June 18, 2024

Lower to middle-income earners depending on their side hustles to make ends meet

5 min read

A survey conducted by short-term lender Wonga has revealed that side hustles are creating extra income opportunities for lower to middle-income families, which they are reliant on to make ends meet.

Over 6 000 survey respondents shared details about their side hustle, which is defined as an additional undertaking that a person takes in addition to their primary job. The responses included the reasons behind why they started one, the amount of income it generates, how they funded it and the type of business they run.

“South Africans are known to be resilient in the face of adversity, and this reflects in the detailed data from the survey,” says James Williams, head of Marketing at Wonga. “It is encouraging that many of the respondents have found innovative ways in which to turn a challenge into an opportunity and earn additional income.

“Our survey revealed that up to 60% of people earning less than R10 000 a month have taken on a side hustle,” he reports. “The number is significant and more than likely reflects the devastating impact of rising inflation, cost of living increases, and higher interest rates.”

According to the survey, a third of respondents started their side hustle prior to 2020, with the numbers increasing each year since, with 17.7% in 2021 and 24.3% taking on a side hustle in 2022. At the time of the survey in May this year, the figure stood as high as 14% of respondents, showing that more people are turning to alternative income streams.

Below are some of the findings from the survey:

Lower income groups most likely to take up a side hustle

The survey indicates the lower income groups are increasingly reliant on additional income in order to make ends meet. When looking at the individual response data, many are selling poultry, braiding hair, and running spaza shops – all traditional activities within an informal economy – alongside their 9-to-5 jobs.

The most common income band for those who have side hustles is between R1 000 and R5 000 per month (46%), which they earn from their regular day jobs. This substantiates the fact that lower income groups rely on the additional income to meet their financial responsibilities.

Investing more time into side hustles will reap the rewards

Investing more time in a side hustle can be the key to growing it into a more sustainable venture. Nearly half (48%) of respondents indicated they spend over four hours a week on their side hustle, of which 24% make more than R 5 000 per month, with a further 9% earning more than R10 000. For those hustlers who spend two hours or less per week, half earn between R100 and R999, showing that investing time into their endeavour results in higher income.

Only 2% of people with a side hustle earn over R20 000 per month, with 0.3% earning over R40 000 per month.

63% of side-hustlers say their side hustle is self-sustaining, while the other 37% say they need to cover side hustle costs from their regular salary from time to time.

More people are running their side hustles from home

Some 62% of respondents say they operate their side hustle from home, whereas 18% say they operate online. Gauteng scores higher than all other provinces for the most online-based side hustles, with 20% of respondents saying they operate online, compared to only 14% in the Northern Cape.

Starting your side hustle: extra income or following your passion?

Starting a side hustle can serve multiple purposes, and it often boils down to a personal choice between pursuing extra income or following a passion.

Data from the survey shows that almost half (47.6%) of the respondents indicated they have a side hustle to generate a secondary source of income. 18% reported they are exploring creative interests or their passion, and 13% are taking advantage of an opportunity.

Loadshedding is affecting more than half of side-hustlers within the informal economy

The impact of rolling blackouts in the formalised economy is often reported on, but less so in the informal sector. Data from the survey indicates loadshedding is having a significant impact on side-hustlers, especially those operating within the township economy. More than half (53%) of the respondents say they have been negatively affected.

Some 40% of respondents reported that loadshedding has cost them between R1 000 and R4 999 per month and 9% over R10 000 per month. The impact cited by these individuals included lost business (18%); supply chain issues (16%); impact on production (16%); and damage to equipment (14%).

Over a third of side hustlers have adopted off-grid solutions

It is encouraging to note that a significant portion of side-hustlers (38%) have embraced off-grid solutions. These individuals have taken proactive measures to mitigate the impact of power outages on their businesses within the informal economy.

Some of these off-grid solutions include alternative energy sources such as solar panels, generators or battery-powered equipment.

Service industry side-hustles incur limited startup costs

The results showed that people who invested more to start up their side hustles have a higher average side hustle income. It makes sense that increased investment in a business is likely to result in higher returns.

However, there are some in the services industry who earn fairly well from their side hustle with very little startup costs. Some of these include laundry services, food deliveries, childcare, tutoring, baking, vlogging, vintage clothing resale, seamstressing and jewellery design.

One of the advantages of service industry side hustles is that they typically incur lower costs. Compared to starting a business in industries that require substantial investments in physical assets or inventory, service-based side hustles often have lower barriers to entry – making them more accessible to individuals with limited capital.

Popular ways to fund a side hustle

Nearly half of respondents (47.8%) say they spent between R100 and R1 000 getting their side hustle up and running. To fund their side hustle, 20% of respondents used some form of credit or loan, while 13% borrowed money from a friend or family member. Respondents indicated they also used personal savings, bootstrapping, crowdfunding and stokvels.

“It is clear that a side hustle can improve your financial situation,” says Williams. “It is a way to earn income in addition to your full-time job – and with the extra income, it may be easier to pay bills, contribute to your savings or assist with emergency expenses.

“It is, however, important for side-hustlers to carefully consider startup costs and funding options. They need to assess their financial situation, the specific needs of their business, and the associated risks of taking on debt,” he concludes.

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