Namibians showing awareness regarding financial preparedness

In its latest Consumer Pulse Study, TransUnion said Namibian consumers are grappling with continued financial challenges, driven by the impact of job losses, salary reductions and high inflation.

According to the study, 38% of consumers experienced stagnant incomes and 34% experienced decreased incomes in the second quarter of 2024.

However, these figures are both down from the third quarter of 2023, by two percentage points and six percentage points, respectively.

This improvement shows that there is light at the end of the tunnel, with 28% of households also reporting an increase in their income, up from 20% in the third quarter of 2023.

“Namibian consumers are showing remarkable resilience in the face of financial challenges. While many are experiencing financial strain, their optimism about future income prospects and the proactive steps they are taking to manage their finances is commendable,” said Lara Enslin, CEO at TransUnion Namibia.



Budgets

Inflation, averaging 5.9% in 2023, driven by a surge in food prices, has exerted pressure on disposable income and spending.

Although overall consumer inflation decreased to 4.9% in the first five months of 2024, it remained a significant concern for respondents - exacerbated by the sharp escalation of transport inflation driven by rising fuel prices.

Many consumers have revised their household budgets in response to these financial pressures.

Over the past three months, 52% of households opted to reduce discretionary spending, primarily Millennials (27–42 years old) at 56% and Gen X (43–58 years old) at 57%.

Furthermore, 27% cancelled or reduced digital services, and another 27% cancelled subscriptions and memberships.

Enslin noted that this prioritisation of essential expenses over discretionary ones indicates a proactive approach to managing financial challenges.



Optimism and financial planning

A significant 81% of Namibian consumers feel optimistic about their future income prospects, an increase of eight percentage points from the third quarter of 2023.

This optimism is particularly strong among younger generations, with 85% of Gen Z (born 1995 to 2010) and 82% of Millennials expressing confidence in income growth.

Despite a prevailing sense of optimism about future income prospects, 49% of consumers anticipate difficulties in meeting their existing bill and loan obligations – a staggering increase from 45% in the third quarter of 2023.

To cope, 36% of respondents plan to make partial payments, 35% will seek temporary work, and 25% intend to borrow from friends or family.

On a positive note, looking ahead, 44% intended to increase their retirement investments in the coming quarter.

At the same time, 39% plan to spend more on medical services, and 36% on digital services. Additionally, 46% of consumers expect to pay more towards bills and loans in the coming year.



Financial inclusion, access to credit

Nearly all consumers (94%) consider access to credit essential.

However, only 32% feel they have sufficient access, a slight decline from 34% in the third quarter of 2023.

In the second quarter of 2024, credit demand surged, with 41% of respondents planning to seek new credit within the next year.

Millennials and Gen X showed the most interest, at 42% and 43% respectively.

Among those planning to seek credit, 35% considered student loans with 31% (eight percentage points more than in the third quarter of 2023) looking at personal loans.

While most consumers (60%) followed through on planned credit applications, fear of rejection based on income or job status (34%) and the high cost of credit (28%) were notable reasons why they abandoned plans to apply for credit.

This could be as a result of the bank lending rate being at a high of 11.5%, which led to increased debt repayment burdens.



Digital fraud, identity protection

Namibia’s low internet penetration continued in the past quarter, with 75% of consumers conducting less than half their transactions online.

Efforts to combat digital fraud showed some success, with the percentage of respondents unsuccessfully targeted by fraudsters declining to 52% from 59% last year.

However, another 11% were targeted and fell victim to digital fraud, highlighting the need for enhanced vigilance and education on recognising and reporting fraudulent activities.

This is further highlighted by the high percentage (37%) of respondents who remained unaware of any fraud attempts.

Money and gift card scams were the most prevalent fraudulent scheme experienced by those targeted, affecting 37% of respondents, followed by vishing (31%) and phishing (29%).

Consumers’ concern about sharing personal information increased to 91%, with identity theft (76%) and invasion of privacy (75%) being primary concerns.

“These numbers show that strengthening cybersecurity measures and promoting digital literacy among all age groups are crucial to effectively mitigate digital fraud risks. 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,” said Enslin.