South African consumers short of cash before month end

The rising costs of food, transportation, and communication have increasingly left consumers short of cash before the end of the month, leading many to seek financial relief through early access to their wages, according to a study by fintech firm PayCurve.

The cost-of-living crisis is heavily impacting employees’ financial stability, causing a noticeable increase in the need for mid-month liquidity.

The report highlights that the main factors driving this trend are rising costs in transportation, communication services, groceries, and unforeseen family expenses.

Consequently, more individuals are running out of cash prior to month-end and are resorting to early wage access for financial support.

The PayCurve report notes that 20.6% of users of its earned wage access (EWA) service are accessing wages early to cover transportation costs.

Over 18% are using EWA for family emergencies, 11% for communication expenses, and 10.1% for groceries.

PayCurve indicates that 80% of South African employees rely on short-term credit to fill financial gaps, with EWA serving as a crucial alternative.

By enabling workers to access earned wages before payday, EWA helps reduce reliance on expensive credit options and supports better financial stability.

DebtBusters’ recent report reveals that South Africans are allocating approximately 62% of their take-home pay to debt servicing.

This high level of debt servicing is further exacerbated by decreasing business confidence, leading to reduced corporate spending and fewer job opportunities, while wages have not always kept pace with economic pressures.

Employers are finding it challenging to offer salary increases that match inflation. Data from July 2024 shows a slight decrease in regular pay growth in the private sector from 6.0% to 5.9%, while the public sector saw an increase from 6.1% to 6.3%.

In July, Micro-Finance reported that South Africans are increasingly turning to loan sharks as banks have tightened their lending criteria due to a rise in bad debts from high interest rates and inflation affecting disposable incomes.