- More than a quarter of those surveyed by global consultancy NielsenIQ only had enough money for food, shelter and basic goods.
- A full 41% of South African consumers surveyed felt they were in a worse financial position than a year ago.
- Local economists say consumers are under severe pressure from rising interest rates and skyrocketing inflation.
- For more financial news, go to News24 Business cover.
South African consumers are against a wall, with more than a quarter of respondents in a survey by global consultancy NielsenIQ saying they only have enough money for food, shelter and basic goods.
The survey results do not surprise local economists, who say pressure on consumers’ disposable income has been building for some time, given rising interest rates and rising food and fuel costs.
NielsenIQ’s Consumer Insights Report 2023 showed on Thursday that apart from the 26% of respondents who said they only had enough for food and other basics like shelter, 41% of South Africans felt they were in a worse financial position. than a year ago, which was in line with the world average of 40%.
The landmark survey, which the consultancy says investigates the current mindset of South African consumers, found that 43% of respondents already felt they were living in a recession, with 74% saying rising cost of living was to blame. his recent financial troubles. . Just under a third also turned to online platforms to search for better deals, save gas and minimize shopping trips.
It also noted that transportation costs were among the top categories where consumers planned to spend more in 2023 (29%). The report also noted that even with the added burdens on household spending, consumers still planned to spend as much on groceries and household items in 2023 as before (48%).
The pressure builds
Azar Jammine, director and chief economist at Econometrix, told News24 that the survey findings underscore the pressure consumers have been under in the past two years from rising food and gasoline prices.
While these were expected to ease somewhat as the year progressed, he said the damage has already been done to consumers whose wages haven’t kept pace with rising staples like food and fuel.
Jammine notes that although prices have stabilized this year, they have still remained high.
This meant that South Africans had to wait until annual wage reviews were submitted in the hope of gaining increases that could help ease the pressure.
At the same time, people had also been borrowing more to keep up with the inflationary pressure that was eating away at their disposable income, and as a result, they were paying higher interest rates for this credit.
Stanlib chief economist Kevin Lings said it was “difficult” for consumers, adding that confidence levels were also well below average for a variety of reasons, including rising inflation, concerns 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 incomes were not keeping up with inflation.
He said that even with inflation easing a bit, most wages and salaries were not keeping up.
The most affected staples
“The biggest problem is that the areas where people spend their money — food, fuel, electricity — are areas where inflation is worst, areas that can’t be avoided,” Lings said.
“The problem is that once you’ve spent your money on things like transportation and food, your utilities, water, sanitation, and electricity, you have very little money left over if you get a 5% pay raise because those items are taking a disproportionate amount. of your disposable income.
As a result, other spending categories were under pressure, including sales of hardware, pharmacy, and home appliances.
Lings said the garment sector was still holding out, but this was due to consumers’ increasing use of store credit.
The market was also seeing a significant increase in credit card debt, personal loans, overdrafts, as well as more distressed credit reports.
“We think all of these elements are going to intensify with interest rates going even higher, which obviously adds to the difficulty.”
