South Africans seeking greater financial returns are now buying riskier investments – some even going as far as gambling – to cope with growing financial pressures, according to the Old Mutual Savings and Investment Monitor (OMSIM) published on Wednesday.
The report, which was released during National Savings Month, says gambling is now seen by some South Africans as a way to make ends meet.
Research reveals that 44% of working South Africans have admitted to participating in online gambling. More alarmingly, 76% of young people between the ages of 18 and 29 admitted to doing the same.
More than a third of respondents said they gamble to meet their monthly financial commitments, with data indicating this is more prevalent among lower-income workers.
“Risky behavior is highest among younger Gen Z investors. Age changes this view, with only 33% of those aged 50 and over saying they would choose risky investments,” said the Old Mutual’s Knowledge and Ideas Manager, Vuyokazi Mabude.
“However, many high-income earners, including older earners, exhibit risky investment behavior, likely because they can afford to do so.”
Price pressures continue
The Old Mutual research release follows Statistics SA’s release of the country’s latest consumer price index (CPI) figure, which showed inflation hit 7.4% in June, a record high in 13 years.
South African consumers have faced mounting cost pressures since the Russian invasion of Ukraine in February. Since then, the price of fuel and food has skyrocketed, leaving consumers with less money in their pockets.
Adding to the financial situation of South Africans, 52% of respondents reportedly dipped into their savings, while 40% admitted to borrowing money from friends or family just to make ends meet.
Unfortunately, there doesn’t seem to be an end in sight for cash-strapped consumers, with the South African Reserve Bank (SARB) set to announce another interest rate hike on Thursday.
A Reuters poll of economists said the Sarb would most likely raise interest rates by 50 basis points to 5.25% in its attempts to curb inflation.
However, research from Old Mutual shows that it is not all gloomy and dire for South Africans, as some consumers appear to have learned the valuable lesson of saving after being plunged into a whirlwind of uncertainty at the height of the Covid-19 pandemic.
The study shows that 39% of respondents have now saved the equivalent of more than three months’ income in order to protect themselves in the event of job loss.
A further 37% said they had developed an emergency savings fund to protect them from rainy days.
Others have gone so far as to seek other sources of income, taking on more seasonal jobs to live more comfortably each month.
“Overall, the OMSIM 2022 research showed that South Africans have learned some of the hard lessons of the Covid-19 period,” says Mabude.
“The shock of losing or facing a drop in income has caused many people to review and reassess their finances. Positive changes have been made and have had an impact on attitudes towards saving – something that will stand them in good stead as they face the new challenges presented by 2022.” – Moneyweb