The third quarter Altron FinTech Household Resilience Index (AFHRI) has bounced back to a level of 109.8, marginally lower than the level of 109.9 recorded in the first quarter of 2022 but 0.6% higher than the second quarter reading, returning to the same level as the comparable pre-Covid-19 third quarter of 2019.

“Since the launch of the AFHRI, the financial resilience of South African households has increased by 9.8% in real terms. The index has fully recovered from the downturn experienced during the Covid-19 pandemic,” says Altron FinTech commissioned economist and Optimum Investment Group economic adviser Dr Roelof Botha.

The latest AFHRI shows positive indicators such as significant employment gains in the public and private sectors and a meaningful increase in total household disposable income during the third quarter of 2022, the latter of which has become a consistent trend.

A significant increase in employment in both the private and public sectors represented one of the major reasons for the continued stability in the financial resilience of households.

“The upward trend in new job creation continued unabated in the third quarter of 2022, with the total number of formal sector employment rising by more than one-million during the first nine months of the year,” Botha comments.

Although more muted than during the first two quarters of the year, another 235 000 new formal sector jobs were created between July and September 2022 and total employment has increased from 14.3-million a year ago to almost 15.8-million, he says.

“It should be noted that employment and labour remuneration in the public and private sectors enjoy a relatively high weighting in the AFHRI, as these indicators represent the mainstay of the financial disposition of most households.”

While the year-on-year index value recorded a marginal decline of 0.2%, which is not cause for undue concern, scrutiny of the trends for the different indicators reveals a more pronounced downward trend for indicators of household wealth, he adds.

The AFHRI trend line shows broad similarity with a number of other key economic indicators including gross domestic product (GDP) and retail trade sales.

The quarter-on-quarter increase was not unexpected against the background of positive real GDP growth during the third quarter of 2022, he adds.

“The South African macroeconomy remains in good shape, as witnessed, inter alia, by positive GDP growth in the third quarter, the resilience of the AFHRI, the strengthening of the rand exchange rate and record export earnings in 2022,” Botha notes.

“It remains to be seen, however, whether government can succeed in reversing the general downbeat mood amongst consumers, owing mainly to the escalation of electricity rationing, decaying roads, high fuel prices and higher inflation and interest rates.”

A point of particular concern pointed out by Botha is the lower household credit extension during the third quarter of 2022 compared with 10 years ago, in real terms.

“This is a clear indication that the high cost of credit and of capital in South Africa is curtailing the country’s growth potential.”

Despite formidable obstacles to economic growth, it is highly likely that the AFHRI will continue its upward momentum during the fourth quarter, mainly as a result of the traditional spike in retail trade sales during November and December of each year, he concludes.