In April 2018, the International Monetary Fund (IMF) estimated that the South African economy will grow by 1.5% this year. However, the fund recently revised its projection to 0.8% since the country moved into a recession in the second quarter of this calendar year.
In addition to the IMF, the World Bank and the Reserve Bank also changed their growth forecasts downward to reflect constrained growth for the months to come.v
What does this mean for the average South African?
A prolonged low economic growth environment is characterised by high unemployment, declining corporate and personal incomes, low consumer spending and therefore subdued economic activity, as well as an increase in government borrowing as a result of lower revenues, mainly income tax.
A recent survey released by Statistics South Africa, revealed that there was a decrease of 69,000 in the total number of jobs available in the second quarter of 2018, bringing the total number of people employed in the formal, non-agricultural sector to 9.7 million. The weakening of the Rand, coupled with the increase in the international price of oil, culminated in the recent fuel and consumer goods price increases which will further increase the financial strain on individuals. According to data released by Statistics SA, South Africans are spending 2,8% less on food and non-alcoholic beverages, 6,8% less on clothing and footwear and 6,1% less on transport fees.
How to cope during these difficult times
“We cannot avoid the effects of a challenging economic environment, however we can implement ways to improve our current situation and prepare for the future” says Johan Nel, CEO of Iemas Financial Services. Drastic lifestyle changes might be required, such as identifying those areas where significant spending cuts can be made. Start by looking at items in your budget such as entertainment, dining out, take-out meals, unnecessary travel expenses, etc.
“It is important to get everyone in the household on board. Talk to your children about the reasons for cutting down on expenses and take this opportunity to educate them about the importance of managing one’s finances responsibly. The sooner they learn, the better” advises Nel.
One might be tempted to tap into investments and savings, however this should be an absolute last resort. “It is important to continue to pay your bills every time and on time to protect your financial record and avoid getting trapped in a debt spiral” says Nel.
Look to the experts for assistance
In addition to consulting a financial advisor to assist you with your financial planning, you can also look for affordable loan products at authorised and credible financial institutions. “As the largest financial services co-operative in South Africa, Iemas cares about the financial well-being of its members. That is why we have developed tailor-made products and services such as a consolidation loan, an educational loan and a purchase card which let you earn rewards every time you swipe at over 10,000 retailers nationwide” says Nel.
Make the right financial decisions for your current situation and circumstances and use online material as well as free financial education opportunities.
Read related blog article here: Iemas offers affordable financing solutions to assits matric graduates in building a bright future.