Latest news with #AltronFinTechHouseholdResilienceIndex
IOL News
06-05-2025
- Business
- IOL News
South African households see slight income improvement, but challenges remain
Despite a slight improvement in household incomes in South Africa, challenges persist as disposable income continues to decline, driven by interest rate hikes and economic uncertainties. Picture: Ron AI Image: Supplied The financial position of South African households improved slightly in the fourth quarter, but real disposable income per person for 2024 continued its decline from 2022, when the interest rate raising cycle increased. This was according to economist Dr Roelf Botha, who commented on the release on Tuesday of the Altron FinTech Household Resilience Index (AFHRI) for the fourth quarter of 2024. He attributed the modest improvement to three 25 basis point cuts in the repo rate between September 2024 and January 2025, which lowered the prime overdraft rate to 11% from a record high of 11.75%. Consumers also benefited from year-end bonuses, two-pot pension payouts, and temporary jobs in the holiday period, particularly in the tourism and retail sectors. 'The data clearly shows that while we're seeing some recovery, households remain under significant financial strain following this period of high interest rates. The marginal interest-rate cuts provided some small relief, but more substantial monetary policy easing is required to meaningfully improve household financial resilience, especially in the face of the diminished global growth figures anticipated this year," said Altron FinTech MD Johan Gellatly. Dr Botha said households are not out of the woods yet. At the latest meeting of the Monetary Policy Committee (MPC) of the Reserve Bank, the rate-cutting cycle was halted, which would prevent the debt cost burden of households from dropping to a level that would encourage a more permanent recovery of household expenditure – the key driver of aggregate demand in the economy. The AFHRI's four-quarter average, which eliminates seasonality, had started to recover but has barely remained above the level recorded at the end of 2021, when the MPC started its relentless cycle of interest rate increases, despite lacklustre GDP growth and an obvious absence of excess demand in the economy, said Dr Botha. The ratio of household debt costs to disposable incomes declined from 9.1% to 8.9%, but this also remained significantly higher than the 6.8% level in 2021. 'The cost of credit (and of capital formation) in the South African economy remains 31% higher than four years ago – one of the main reasons for the lethargic economic growth rate that moved in tandem with each increase in the repo rate,' said Botha. 'The decision by the MPC at its March policy meeting not to lower the repo rate further is regrettable, as several key economic indicators continue to show weakness, with business confidence having retracted since the beginning of the year,' he said. The S&P Global Purchasing Managers' Index for South Africa fell to 47.4 in January 2025, down from 49.9 in December, marking the sharpest contraction in the private sector since July 2021.
The Citizen
06-05-2025
- Business
- The Citizen
'SA Financial households improve slightly, but not out of woods'
While there have been some recovery, households remain under significant financial strain. A household resilience report has revealed a 'modest improvement' in the financial position of South African households, with the ratio of household debt costs higher than in 2021. According to the Altron FinTech Household Resilience Index (AFHRI), the improvement was mainly due to three cuts of 25 basis points each in the repo rate between September 2024 and January 2025. This led to the lowering of the prime overdraft rate to 11% from a record high of 11.75%. Not out of the woods Economist Dr Roelof Botha, who compiled the report, said households are not out of the woods yet. 'At the latest meeting of the Monetary Policy Committee (MPC) of the Reserve Bank the rate-cutting cycle was halted, which will prevent the debt cost burden of households from dropping to a level that would encourage a more permanent recovery of household expenditure.' ALSO READ: Small fuel price decrease no help for consumers in looming rough ride Bonuses and temporary job The increase in the AFHRI during the fourth quarter of 2024 also reflected the influence of year-end bonuses paid to employees, as well as temporary jobs created during the December holidays, especially in the tourism and retail sectors 'Withdrawals from pension funds and other investments related to the so-called two-pot system artificially inflated the performance of the AFHRI, an effect that is likely to become more subdued during 2025 and that is detrimental to the financial disposition of households in the longer term,' the report showed. Household debt costs According to the report, although the ratio of household debt costs to disposable income has declined to 8.9%, this remains significantly higher than the 6.8% level in 2021. 'This is prior to the decision by the MPC to adopt a restrictive monetary policy stance at a time when the economy had embarked on a fragile recovery from the Covid-19 pandemic.' The report also showed that the cost of credit (and capital formation) in the South African economy remains 31% higher than four years ago, one of the main reasons for the lethargic economic growth rate that moved in tandem with each increase in the repo rate. ALSO READ: Steep increase in price of household food basket means more people will go hungry Financial strain MD of Altron FinTech, Johan Gellatly, stressed that while there has been some recovery, households remain under significant financial strain following a period of high interest rates. 'The marginal interest-rate cuts have provided some small relief, but more substantial monetary policy easing is required to meaningfully improve household financial resilience, especially in the face of the diminished global growth figures anticipated this year.' Gellatly warned that without further cuts, South Africa risks prolonged economic stagnation, as consumer spending remains subdued. ALSO READ: Modest decline in essential food prices but savings not always passed on
