Consumers under pressure: South Africans spiral as their disposable income shrinks

Consumers battled in 2023, regardless of income, due to the high cost of living, soaring inflation, interest rates, and food and fuel prices.

The cost of credit also ate into incomes hollowed out by inflation.

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Cost-of living crisis

South Africans tried to survive the cost-of-living crisis in various ways, with 32% in a survey saying they moved to shopping online to get better deals, save on petrol and minimise shopping trips, while 26% said they only had enough money for food, shelter and the basics.

According to the 2023 NIQ Consumer Outlook Report for South Africa, people lived in a financial pressure cooker, with 70% of those surveyed already feeling as though they are living in a recession, while 76% said the increased cost of living was to blame for their financial struggles.

Roller-coaster

Inflation hit its highest level in 13 years in 2022 at an average of 6.9%. In January 2023 inflation decreased to 6.9% from 7.2% in December, but then scaled back up to seven percent in February and 7.1% in March, before slowing to 6.8% in April and 6.3% in May, 5.4% in June and 4.7% in July.

Then it increased to 4.8% in August and jumped to 5.4% in September. It cooled to 5.5% in November.

Spending kept in check

Interest rates remain at the highest level since April 2009 and the impact is showing, even though previous increases have yet to filter through to the real economy.

The year started on a repo rate of 7%, but this soon became 7.25% in January. Then came the shocking 50 basis points (bps) increase in March and another 50bps increase in May which brought the repo rate to 8.25%, where it remained.

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Food prices

Food became so expensive that 66% of people surveyed by Debt Rescue said they started to skip meals because they could not afford three meals per day.

However, Wandile Sihlobo, chief economist of the Agricultural Business Chamber, says consumer food price inflation began to slow from March, from 14.4% to 8% in September.

The product prices underpinning the deceleration were primarily bread, cereals, meat, fish, oils and fats. October disrupted the sixmonth decline, with consumer food inflation increasing to 8.8% from 8% the previous month.

The product prices underpinning the increase were mainly milk, eggs, cheese, fruit and vegetables.

Fuel prices

Although the price of fuel seems to be decreasing, there is new concern as international oil prices have increased again due to attacks on ships in the Red Sea.

The price of unleaded 83 petrol started the year on R21.10 and ended up costing R22.79 this month, with a high of R25.22 in October.

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Not a pretty picture

According to TransUnion’s Consumer Pulse Study for the third quarter, debt management remained a concern, with more than one in three South Africans (38%) unable to meet their current bills and loan obligations.

Of those unable to pay, 39% planned to make partial payments, 36% said they would dip into their savings, 24% would borrow money from friends and family and 11% planned to take out a personal loan.

Another 10% said they simply do not know what they would do.

Household, disposable income

According to the Reserve Bank’s Full Quarterly Bulletin for the third quarter (Q3), household incomes contracted for the third consecutive quarter, with real personal disposable income declining by 0.3% compared to Q2, after shrinking by the same margin in the second quarter.

Personal disposable income declined by 2.9% so far, while inflation continued to outpace wage and salary increases.

The cost of servicing debt increased at the same time, consuming 8.9% of disposable income, up from 8.8% in Q2, which primarily reflected the impact of sharply higher interest rates.