More South Africans dabble in risky investments to get by

South Africans looking for greater financial returns are now buying into riskier investments – some even going as far as gambling – to deal with mounting financial pressures, according to the Old Mutual Savings and Investment Monitor (OMSIM) released on Wednesday.

The report, which has come out during National Savings Month, indicates that gambling is now seen by some South Africans as one way to make ends meet.

The research reveals that 44% of working South Africans have admitted to taking part in online gambling. More alarmingly, 76% of young people aged between 18 and 29 have admitted to doing the same.

More than a third of respondents said they gamble to meet their monthly financial commitments, with the data indicating that this is more prevalent among low-income workers.

“Risky behaviour is highest among young Gen-Z investors. Age modifies this approach, with only 33% of people aged 50 and above saying they would choose risky investments,” Old Mutual’s head of knowledge & insights Vuyokazi Mabude says.

“However, many high-income earners, including older earners, exhibit risky investment behaviour, probably because they have the means to do so.”

Price pressures continue

The release of the Old Mutual research follows Statistics SA’s release of the country’s latest Consumer Price Index (CPI) figure, which shows that inflation reached 7.4% in June – a 13-year high.

South African consumers have been faced with mounting cost pressures since the Russian invasion of Ukraine in February. Since then, the price of fuel and food has skyrocketed, leaving consumers with less cash in their pockets.

Read: Inflation: What it is and how it affects you

Adding to the financial picture for South Africans is the finding that 52% of respondents have reportedly dipped into their savings, while 40% admitted to borrowing money from friends or family just to be able to make ends meet.

Unfortunately, there seems to be no end in sight for cash-strapped consumers, with the South African Reserve Bank (Sarb) expected to announce further interest rate hike on Thursday.

A Reuters poll of economists indicated that the Sarb is most likely going to increase interest rates by 50 basis points to 5.25% in its attempts to slow down inflation.

Not all bad news

However, the Old Mutual research shows that it is not all gloom and doom for South Africans as some consumers seem to have learnt the valuable lesson of saving after being tossed into a whirlwind of uncertainty during the height of the Covid-19 pandemic.

The research shows that 39% of respondents have now saved up the equivalent of more than three months’ income in order to protect themselves in the event of losing their jobs.

A further 37% reported developing an emergency saving funds to shield them from rainy days.

Others have gone as far as seeking alternative sources of income, taking up more seasonal employment to get them through each month more comfortably.

“Overall, the 2022 OMSIM research has shown that South Africans have learned from some of the harsh lessons of the Covid-19 period,” Mabude says.

“The shock of losing or facing reduced income caused many to relook and re-evaluate their finances. Positive changes were made and have impacted the attitudes towards savings – something that will stand them in good stead while they face the new challenges presented by 2022.”