Analysing the consumer market microstructure in South Africa by means of a consumer financial vulnerability survey: Uncovering the predictors of financial vulnerability

As with many developing countries, the consumer macrostructure of South Africa is beset with a number of serious problems including high levels of poverty, a very unequal income distribution, negative personal saving rates and high personal gearing ratios. A consumer financial vulnerability study conducted in 2009 showed that South Africans are generally financially vulnerable, thus confirming these problems in the consumer macrostructure and suggested various reasons for the existence of such problems. The question could be asked regarding the reasons for such problems in South Africa given the economic progress that has been made during the post-apartheid era. In order to identify the reasons for the said problems, this paper focused on the endogenous and exogenous predictors of financial vulnerability in South Africa, which could be derived from the said consumer financial vulnerability survey. The said survey pertained to all consumers in South Africa. A representative sample of households was drawn by means of a stratified multi-phase probabilistic sampling technique. Responses were obtained from 976 households representing 2,329 individual respondents. The data obtained from such respondents was captured in an SPSS file and analysed by means of diagnostic, descriptive, inferential and econometric analysis techniques. Such data was found to be highly valid and reliable. Predictors of consumer financial vulnerability uncovered by this study include, inter alia, endogenous predictors such as over-indebtedness, bad financial planning and, consumers spending more that they earn. Exogenous factors include adverse economic conditions, age and population group. In the analyses that were conducted for this paper, the usual econometric diagnostics (that is, co-linearity, serial correlation and underindentification) of postulated relationships were conducted to ensure valid conclusions regarding predictive relationships. By means of such analyses consumer market microstructure dynamics are described to generate results that could be used to provide input to policy and programme formulation as well as the education of personal financial advisors who deal with financially vulnerable customers. The article recommends that policies and programmes should be introduced to deal directly with the high levels of consumer financial vulnerability in South Africa, e.g. financial education programmes.