Botswana Consumer Spending Declines as Rising Cost of Living Hits Household Finances
Botswana’s consumers are struggling to make ends meet, with the ongoing high cost of living[1] continuing to take its toll on household finances. These prevailing concerns over financial headwinds could have a significant impact on consumer spending and ability to pay debt, according to a recent TransUnion survey.
TransUnion’s Q2 2023 Consumer Pulse Study[2] shows that nearly a third (34%, up four percentage points from Q3 2022) of consumers expect to be unable to pay at least one of their current bills and loans in full. Of those consumers, almost a quarter (24%) plan to borrow from a friend or family member to help pay some of their current bills and loans. Overall, nearly one in four (38%) anticipate increased spending on bills and loans, over half (53%) expect to reduce their discretionary spending (dining out, travel and entertainment) and nearly a third (32%) say they’ll decrease large purchases such as appliances and vehicles in the next three months.
“Macroeconomic pressures remain top-of-mind for many consumers, and this cuts across all sectors of society. What they used to buy for 10 pula now costs 15. They’re worried about inflation, rising interest rates, affordability of basic needs (housing, transport and food prices), and this is affecting how they are managing their household finances,” said Kabelo Ramaselwana, chief executive officer of TransUnion Botswana.
Despite decreased future spending, there is a welcomed sign of incomes that appear to be growing. Nearly four in 10 (37%, 11 percentage points higher than Q3 2022) Botswana consumers report an income increase over the last three months. A similar number (38%) said their income level stayed the same and one in four (25%) said their income decreased. Encouragingly, more than seven in 10 (75%) expect their incomes to increase over the next 12 months.
While steady or increasing income levels may help mitigate the effects of inflation and increased debt levels, concerns over cost-of-living and interest rate increases continue to impact spending behaviour for many consumers. Shifts in household spending included cutting back on discretionary spending (63%, up 25 percentage points from Q3 2022), cancelling subscriptions or memberships (35%) and reducing digital services expenses (27%, up 8 percentage points from Q3 2022) in the last three months.
“Overall, the study suggests that consumers are taking a prudent approach in managing their finances in the face of economic uncertainty, including reining in spending and managing their debt levels, with nearly a quarter – 24% – saying they were paying down debt faster,” said Ramaselwana.
Debt levels remain a key concern for many consumers, with higher interest rates affecting decisions to apply for additional credit or refinance. A third of Botswanans (33%) plan to apply for or refinance credit in the next 12 months. Of those who plan to apply, new personal loans are the most common product (27%), followed by new mortgages (22%) and new credit cards (21%).
Managing financial choices
Nearly all consumers (94%) believe access to credit and lending products is important to achieve their financial goals. However, around two in three (65%) believe they lack adequate access to credit and lending products. Younger generations are especially concerned: 73% of Gen Z (born 1995–2004) and 62% of Millennials (born 1980–1994) were unsatisfied with their credit access.
Most consumers (93%) acknowledge the significance of credit monitoring, but less than half of consumers (43%) reported checking their credit reports at least monthly. Ramaselwana says it is especially concerning that nearly a third (32%) of consumers said they didn’t monitor their credit reports at all. This highlights the need for more education and tools to support regular credit monitoring.
Almost half (46%) of respondents believed their credit scores would increase if financiers incorporated non-standard information into their assessments, such as rental payments and nontraditional payment data (i.e., gym memberships) to help ease or make full assessments of the individual if credit information is limited.
Identity risks and usage
Digital fraud attempts are becoming an increasing issue, with 72% of those surveyed reporting being targeted by online, email, phone call or text message fraud attempts over the past three months. The most common types of fraud schemes among those reporting being targeted included money or gift card scams (51%), vishing (fraudulent phone calls to trick consumers into revealing their data, 38%) and phishing (fraudulent emails, websites, social media posts or QR codes designed to steal data, 35%).
As a result, consumers are concerned about the security of their personal information, with 94% expressing concern about divulging their details. Eight in 10 (80%) are worried about identity theft, and nearly the same number (77%) worry about invasions of their privacy when asked about the reason for being concerned with sharing personal information. The data highlights the crucial importance of trust and robust cybersecurity measures in financial transactions and interactions.
ENDS
Notes to Editors:
TransUnion’s Consumer Pulse Study was conducted in Botswana for the first time in Q3 2022. The Study was conducted again in region in Q2 2023.
[1] Trading Economics source here.
[2] The survey polled 401 adult Botswana consumers between 5–22 May 2023.
