Political issues are becoming a growing risk to consumer finances, making consumers more vulnerable. Consumer vulnerability is evident when consumers say their finances influence their relationships and dominate their thoughts, causing them to neglect other important issues. The same old culprits, load shedding and political issues weighed heavily on consumer finances. A total of 85.1% of respondents said their financial problems are affecting their relationships, and 81.2% said they constantly think about their financial problems. However, setting financial goals empowers them to make better financial decisions that reduce their financial vulnerability. Although the overall condition… Political issues are becoming a growing risk to consumer finances, making consumers more vulnerable. Consumer vulnerability is evident when consumers say their finances influence their relationships and dominate their thoughts, causing them to neglect other important issues. The same old culprits, load shedding and political issues weighed heavily on consumer finances. A total of 85.1% of respondents said their financial problems are affecting their relationships, and 81.2% said they constantly think about their financial problems. However, setting financial goals empowers them to make better financial decisions that reduce their financial vulnerability. Although the overall health of South Africa’s consumer finances improved slightly in the third quarter of 2022, it remained under pressure according to the Momentum-Unisa Consumer Financial Vulnerability Index (CFVI), which fell from 48.9 points in the second quarter to a still-below par 49.7 points in the third Quarter. The Index is being produced in partnership with Unisa as part of Momentum’s Science of Success campaign to provide South Africans with information and strategies to accelerate their journey to financial success. ALSO READ: Consumer finances are crumbling under the pressure of rising prices and interest rates What is consumer financial vulnerability? The term “consumer financial vulnerability” implies that consumers experience a sense of financial insecurity or financial inability. The Index provides insight into the psyche of consumers and the extent to which they feel vulnerable about their income, spending, savings and debt-servicing abilities. Rising food prices, load dumps and high fuel prices, as well as political instability and corruption posed the biggest risk to consumer finances, according to key informants who touch consumers every day. They expect risk factors to persist in the fourth quarter, but in a different order. The fastest growing risk factor is politicians who do not focus on consumer needs. Despite moving mostly sideways, the index improved marginally in all four sub-components, suggesting that households should make a stronger contribution to economic growth in the third quarter and may contribute more to positive economic growth after a decline in the second quarter. The index shows a slight improvement in consumer financial vulnerability to 49.7 points compared to the second quarter’s 48.9 points, suggesting that the state of consumer finances remains in a very exposed state of financial vulnerability. But despite the recovery, the index was still worse than a year ago when it stood at 50.3 points. ALSO READ: South African households are more indebted but own R1.2 trillion less Why was there an improvement in consumer finances? The evaluation of the knowledge gained shows that the main reason for the slight improvement in the consumer protection situation is the increase in the income sub-index from 49.8 to 51 points. Changes in the sub-index values were due to more consumers being able to access other sources of income, such as B. Remittances from family and friends, and this improved income contributed to a somewhat lower spending vulnerability. However, high consumer price inflation, particularly from rising food and fuel prices, and higher interest rates put pressure on consumers and limited their ability to afford their usual purchases, forcing them to make cuts. Although consumers were marginally less vulnerable to savings, pressures from rising consumer price inflation and rising interest rates helped reduce the money available to save, and paying off their debts remained consumers’ Achilles’ heel as the rising consumer price inflation and interest rates significantly decreased their ability to repay debt. Risk factors affecting consumer finances include rising food prices, load shedding, high fuel prices, political instability and corruption, persistent unemployment, poverty and inequality, higher municipal tariffs, slow economic growth, and higher interest rates. Other risks include the war in Ukraine, a lack of policy focus on consumer needs, weak service delivery, exchange rate changes, high personal income taxes and lower business confidence. The perceived increase in risk to consumer finances due to political instability and corruption was the biggest change between the two quarters. He finished sixth in the second quarter and fourth in the third quarter. ALSO READ: Consumers becoming less financially vulnerable – survey Consumer Finance Expectations The expectations for the economic environment and consumer finances in the fourth quarter are: The overwhelming majority of key informants (72.5%) expect consumer price inflation to continue to rise rapidly in the fourth quarter. The global and South African economies are also likely to deteriorate in the fourth quarter. 51.0% expect the unemployment rate to increase, while another 32.4% expect it to remain at the current high level. 74.5% of key whistleblowers believe it will take another 2 years for consumer finances to recover from the effects of the pandemic and lockdown. 50.5% expect consumer finances to deteriorate in the fourth quarter. 72.5% expect a rapid price increase in the fourth quarter. 56.9% expect the economy to develop worse in the fourth quarter. The same top four risks are expected for the fourth quarter, but in a different order. Load shedding, political instability and corruption are expected to have the biggest impact on consumer finances, followed by rising food and fuel prices, but the biggest “risk mover” is the policy focus, which is distinct from consumer needs.