Rebuilding SA’s economy starts at home

The current economic landscape in South Africa

Lockdown brought the South African economy to its knees. The year 2020 saw SA record one of its deepest contractions (-6,4%). However, in 2021 as the economy gradually reopened, there was a fantastic recovery, with SA’s GDP bouncing back to 4,9%.

While this was great news for last year, this year we face factors such as rising unemployment and higher labour costs, rises in consumer price inflation, the dynamics of the Ukrainian war, and more, which means our economy is still under severe pressure. Growth in income per capita has been flat since 2010 and declining since 2015 due to economic growth failing to keep up with population growth. According to Deloitte, South Africans will continue to be worse off over the next few years unless the country switches to a higher and more sustainable growth path.

Challenging, yet optimistic household economics

In contrast, household consumption recovered well in 2021 (estimated at 5,6%), but is predicted to average just 2% over the next three years. As per Deloitte’s Global Consumer Tracker, household debt has increased, and consumers are particularly concerned about rising prices, keeping up with payments, putting money away, and reducing credit-card debt.

In spite of this, out of the 23 countries surveyed by Deloitte, South African consumers came out as the most optimistic about improvements in their financial situation over the next three years.

How to strengthen your economy at home

While the country’s economy is being rebuilt on the backs of entrepreneurs, households can do a few things to make a big difference when it comes to rebuilding their own personal finances.

Here are some ideas that will help:

• Start tracking spending habits. It will probably be eye-opening to figure out where money is going when you track spending over 30 or 60 days. You can separate spending under the headings "needs" and "wants" by printing out your bank statement and using highlighters or pens of different colours as you work through it.
• Create a budget. A budget doesn’t have to be super complicated. It is simply a plan for where your money will go. Your bank might have an inbuilt budget planner with its app.

Essentially, there are three steps to creating a budget:

• List your income.
• List your fixed monthly expenses, such as rent or bond payments, water and lights, car payment, insurance, etc.
• List your needs, such as food, fuel, school fees, medical expenses, etc.

Whatever is left over falls under your “discretionary spending”. Determine what percentage of that you can put towards savings, what percentage you can use to pay off credit-card debt, and what you can use for entertainment, gifts, etc.

• Review monthly subscriptions. Many people pay monthly subscriptions for streaming services, internet, cellphones, publications, weight loss programmes, the gym, you name it. It is likely that once you set it up, you don't think about it much, yet your account is debited every month. Review what subscriptions you absolutely must keep, and then cancel your subscription to the services that are non-essential. In addition to cancelling the subscription, make sure to unsubscribe to any newsletters or regular advertisements from that source to reduce the temptation to resubscribe.

Even if the subscription value seems small, reducing these kinds of expenses brings you one step closer to gaining financial stability. Restarting your home’s economic growth should be approached as an iterative process and done in small steps, not one big leap. Every bit helps!

• Reduce and reuse. Change your thinking about what you already have and how you can reuse these things. You can reuse your plastic containers for leftovers or school lunches. You can even arrange a clothing swap event with your girlfriends instead of shopping for new clothes in a store.

See how you can reduce monthly household expenses, such as your water and electricity. Your electric bill accounts for about 12% of the average household budget. While you need electricity (as load-shedding disruptions prove) and water to live at home, there are many ways to reduce your utility bills:

1. Open the curtains to take advantage of natural lighting during the day.
2. Don’t leave the computer running.
3. Unplug your cell phone charger when not charging your phone.
4. Review your home-internet usage – maybe you do not really need the current internet speed you have and a lower option would be cheaper saving you money.
5. Don’t run the dishwasher without a full load.
6. Hang up your washing on the washing line instead of using the tumble dryer.
7. Insulate your geyser.
8. Add a geyser timer to set the hours when water is heated. For example, a few hours in the morning when everyone gets up, and few hours in the evening when everyone need to bath/shower. This is a great way to save on the electricity bill.

• Rethink housing. Although cutting housing costs may seem like a nuclear option, there are ways to downsize that may be more straightforward than you think. If you rent, consider getting a roommate or moving to a cheaper apartment.

If you own the property, see if you can refinance your bond to get a lower interest rate to reduce your monthly payments. See if switching building insurance providers will reduce your monthly insurance premium.

• Consolidate your debt. One way to drastically cut expenses is to consolidate debt. If you have credit cards, those monthly payments could be eating up a big portion of your take-home pay. Check out the interest payments on the cards – likely it’s between 16% and 30%. Debt consolidation means combining multiple debts into one monthly payment. The end goal is to reduce what you pay in interest and lower the monthly payment and pay the debt off.
• Reduce insurance premiums. Another way to reduce monthly expenses is to review the cover options you have taken out. Some may not be relevant anymore, so you can make adjustments to home cover and car insurance. If you pay both, shop around for companies that will bundle them for a cheaper rate. For example, at Santam you get a reduced rate for your car insurance if you also take up house contents cover in one policy.

This is why it is so important to keep your insurance details up to date. Changes in your circumstances and driving habits could allow you to save considerably on your monthly insurance premiums. Or, it could be restrictive, as you may not qualify for the cover you had or want.

1. Reduce risk on unexpected costs. Geysers bursting in the middle of the night, unexpected break-ins, damage to and theft of property and assets can take a hefty slice out of your hard-earned savings, or in some cases, leave you unable to replace what has been lost or damaged. Affordable short-term insurance means you can keep calm and carry on in the face of emergencies.
2. Eat at home. Takeaways, convenience foods, and restaurants are fantastic as a treat, but will erode your budget if they are a staple source of food. Start a meal planner and eat at home. Shop groceries with a list based on the meal planner so that you don’t end up throwing away food that you bought on a whim and never got around to eating.

Focus on squashing debt. Switch to cash only as a reality check of money coming in and out. Start paying off a little extra on your credit cards and other debt. The quicker you get rid of your debt, the more money you will have left over at the end of the month.

It starts at home. Combine your home and car insurance and save, with Santam.

Not only do Santam clients get the best in short-term insurance that offers affordable, value-add car and household insurance, but you also get added extras, such as:

• roadside emergency service
• a chauffeured drive home if your alcohol consumption is above the legal limit
• emergency household repairs for plumbing, locksmith, glaziers, and electrical
• legal advice when you need it most from our experienced attorneys.

Speak to your intermediary or get car insurance online from Santam Insurance today.