Consumers are cautious about spending

Consumers are burdened by the repayments of car and home loans and that is one of the reasons for them not having enough money to spend.

Consumers are burdened by the repayments of car and home loans and that is one of the reasons for them not having enough money to spend.

Published Jul 15, 2024

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The Pietermaritzburg Economic Justice and Dignity (PMBEJD) group says despite the inflation rate dropping, consumer spending is still low owing to external factors such as the high interest rates and high electricity costs.

This follows the PwC Voice of the Consumer Survey 2024: South Africa findings, which focused on more than 1 000 South Africans and which indicated that 75% of local consumers rank inflation as the number one risk that could impact the country over the next year.

PMBEJD programme co-ordinator Mervyn Abrahams said that despite headline and inflation dropping, consumer confidence was at an all-time low.

“Food prices have definitely come down. But consumers still face high interest rates and high electricity costs.

“Just recently we had an electricity tariff increase, which has led to the consumer having less disposable income. The tariff increase and the current interest rate are above inflation, so although the consumer is seeing food prices come down, they still don’t have enough money due to other high expenses.”

Abrahams said consumers were facing many challenges; that is why luxuries were low on the agenda for them. “Wages don’t go up at the rate that tariff increases go up. We have spoken to consumers and the indications we get is that the order of using their income is prioritised by paying debt, transport, electricity, rent and then groceries.

“All these factors combined mean the consumer has less money in their pockets for food and groceries.”

Abrahams said an interest rate cut was crucial for the consumer.

“Consumers are burdened by the repayments of car and home loans and that is one of the reasons for them not having enough money to spend. I know that the South African Reserve Bank has to wait for inflation to come down to 4.5% before an interest rate drop, but they should not wait too long as this is one of the key ways that the consumer will have more confidence in spending and more disposable income.”

PwC in its survey said that more than three-quarters (77%) of South African consumers expect the most significant increase in spending in the next six months to be on groceries.

“At the same time, 75% of local consumers rank inflation as the number one risk they believe could impact the country over the next year, followed by macro-economic volatility (55%) and social inequality (40%).”

Anton Hugo, PwC Africa Retail’s industry leader, said 1 009 South Africans participated in the global survey which reflects the insights and perspectives of more than 20 000 consumers across 31 countries.

“Consumers largely accepted the price increases of the Covid-19 era, (but) they are showing little tolerance for continued rises, especially as they turn their attention to mounting non-discretionary spending.

“This has resulted in consumers searching for better value for their money, with 44% saying they would consider switching from their preferred brands to more affordable options.”

Lullu Krugel, PwC Africa’s sustainability leader, said that consumers indicated a growing interest in plant-based diets.

“This hints at a rising awareness of the environmental burdens posed by traditional meat production, particularly beef which is a known contributor to greenhouse gas emissions.”

Krugel added that explicitly addressing these consumer concerns may help companies integrate plant-based options into mainstream shopping habits.

“Companies need to be mindful that the main motivations behind these shifts are consumers’ considerations of general health (66%) and product cost (58%) when they make food and dietary choices,” she said.

The Mercury