Botswana Households Experience Improved Financial Wellbeing

• TransUnion Q2 2024 Consumer Pulse Study shows 77% of Botswanan consumers expect their income to increase in the coming year
• Economic improvements driven by easing inflation and higher wages are being navigated cautiously, with a focus on financial stability and debt management
• The demand for credit remains high, and consumers are keenly aware of the importance of monitoring their credit reports

According to information and insights company TransUnion’s latest Consumer Pulse Study, Botswana’s economic landscape is showing positive shifts in the second quarter of 2024.

Household incomes improved, with 41% of consumers reporting income increases over the past three months, a notable rise of four percentage points from the previous year, and a figure that is almost double the number of households that saw a decline in income (21%). This improvement aligns with 25% of households starting new businesses to increase their income, as well as Botswana’s formal sector earnings, which saw a 13.1% increase by the end of last year, compared to 8% wage growth in 2022.

Further compounding the positive macroeconomic climate, the inflation rate has decelerated significantly, to 3.4% (January – April) in 2024, down from 5.1% in 2023 and a peak of 12.2% in 2022. While inflation is expected to average out at 4% for the year, this significant decrease is contributing to a feeling of improved financial wellbeing and buoyancy. Optimism about future income has risen, with 77% expecting an increase over the coming 12 months (up three percentage points compared to 2023).

Kabelo Ramaselwana, Country Manager at TransUnion Botswana, notes that the slowdown in inflation supports disposable income growth and these economic improvements and income increases are being managed responsibly by Botswanan consumers. “However, it is possible that the high unemployment rate combined with income inequality are putting the brakes on and could further limit household spending growth in the near-term.”

Ability to pay bills is vastly improved

According to the study, 74% of consumers expect to be able to pay their bills in full, with the proportion of households struggling to make payments down by eight percentage points to 26% compared to the same time last year. Of this struggling segment, 43% plan to make at least partial payments. A further 21% plan to dip into their savings to service their debt responsibilities and, in an increase of seven percentage points from 2023, 11% plan to take out a personal loan to cover their bills.

As households gain traction towards financial stability, 25% are focusing on paying down their debt faster and 29% are building financial resilience with increased contributions to emergency funds.

Consumers are also cutting back on non-essential expenditure, with 56% of respondents reducing their discretionary spending over the past three months, with 28% cancelling subscriptions and memberships. Looking ahead, consumers plan to focus on paying bills and loans (46%), boost retirement funds and investing (45%), and pay for medical care and services (42%).

Credit and financial inclusion

Access to credit remains crucial for Botswana’s consumers, with 96% considering it important. Perceived access to credit improved markedly by 10 percentage points from last year as 45% felt adequately served, notably among Millennials (27–42 years old) at 48% and Gen X (43–58 years old) at 49%. Looking ahead, 33% of consumers plan to apply for new or refinance existing credit, with Millennials (34%) showing the highest demand.

Among those planning to apply for new or refinance existing credit within the next year, 37% indicated a demand for new personal loans, reflecting a notable nine percentage-point increase from the prior year. Gen Zs (48%) and Millennials (35%) were the most interested in acquiring personal loans while, overall, 34% were considering new home loans, a significant 12 percentage-point rise from the previous year.

However, 50% of potential borrowers abandoned their plans to take out new credit, with 31% citing the high cost of credit as the reason for this decision.

Monitoring credit reports

Monitoring their credit status is viewed as extremely, very or moderately important by 85% of consumers, yet only 44% review their credit reports monthly. A growing number of consumers (55%, up from 46% last year) believe that incorporating alternative data, such as rental payments would improve their credit scores.

Fraud and consumer education

Digital fraud remains a concern, with 72% (up nine percentage points) of respondents having been targeted by fraud schemes, although only 5% fell victim, a decrease from 8% the previous year. Vishing (47%), phishing (40%), and smishing (38%) are the most prevalent scams. Surprisingly, 23% of consumers reported being unaware of any targeted fraud schemes. Nearly all (96% in Q2 2024, up from 94% the previous year) consumers expressed concerns about sharing personal information. Their main concerns included fear of invasion of privacy (84%), worries about identity theft (77%), and receiving unsolicited marketing communications (36%).

“These findings highlight the importance of robust data protection measures and privacy policies. Addressing these concerns is crucial for businesses to build consumer trust and ensure responsible data handling practices. At the same time, consumers should check their credit reports regularly to flag any possible fraud that affects their credit scores, as early as possible,” says Ramaselwana.

Consumers can learn more about their credit profile from TransUnion here.