TransUnion survey finds consumers battered but resilient
Asurvey by the country’s leading credit bureau, TransUnion Botswana, has found that while a significant portion of consumers report that their incomes dropped in the last three months, many are still able to service their debts.
Local consumers are generally yet to recover from the COVID-19 knock on their disposable incomes, while inflation and interest rates are trending at historic highs and have further worsened the situation amongst households. Unemployment, which was already high prior to the pandemic, has also risen in recent years.
TransUnion’s research, done in September and also covering South Africa and Kenya, found that in Botswana, 35% of surveyed consumers expected that their incomes would decline in the next three months, compared with 28% in Kenya and 19% in South Africa.
The major reason behind the expectation of lower household income in Botswana was the loss of jobs, followed by starting a new business, wage or salary reduction, and closure of business.
Despite the negative outlook, Botswana tops the three surveyed countries in terms of consumers reporting that they expect to be able to pay at least one of their bills or debts in full.
“Credit risk in Botswana is amongst the best in Southern Africa and consumers here are generally less risky,” TransUnion Africa’s director of Financial Services, Research and Consulting, Weihan Sun told the credit bureau’s recent conference.
“More consumers in Botswana expect to be able to pay their debt and that is linked to the less risky profile.”
According to the study, most of the local consumers reporting that they could not pay their debts or loans in full, plan to pay a partial amount or use money from their savings. A lower number of them plan to pay their bills by borrowing from friends and family.
TransUnion’s survey also found that in the past three months, 38% of local consumers had cut back on discretionary spending and cancelled subscriptions and memberships. Nearly 20% of local survey respondents had cancelled or reduced digital services in the last three months. The figures across the different questions generally compare more favourably to South Africa and Kenya.
More than half of the local consumers surveyed in the last three months had cut back spending on retail items such as clothing and electronics, a figure higher than South Africa and Kenya, while survey respondents across all three countries had significantly cut back on larger purchases such as vehicles.
However, looking forward, the TransUnion survey suggests that 77% of local survey respondents expect household incomes to increase in the next 12 months, compared with 74% in South Africa and 81% in Kenya.
Sun said the survey was critical in providing lenders and other financiers with trends in consumer sentiments. “This was the first time we did the survey in Botswana and it gives us insights into how consumers in Botswana are behaving and how they are reacting to the market conditions,” he said.
“It indicates how household incomes are changing, how consumers are budgeting and other factors.”
Bona Life is confident of bouncing back to its formerly prominent spot in the market, following a P180 million recapitalisation effort by sole shareholder, the Botswana Public Officers Pension Fund (BPOPF).
Bona Life first established as Bramer Life in 2014 found itself in statutory management in 2015 after one of its shareholders, a Mauritian company, ran into legal troubles. At the time, help came from BPOPF which had set up a P500 million private equity investment fund run by an asset management firm, Capital Management Botswana (CMB).
However, an acrimonious fallout between BPOPF and CMB over ownership of the investment fund as well as an alleged poor business model at Bona Life pushed the life insurer back into statutory management in 2020.
Addressing the media this week, Bona Life CEO Phatsimo Keakabetse said the injection by BPOPF has strengthened their balance sheet.
She said while a recent survey conducted by an external firm had shown that the market was wary of returning to Bona Life, the company was confident of regaining its position.
“There is a bit of fear and also a bit of optimism which of course is the right sentiment,” she said in response to BusinessWeek enquiries.
“But since coming back to the market, we are seeing so much excitement perhaps cultivated by the environment that we are operating in.”
Before entering its last statutory management, Bona Life was the country’s third-largest life insurer, enjoying healthy patronage from both the public and private sectors. While the company has been regrouping, its competitors have noted a tightening of conditions in the life insurance sector due to COVID-19 and more recently, runaway inflation and interest rates.
Last month, the country’s largest life insurer, Botswana Life, reported that a drop in net premium income due to policy lapses, as clients faced tightening conditions around their personal finances.
Keakabetse said Bona Life’s strategy is centred on the customers and how the company will service them across the country.
“We have built and are still on the way to building platforms centred on the customer.
“Our offering is based on understanding and our value proposition is focused on our customers.
“Before I sell to you, I want to know as much about you as I can, because I want to sell you a product that is about you.
“We sit down and want to understand you as a customer,” she said.
Bona Life boasted a portfolio of over P700 million in policies when the Non-Bank
Financial Institutions Regulatory
Authority placed it under statutory management in 2020. This was after the life insurer failed to meet the prudential capital thresholds set by the regulator.