South Africans are keeping a tight leash on their pocket as high prices bite. Image: iStock
South Africans have switched up their spending habits in response to a tough economy.
Deloitte’s 2023 Consumer Signals report reveals that South African consumers are implementing cost-saving strategies to cope with rising living costs.
Though many are feeling slightly positive about their financial future than they did last year, growing concerns about the country’s economy loom large.
“Despite some indicators improving year-on-year, high food price inflation and persistently high interest rates, mean consumers continue to be cautious about their financial future,” said Rodger George, Consumer Industry Leader at Deloitte Africa.
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The country’s inflation rate hit record-high levels this year, causing immense financial strain for many consumers who were forced to dig deeper into their pockets to survive.
Higher food prices of items like eggs, milk, vegetables and cheese contributed to pushing inflation through the roof. Furthermore, the agricultural sector was hit hard by load shedding, which led to higher operating costs, resulting in high vegetable prices.
Meanwhile, the poultry industry also took a knock from the Avian Flu outbreak mid-2023, which resulted in egg shortages and high prices.
However, South Africans are seemingly managing their expectations amid a tough year – the report indicates that inflation concerns have remained stable over the last 12 months.
“Consumers expect higher prices next month for groceries, clothing and alcohol,” said George.
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Spending intentions slowed down in October, compared to the month prior. This is attributed to consumers holding back on spending in anticipation of Black Friday and the upcoming festive season.
“We saw a similar pattern last year with spending intentions dropping in September and picking up again towards the end of the year,” George said.
Deloitte anticipates further changes in consumer spending over the next four weeks.
“Due to the increasing cost of living in South Africa, consumers in all income groups are expecting to spend more on housing, groceries and entertainment and leisure travel, and less on everyday household goods and education,” George said.
“It is clear across all income groups that essential items take the bulk of the wallet,” he said, adding it was concerning to see that education contributed the lease to wallet share.
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Consumer spending habits differ among countries, with purchase priorities varying across economies.
The report indicates that South Africa’s spending on more discretionary items resembles that of advanced economies.
“Like consumers in advanced economies, South Africans spend the largest share of their income on housing and groceries,” George said.
Furthermore, the report suggests that South Africa is an outlier compared to fellow emerging markets like China, Brazil and India.
“In contrast, Chinese, Brazilian and Indian consumers tend to spend more on recreation, entertainment and leisure travel,” George said.
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While rising living costs have transformed South African spending habits, load shedding cranked up the pocket-pressure.
Deloitte’s report reveals most grocery shoppers were extremely careful not to buy too much food, out of fear it could be spoiled by power cuts.
Meanwhile, 44% of consumers prepared more meals at home than usual over ordering food from restaurants.
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The most wonderful time of the year used to be the perfect time to travel, however affordability has become a barrier for 88% of South Africans who simply don’t have the funds.
Furthermore, 27% of respondents said they’d rather spend their money on anything else but travel.
“Given that leisure travel remains a luxury in South Africa, it is likely that most consumers will choose to spend more time at home with family and friends during the December break,” George said.
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