SA consumers remain anxious yet optimistic about their financial future

People are highly stressed by rising prices and the pandemic, and show concern about climate change: Rodger George – Africa Consumer Industry leader at Deloitte.

FIFI PETERS: In terms of what consumers are worried about, a survey has come out of Deloitte showing that 86% of South Africans are concerned about rising prices; that is the Deloitte Consumer Sentiment Survey. I guess that this is not entirely surprising, given the increase in petrol prices that we’ve paid over the year. They’ve practically doubled. Food is a whole lot more expensive, as are water and electricity. The list goes on.

Here to discuss the survey further and other things that are top of mind for consumers is Rodger George, the Africa Consumer Industry leader at Deloitte. Rodger, thanks so much for your time. I see that your survey was quite extensive. You looked at 23 other countries. So how do our concerns about inflation and higher prices compare to the concerns of consumers elsewhere?

RODGER GEORGE: Fifi, thanks very much and great to be on the show. You’re absolutely right. We survey consumers across 23 countries and in terms of the concern around inflation and increased prices South Africa, out of all 23 countries, was top of the list with 86% of consumers being really concerned. This is a forward-looking view. We asked: ‘In the next month or two or three what are your expectations?’

We also asked them, looking back, where they had experienced price increases in the last month. Overwhelmingly they came up with almost every single category, particularly in the grocery category, where 78% of the consumers that we surveyed said that they had experienced real increases on a month-on-month basis. …restaurant increases at 61%, and alcohol and tobacco at 59%.

What was interesting to me, though, is if you look at the income levels of the respondents who responded, the higher-income earners were actually experiencing higher price increases than the middle and the lower. Although, having said that, they all did experience that. It can probably be put down to the channels where the higher- and the middle- and the lower-income earners shop for their groceries and also for their clothing, and which restaurants they choose to eat at.

FIFI PETERS: How are consumers reacting to this increase? How is it shaping their behaviour, in the sense that are you seeing it’s causing a lot more consumers to tighten their belts, or to live beyond their means?

RODGER GEORGE: I must say that there were a couple of things coming through our survey. The one theme is around finance, consumers who have been cash-strapped since we’ve been running the survey, which is almost at the outset of Covid around the globe. South African consumers without a doubt have been stressed; they have concerns around credit-card balances; the concern around making the next payment has always been there and continues to be there.

I think that environment – where they are cash-strapped, and have a very jaundiced view on potential rising costs – is going to curtail their speeding, and they’re going to divert certain elements of their wallets into non-discretionary spend.

FIFI PETERS: Three out of four South Africans in the survey are pretty financially anxious. I guess, again, this is not a surprise given what has happened to the economy. Just yesterday we saw the level of joblessness in the country – very shocking and worrying. But again, how does this financial anxiety compare to pre-pandemic days?

RODGER GEORGE: I think in terms of financial anxiety we are way, way above the global averages. In the case of making upcoming payments we are 10 percentage points higher than the global average. So South Africans, 39% of them, are saying they’re worried about making the next payment at the end of the month.

In the case of concern around not saving enough, we are 29 percentage points ahead of the global average. If you look at South Africa, this has sort of been quite consistent – the sort of cash flow, the financial squeeze. We’ve checked the data against Covid and where globally we see the movement that’s where the Covid spike occurs; in South Africa it’s been pretty flat. I think the reason for that is that there is an underlying financial crisis which is being masked by the health crisis of Covid. South African consumers are definitely strapped.

What is making life really worse for them is that the Covid pandemic is bringing on a whole lot of other cost increases and input costs into the supply chains, into the product chains, and into the import chains – which is making products more expensive. If you find a cash-strapped customer who does not have money, and he’s already financing a large part of purchases on credit card spend, that does not bode well for the coming season for retailers.

FIFI PETERS: Yet it’s a bit of an anomaly in the survey, in the sense that while South African consumers are extremely financially anxious, particularly about their short-term situation, the longer term looks a bit brighter in that sense. Do you know why they are a lot more optimistic about their long-term finances?

RODGER GEORGE: I must say, Fifi, this puzzled us, because we sat as a team trying to understand what could be the background. To put it in context, South Africa, in terms of all the 23 countries, showed the third-highest levels of optimism in terms of their financial situation improving in the next two years. That’s that almost three out of four consumers are expecting their financial situation to improve, so either they’ve dropped to the bottom, or alternatively I think people expect the vaccine programmes to roll out and the economy to sort of recover – and I think they’re expecting an increase.

Interestingly enough, if you look at the countries that are the most optimistic, India is the highest with Brazil and South Africa [next] – and they are all very close around the mid-70% mark; and then China and Mexico are slightly behind that, which to me also signals an emerging-market phenomenon where people in emerging markets are much more optimistic about the growth of their economy. And if you look at the optimism, that wanes quite significantly as you go down the list and you get to the more established markets, with countries like Italy, France, Japan and Belgium at the bottom of the list; they really have less optimism about the financial situation improving in the next two years.

FIFI PETERS: Then matters around climate change – how is that impacting consumer behaviour?

RODGER GEORGE: This was very, very surprising to us, because for a number of years we’ve been running these surveys, and every year when I ask people if buying a sustainable product is important to you, everyone says yes. And then a couple of questions later on when you ask what drives your purchasing behaviour, most people put ‘price’ and ‘availability’. This year for the first time South Africans actually said that in the last month 75% of the nation has bought a product that is sustainable, and they’ve paid more for it.

So what I’ve seen very much is a shift from saving to actually doing. If you look at the climate and the sustainability of the world’s resources, South Africans are fourth in terms of their concerns around the climate, and are third in terms of their concern that climate change is an emergency.

Once again, if you look at the countries that are most concerned, those sort of Brics emerging-market countries are really concerned and some of the more established markets perhaps show less concern, although a lot of concern – but less than the emerging markets.

FIFI PETERS: What is interesting, though, is that if you look at how companies are responding to consumers, despite the fact that the situation is pretty bleak in South Africa we are seeing quite a lot of interest, particularly from foreign companies wanting to buy South African companies in the consumer space. What do you think that’s a function of?

RODGER GEORGE: If you look at the retailers and the consumer manufacturers, South Africa is quite a well-established market with fairly mature formal retail channels into the market. So I think there’s an existing market that companies can come and sort of play in.

And then there’s also the opportunity of the wider informal market and the surrounding countries and neighbouring countries as a gateway into Africa. So I think the fundamentals are good. I think our financial institutions are good, as is the rule of law.

So there are a lot of plus points vesting in South Africa and, if you compare it to a number of the emerging markets, we do look like we offer a lot of opportunity. Of course, if you look at the numbers across the African continent, they are growing middle-class populations, with lots of consumers that you are able to now reach through lots of digital channels, as an example. I do think it does offer a lot of opportunities for companies in the continent to expand in terms of foreign investment, and the returns are much better than putting your money, I guess, into a bank.

FIFI PETERS: Rodger, thanks so much for giving us that insight. We’ll leave it there. Rodger George is the Africa Consumer Industry leader at Deloitte.



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