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Navigating Financial Challenges In South Africa Today

Mar 14, 2024 | Money

Among the many obstacles that South Africans are facing in 2024, including loadshedding, elections, and unreliable municipal service delivery, it would seem that the area of finance is racing to the head of the troublesome pack. To navigate the financial challenges that promise (or threaten, depending on how you view it) to shape our year, individuals and households simply must understand these issues, understand how they impact their own financial journey, and be in a position to make informed decisions.  

Let’s unpack some of these challenges and solutions. Hopefully, armed with this knowledge, as well as a handy explanation of the more relevant financial and economic terms, you will feel more prepared to tackle your money journey.  

The Impact Of Political Uncertainty  

Every election year will have its own impact on the economy, and this year is no different. With the possibility of a coalition government, we have a new layer of unpredictability which is undoubtedly going to influence business confidence and the level of volatility in local markets. Not to mention, the risk of a left-leaning government in a post-election world has everyone concerned about service delivery, increased taxations, and ongoing corruption. 

The fact is that all this uncertainty is likely to have a dampening affect on economic stability and growth, serving to add to South Africa’s potential obstacles in 2024.  

Economic Growth and Loadshedding 

According to the experts, we can expect economic growth to sit at around 1.0% or thereabouts in 2024, doubling the growth experienced in 2023. In reality, though, this could be a case of wishful thinking. We need face the fact that there are ongoing challenges, such as loadshedding, which is also expected to put a persistent strain on our country’s economic potential. 

Households need to be aware that high levels of loadshedding are going to affect what we pay and budget accordingly. Yes, the economy is going to grow, but costs could still climb and that holding back and avoid sinking into further debt.  

Embrace Financial Education // Increase Your Financial Literacy 

Financial literacy, at its heart, is the knowledge of how to make smart decisions with your money. In South Africa, the financial literacy rate sits at around 51% is on the lower end of the scale. The thing is, if you’re going to make smarter decisions, you need to understand the lingo. 

Here are the most misunderstood terms that you should understand: 

  • Broker – A person who is authorised to handle business and transactions on behalf of a client.  
  • Credit rating or score – An evaluation of your financial health and an indicator of your credit risk, which is calculated by reviewing your financial activities, including your repayment history. Get your free credit report here!
  • Debt consolidation loan – A single loan provided by one company, which enables you to pay off all your smaller liabilities in a way that’s easier to manage. 
  • Liabilities – A general term used to describe what you (either as an individual or as a business) owe, like a personal loan. 
  • Refinance – A process whereby a borrower takes out a new loan to pay off the existing loan, often giving the benefit of better repayment terms. 
  • Secured debt – Any loan backed by a legal claim on a borrower’s car or home so that if the borrower can’t settle the amount owed, their property is sold to cover this amount.  
  • Unsecured debt – A high-risk loan that isn’t backed by any collateral, which is why there’s usually a higher interest rate and the borrower must have a good credit rating. 
  • Securities – Any medium in which money is invested, including cash, shares, stock, debentures, debenture stock, and bonds. 
  • Unit trust – A form of collective investments, sort of like a pool of assets consisting of shares, fixed-interest stocks and cash.  

Embracing Prudent Financial Practices 

As a nation, we tend to spend it when we’ve got it, not stash it away for a rainy day or the future. It’s a very ‘happy-go-lucky’ approach to money, but hardly helpful long-term.  

Noticeably, increasingly more South Africans are realising that they need to embrace more prudent financial practices, with around 54% of a Sanlam-commissioned study indicating that they would tell their younger selves to treat money as an asset to grow rather than a luxury to spend. 

To that end, create a budget, avoid impulse buying, and be cautious about taking on new debt. You should also consider your future and how you can invest now in order to be able to retire when the time comes. 

Be Strategic About Your Financial Planning  

We thoroughly endorse financial education at every level. That said, it is also prudent to seek professional advice from a financial advisor who specialises in South African financial markets. With an expert at your side, you can create a comprehensive financial plan, review your investments, and provide guidance on tax planning and estate planning.  

In short, it is strategic to get an expert in to help you actually be strategic around your financial planning.  

Feeling Informed? 

We trust that this information will help you feel more confident about your next steps and how you plan to manage your finances going forward. 

Don’t forget that in addition to informative content, AA Inform is also home to various financial tools, including a Free Credit Report, Monthly Personal Budget Calculator, and even a Loan Repayment Calculator.  

Click here to view our finance tools. 

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