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debt servicing index dropped from
56.6 points to 47.8; and the income
index from 57.6 points to 44.8.
This means that consumers experienced
that their cash flow in terms
of income, savings and debt serving
was very exposed to risks, explains
De Clercq.
In addition: Their expenditure,
though, was exposed to mild pressures
only, as they were still able to
complement their spending with new
credit in order to honour expenditure
commitments.
However, not all consumers are
equally vulnerable. There are winners
and there are losers with respect to the
level at which the economy benefits
or disadvantages them, remarks Prof
Carel van Aardt, Research Director
of Unisa’s Bureau of Market Research.
To determine who the winners are
and who are the losers in a macroeconomic
context, it is necessary to
identify the economic variables that
cause consumers to become more or
less vulnerable.
Consumers are not able to afford
their required necessities and
become expenditure vulnerable
The Bureau achieved this by subjecting
historical consumer financial
vulnerability and macro-economic
variables conjointly in a Vector
Autoregression (VAR) model.
The model revealed the following
chain of consumer cash flow vulnerability:
�� Consumers are not able to afford
their required necessities and
become expenditure vulnerable;
�� If they can’t generate more
income to compensate, they
become income vulnerable;
�� They draw on their savings to
finance the excess expenditure
and become savings vulnerable;
�� If they can’t afford the credit they
used to finance their expenditure
and have no savings left as contingency,
they become vulnerable
in terms of debt-servicing.
The model also clearly shows that
the four subcomponents of the CFV
Index- conjointly and in combination
with price increases, the prime
interest rate, the unemployment rate,
household liabilities and household
assets explain almost 100% of the
variance in each subcomponent.
From this analysis it
was possible to identify
the cash flow
winners and losers in
a macro-economic
context, says Van
Aardt.
Further: Much can be done by the
authorities in order to create more
cash flow winners and thus a more
sustainable economic growth path.
Van Aardt believes the following
interventions can go a long way in
improving the way consumers handle
their finances:
�� Teaching people to manage their
finances.
�� Ensuring that people have labour
market and entrepreneurial skills.
�� Ensuring efficient and effective
wealth transfer systems.
�� Offering incentives for people to
save while simultaneously discouraging
unnecessary spending.
�� Ensuring comprehensive price
and debt management systems.
�� Addressing unemployment
head-on: mass re-education,
flexible labour market, demandsupply
linkages and FAS/SDB
arrangements.
�� Ensuring life-long asset growth
through compulsory saving
schemes.
�� High-level financial education
and easily accessible investment
platforms.
�� More efficient use of fiscal
resources plus lower tax burdens.
�� Effective and efficient governance.
About the Author
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