eBusiness Weekly
Nick Wilson
News24.com
South African consumers have their backs against the wall, with more than a quarter of the respondents in a survey by global consulting company NielsenIQ indicating they only have enough money for food, shelter and basic goods.
The survey results come as no surprise to local economists, who say that the pressure on the disposable incomes of consumers have been building for some time, given rising interest rates and the soaring costs of food and fuel.
NielsenIQ’s 2023 Consumer Outlook Report showed on Thursday that apart from 26 percent of respondents saying they only had enough for food and other basics like shelter, 41 percent of South Africans felt they were in a worse financial position than a year ago, which was in line with the global average of 40 percent.
The landmark survey, which the consultancy said probes the current mindset of South African consumers, found that 43 percent of respondents already felt like they were living in a recession, with 74% indicating that increased costs of living were to blame for their recent financial struggles. Just under a third had also turned to online platforms to seek better deals, save on petrol and minimise shopping trips.
It also noted that transport costs were among the top categories that consumers planned to spend more on in 2023 (29 percent). The report also flagged that even with the additional burdens on family spending, consumers were still planning to spend as much on groceries and household items in 2023 as before (48 percent).
Pressure builds
Azar Jammine, director and chief economist at Econometrix, told News24 the survey’s findings underlined the pressure consumers have been under over the past two years because of higher food and petrol prices.
While these were expected to ease a bit as the year progresses, he said the damage has already been done to consumers whose salaries have not been keeping pace with the rate of increase of staples such as food and fuel.
Jammine points out that while prices were stabilising this year they still remained high.
This meant that South Africans had to wait until annual salary reviews came up in the hope of securing increases that could help mitigate the pressure.
At the same time, people had also been taking on more debt to keep pace with inflationary pressure eating away at their disposable incomes and as a result were paying higher interest rates on this credit.
Stanlib chief economist Kevin Lings said it is “tough out there” for consumers, adding that confidence levels were also well below average due to a variety of reasons such as rising inflation, concern about electricity supply and water and sanitation services.
The market was also beginning to see an increase in the amount of distressed credit as people increasingly used credit because their income was not keeping pace with inflation.
He said that even with inflation easing a bit, most salaries and wages were not keeping up.
Staples worst affected
“The biggest problem is that the areas where people spend their money (food, fuel, electricity) are areas where inflation is the worst, areas that you can’t avoid,” said Lings.
“The problem is that once you’ve spent your money on things like transport and food, your utilities, water sanitation and electricity, you have very little money left over if you are getting a 5 percent wage increase because those items are taking up a disproportionate amount of your disposable income.”
As a result, other categories of spending were coming under pressure including hardware, pharmacy and appliance sales.
Lings said the clothing sector was still holding up, but this was because of the increasing use of store credit by consumers.
The market was also seeing a significant increase in credit card debt, personal loans, overdrafts as well as more reports of distressed credit.
“We feel that all these elements are going to intensify with interest rates going up further, which obviously adds to the difficulty.”
