government employment will be contained by fiscal consolidation.'
BUSINESS REPORT
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Citizen
a day ago
- The Citizen
Weekly economic wrap: local data good for local GDP
Although this week's economic data looked good for GDP, there is a pervasive sense of waiting for the US tariff that affected unemployment. It was a busy week on the economic data front with most of the local data looking good for the second quarter South African gross domestic product (GDP). South Africa also submitted a new proposal for the US tariff ,which will hopefully see the 30% reduced. Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER), says the batch of June high-frequency data was generally positive for GDP. She notes that while June retail sales slowed after a very strong April and May, the full quarter was solid and, as such, also bodes well for consumer spending in the second quarter. 'In addition, the quarterly improvements in mining and manufacturing production are welcome after both sectors contracted in the first quarter. Conversely, wholesale declined and the labour force survey showed an uptick in the unemployment rate, with little job growth outside of the trade sector.' De Schepper says there was also plenty to digest on the international data front with the biggest release being the US inflation data. 'After a softer-than-expected consumer inflation print, markets fully priced in a 25 basis points rate cut by the Federal Reserve in September, with some talk of a potentially bigger cut. However, a surge in wholesale inflation (PPI) provided a sense check to this narrative.' ALSO READ: 12 companies close, 4 000 jobs lost as US tariffs and sales slump bite automotive industry Everyone waiting for the outcome of the Trump/Putin talks on Ukraine Bianca Botes, director at Citadel Global, points out that oil markets have been treading water, with Brent slipping back under $67/barrel after a short-lived bounce, as traders wait to see whether the Alaska meeting between the US and Russian presidents can deliver tangible progress on Ukraine. 'Washington warned of sharper sanctions on Russian crude buyers if talks fail, keeping geopolitical risk priced in. At the same time, signs of stronger demand from Japan and the prospect of US monetary easing are acting as a counterweight to the OPEC+ (Organization of the Petroleum Exporting Countries and other oil-producing countries) supply expectations and demand-growth concerns. 'Gold has been losing ground, heading for its worst week since late June. However, it is marginally in the green this morning. The hotter US inflation print of 2.7% has shifted rate-cut forecasts toward a slower pace, dulling bullion's appeal in the near term.' Botes says the rand has pulled back to around R17.60/$, giving up its earlier strength as gold prices slipped and the greenback regained some lost ground. 'Domestic sentiment remains cautious, with stronger manufacturing output offset by weaker employment and unease over the long-term cost of US trade measures.' The rand was trading at R17.58/$ on Friday afternoon. ALSO READ: Unemployment could get even worse in third quarter due to US tariffs Unemployment increases again in the second quarter According to Statistics SA's Quarterly Labour Force Survey, the unemployment rate increased to 33.2% in the second quarter, up from 32.9% in the first quarter. Damian Maart, economist at the Bureau for Economic Research, says the number of people classified as not economically active due to discouragement declined by 0.8% (28 000), while those not economically active due to other reasons remained the same between the two quarters. 'This decline pushed the expanded unemployment rate down by a modest 0.2% to 42.9% in the second quarter, which remains worryingly high.' Busisiwe Nkonki and Isaac Matshego, economists at the Nedbank Group Economic Unit, noted that overall, job creation remained low as companies sit with excess capacity amid weak demand and uncertainty regarding US trade policies affecting South Africa. Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, say the increase in the unemployment rate, combined with the ongoing moderation in the absorption rate, underscores persistent vulnerabilities in the labour market and the economy's limited capacity to generate much-needed jobs. They point out that the economy managed to recover 2 272 053 of the jobs lost in the first half of the pandemic year (2020) and the 659 566 jobs lost in the third quarter of 2021 after the July 2021 social unrest. 'However, formal non-agricultural employment diverged from its pre-pandemic trajectory, a sign of the economy's weakened structural health and diminished ability to achieve the job creation ambitions of the National Development Plan (NDP).' ALSO READ: Business confidence increases, but will come under pressure from US tariff Retail sales growth fell short Retail sales growth slowed notably but is still positive on a quarterly basis. It was under market expectations of 3.3%, posting a 1.6% increase in June compared to 4.3% in May. Wholesale trade sales, on the other hand, contracted at a slower pace of 1.7% in June compared to a 3.7% decline in May. Maart says this marked the slowest rate of contraction in the past three months. Motor trade sales grew at a slower annual rate of 3.1% in June, down from 4.1% in May. Sales were flat monthly and quarterly growth was marginal at 0.6%. Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano say despite the loss in momentum, this print suggests that the retail industry grew by 0.9% in the second quarter, affirming their view of a recovery in GDP growth in the second quarter. Nkonki and Matshego expect the upward momentum in retail sales to continue, supported by rising real incomes, subdued inflation, continued withdrawals of contractual savings, and lower debt servicing costs compared to a year ago. ALSO READ: Mining production improves, but challenges loom Manufacturing and mining production surprised to the upside Manufacturing production grew by 1.5% compared to the first quarter, which saw a 1.9% decline. On an annual basis, manufacturing production growth also surprised to the upside, exceeding market expectations of 0.8% by rising to 1.9% in June, Maart says. Like factory output, mining production outperformed expectations, showing a notable improvement with an increase of 2.4%, in its second month of growth. The biggest boost to the annual performance came from platinum-group metals. Maart says overall mining production is set to make a positive contribution to GDP growth in the second quarter, recording a 3.9% increase compared to the previous quarter. Nkonki and Matshego say the outlook for both sectors remain murky. 'The 30% US tariff will directly affect manufacturing production as US demand for South African products decline, but the cyclical upturn in domestic demand should help to soften the blow. 'Given that most mining products are exempt of US tariffs, this sector will be affected indirectly as US trade policies place downward pressure on global growth and commodity prices.' Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano say the full manufacturing and mining data suggests that the sector contributed positively to GDP growth in the second quarter, based on the 1.6% quarterly growth.
IOL News
a day ago
- IOL News
How grants are addressing the housing crisis in KwaZulu-Natal's informal settlements
The rapid urbanisation and migration to urban centres have exacerbated the housing backlog in KwaZulu-Natal. Image: Tracey Adams / Independent Newspapers The rapid urbanisation and migration to urban centres have exacerbated the housing backlog, and this surge has outpaced housing solutions in KwaZulu-Natal. A report on the implementation of the informal settlement upgrading programme within KZN was presented by the Department of Human Settlements to the Portfolio Committee on Human Settlements on Friday. The department stated in its report that many residents are unable to access formal housing due to economic constraints and limited availability, and resort to establishing informal dwellings. This surge has outpaced the provincial government's capacity to provide adequate housing solutions, leading to a substantial backlog in formal housing provision. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad loading The department stated that, as outlined in the National Housing Code, projects are implemented through a four-phase approach. They are: Phase 1. Application: Municipalities apply to provincial Human Settlements departments for funding for informal settlement upgrading, submitting interim business plans with their applications. Phase 2. Project Initiation: A ctivities like acquiring land, understanding the settlement's demographics, installing interim services, conducting pre-planning studies, and developing a business plan. Phase 3. Project Implementation: The actual construction of infrastructure and housing, focusing on enhancing serviced sites and providing necessary facilities. Phase 4. Consolidation: I nvolves further development and improvement of the upgraded settlement, potentially including housing consolidation and community development. The department stated that the Informal Settlements Upgrading Partnership Grant (ISUPG) was introduced as a window within the HSDG in the 2019/20 financial year. The window was intended to serve as a planning and preparation platform before it was established as a standalone grant in the 2021/22 financial year. The ISUPG specifically targets the upgrading of informal settlements to increase investment in in-situ upgrading. It emphasises building partnerships with communities to develop and execute informal settlement upgrading strategies. The funds are to be used to identify informal settlements in need of upgrading, provide households with security of tenure, and deliver municipal engineering services. The department has made substantial progress in upgrading informal settlements, with a total of 103 plans completed across the province. It added that plans are intended to assist it in ascertaining cost estimates for infrastructure provisions that are pivotal in upgrading informal settlements. Therefore, these plans serve as a roadmap for upgrading informal settlements within the province. "The upgrading plans further provide categorisation of informal settlements, which is necessary as it guides upgrading and intervention required. These categories guide the approach to providing basic services, ensuring security of tenure, and potentially relocating residents."
IOL News
2 days ago
- IOL News
Westville Prison's new bakery: A dual benefit for inmates and taxpayers
Correctional Services Minister Dr Pieter Groenewald tastes a piece of bread baked by Westville Prison inmates at the new Durban Management Area Bakery at the prison. Image: Sibonelo Ngcobo / Independent Newspapers The opening of the Durban Management Area Bakery at Westville Prison in Durban was for the benefit of taxpayers and the rehabilitation of inmates. Correctional Services Minister Dr Pieter Groenewald said it was an honour to open the bakery because it will benefit South African taxpayers. 'This bakery can produce 3,840 loaves of bread daily. The rate is about 480 loaves of bread an hour,' Groenewald said. 'We have almost 50 inmates involved in the bakery, meaning they get a pre-training and then they also rotate in certain ways to ensure that they also are practically part of the process.' Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad loading Inmates at Westville Prison engage in hands-on training at the newly opened bakery, learning valuable skills for their reintegration into society. Image: Sibonelo Ngcobo / Independent Newspapers Groenewald said this is part of rehabilitation, ensuring that when the inmates leave Correctional Services facilities, they are successfully reintegrated into society. 'When they finish here, they will receive a certificate to say that, and this is part of their skills they have learned in Correctional Services, so it's a dual benefit for the inmates on the one side and the taxpayers on the other side,' Groenewald said. 'We will save more or less R3 million annually with this bakery. The facility cost us about R7 million, but it is an investment, so we must also see this as an investment; after about two years, we will have the full benefit.' Groenewald said they produce a loaf of bread for R8. Currently, through external suppliers, they pay almost R23.50 per 700g loaf of bread. He said bread plays a crucial role in the inmates' nutrition programme. Inmates rotate through various roles in the bakery, gaining practical experience and a certificate upon completion of their training. Image: Sibonelo Ngcobo / Independent Newspapers 'This is the 13th bakery in Correctional Services, and we hope by 2028 that we will have 20 bakeries,' Groenewald said. When he became minister, he said they must enhance the self-sufficiency of Correctional Services to benefit taxpayers. 'If you add the agricultural activities and all other activities, the previous year, through the management of the National Commissioner, we saved the taxpayers almost half a billion rand. Add to that the other benefit of rehabilitation for reintegration.' Groenewald told the inmates to see themselves as privileged to work in the bakery. They learn a specific skill. If they go out of the Correctional Services facilities, they will get a certificate saying they have worked and have the specific skills in terms of bakery. They will get a job easily when they are out, and some of them can even start bakeries. Correctional Services Minister Dr Pieter Groenewald highlights the dual benefits of the new bakery: enhancing inmate skills and reducing costs for South African taxpayers. Image: Sibonelo Ngcobo / Independent Newspapers 'So that is another bonus because we have an obligation as Correctional Services to ensure that there is successful law-abiding reintegration in our society.' Groenewald said that before selection, the inmates had their records looked at. They see what category of inmate they are. Then, in terms of different skills, they get selected and do a pre-course on bakery. 'There are about 50 of them, and from that, after they completed the pre-course, they come in in a practical situation, and they rotate them to ensure that they also are practically part of the process,' Groenewald said. 'In the end, at least you have 50 of the inmates in this specific bakery. Countrywide, this is the 13th bakery, and we hope to increase it to 20 by 2028.' Mlindeni Xaba, an inmate at Westville Prison, expresses gratitude for the opportunity to learn baking skills that will aid his future after release. Image: Sibonelo Ngcobo / Independent Newspapers Medium C inmate Mlindeni Xaba, 30, speaking on behalf of the inmates he works with in the bakery, thanked Correctional Services officials for the opportunity they gave them, for how they are treated, and for helping them choose the right path. 'We're also thankful for the skills they've imparted to us, so that we can use them when we are released,' Xaba said. He was handed an eight-year sentence for robbery and has been behind bars for two years.
