Consumers Optimistic amidst Economic Headwinds

• 77% of respondents expect their incomes to increase
• Another 70% say they are able to pay bills and loans

According to research conducted by TransUnion, three in four (77 percent) expect their incomes to increase in the next year, while seven in ten say they can pay their current bills and loans in full. In all, 26 percent of respondents to TransUnion’s quarterly Consumer Pulse Study said their incomes had increased in the previous three months. Nearly four in 10 (39 percent) said their incomes had remained unchanged, while one in three (35 percent) reported decreased household incomes, largely because of job losses.

These positive signs came despite Botswana’s annual inflation rate soaring to 14.3 percent in July 2022, the highest since December 2008, on the back of elevated global energy prices and the weakening of the Botswana Pula which reached record low lows against the US dollar. With the cost of transportation (9.2 percent), food and non-alcoholic beverages (1.7 percent), and housing and utilities (1.2 percent) rising, this will have an impact on consumer spending in the coming months, according to Weihan Sun, Director of Research and Consulting at TransUnion Africa.

“We’ve seen inflationary pressure curbing discretionary spending amongst Botswana’s households over the past three months, and we expect this trend will continue,” said Sun. “However, the fact that households are still able to service their bills and loan obligations is a sign of resilience, especially during uncertain macroeconomic conditions at a global level.” Of all respondents, 38 percent said they cut back on discretionary spending (dining out, travel, and entertainment) in the past three months, and 58 percent expect to further cut their discretionary spending in the next three months. Nearly 4 in 10 (38 percent) said they had cancelled subscriptions or membership services over the past few months.

Regarding bills and debt management, 32 percent of all survey respondents who said they wouldn’t be able to pay a current bill or loan in full said they intended to cover a partial amount affordable to them, but not the entire outstanding balance. Another 24 percent of those unable to pay will borrow money from a friend or family member, and 22 percent are likely to tap into their savings.

Nearly all (95 percent) consumers considered access to credit and lending products important to achieving their financial goals. However, only 33 percent of all consumers believed they had sufficient access to credit. One in three (34 percent) consumers plan to apply for new or refinance existing credit in the next year, with personal loans (40 percent), new mortgages, home loans or bond payments (22 percent), and private student loans (20 percent) top of the list.

Of consumers who considered applying for new or refinancing existing credit, 45 percent ultimately decided not to. The primary reasons for not taking action were the cost of new credit being too high (28 percent), deciding they did not need new credit (28 percent), or believing their application would be rejected due to their income and employment status (26 percent).

Managing financial choices

Four in 10 (40 percent) consumers say they conduct more than a quarter of their transactions (finances, retail, and business transactions) online. However, for Gen X consumers, that rises to 50 percent. Most consumers (79 percent) believe monitoring their credit is very or extremely important, and 60 percent monitor their credit at least once a month. More than two in five (43 percent) consumers believe their credit scores will increase if businesses leverage alternative data sets not included on a standard credit report, like rental payments, gym membership payments, short-term loan history and buy now, pay later (BNPL) products.