A recent study by TransUnion – a credit reporting agency – on household debt has painted an impressive picture of the country’s financial health in the second quarter of 2024, saying consumers polled are optimistic about financial stability and economic wellbeing.
The Consumer Pulse Study recorded a 41 percent increase in consumer income in the period under review, representing a four percent increase when compared to the same period last year. TransUnion said the results signal economic recovery and increased consumer confidence in Botswana.
TransUnion said the survey is a vital pulse-check on consumer behaviour and attitudes.
The agency attributes the recent improvement to an uptick in scores of households starting new businesses. According to the agency, a quarter of surveyed households reported starting new businesses. Additionally, the improvement aligns with the notable rise in formal sector earnings, which saw a substantial 13.1 percent increase at the end of last year, up from 8 percent wage growth in 2022.
Outlook for future income also paints an optimistic picture, with 77 percent of households expecting more income improvements over the next 12 months, especially among Gen Z and Millennials.
The survey also reported an increase in financial stability by households, with three quarters reporting the ability to pay their bills in full, which is a marked improvement from previous quarters and reflects a broader trend of economic stabilisation. The proportion of households struggling to make payments has decreased by 8 percent from 34 percent during the period under review to 26 percent this year. Of this struggling segregate, 43 percent intend to make partial payments. A further 21 percent of households planned to use their savings to service debts with 11 percent planning to get personal loans to cover their bills.
Debt management also remains a key priority for households, with 25 percent of households focusing on reducing their debt, and 29 percent increasing their contributions to emergency funds in the past three months. Despite these positive trends, household discretionary spending has decreased to 56 percent, with 28 percent cancelling subscriptions and memberships, signalling a cautious approach to financial management. Looking ahead, households expect to further reduce their spending by cutting back on retail shopping, scaling down on large purchases and reallocating their spending towards essential needs, with a notable increase in spending on bills and loans (46 percent), retirement funds (45 percent), and medical care (42 percent).
According to the study, 96 percent of consumers consider credit access crucial, and perceived access has improved by 10 percentage points from last year, as 45 percent of respondents now feel adequately served by credit facilities, with Millennials (48 percent) and Gen X (49 percent) leading this trend. However, challenges remain. While 33 percent of respondents plan to apply for new or refinance existing credit, 50 percent have abandoned their credit plans due to high costs. This highlights the ongoing issue of affordability in the credit market, despite Botswana’s efforts to enhance credit aConcerningence to the quarterly study, digital fraud persists, with 72 percent of respondents having been targeted by digital fraud schemes, although the proportion of victims has decreased from 8 percent to 5 percent. Vishing, phishing and smishing showed significant increases compared to the previous year.
Vishing (involving fraudulent phone calls to obtain data and reported by 47 percent of respondents) emerged as the most prevalent scam, marking an eight percentage-point increase from last year. Additionally, phishing (which includes fraudulent emails, websites and social posts aimed at data theft and reported by 40 percent of respondents) increased by six percentage points. Smishing (fraudulent text messages targeting data extraction and reported by 38 percent of respondents) also saw a six percentage-point increase from Q2 last year. Money or gift card scams, while still prevalent (reported by 41 percent of respondents), dropped from the most reported fraud scheme last year by a notable 10 percentage points. Surprisingly, 23 percent of consumers reported being unaware of any targeted fraud schemes, underlining the need for heightened awareness and vigilance against digital fraud.
TransUnion’s Q2 2024 survey paints a picture of a resilient and cautiously optimistic Botswana. While financial health is improving and income gains are being realised, households remain prudent in their spending and wary of digital threats. As Botswana continues to enhance credit access and address affordability issues, the road ahead looks promising but demands careful navigation.
