Are things looking up for the South African Consumer?

Deloitte Consumer Signals research conducted on a monthly basis throughout 2023 revealed ongoing consumer concerns around rising prices and inflation.

Many challenges, such as a rise in the cost of living and economic constraints, marked the year 2023. Deloitte Consumer Signals research conducted on a monthly basis throughout 2023 revealed ongoing consumer concerns around rising prices and inflation. Muted saving intentions were displayed by lower-income and middle-income groups consumers who diverted the greater share of their wallets to groceries, housing, clothing and other essential items. Consumer confidence continued to decrease and remained low throughout the period.

As 2024 takes off, the South African consumer industry is not out of the woods yet, although consumers can expect some respite this year in the form of slowing inflation and expected decreased debt servicing costs. However, consumer confidence is expected to remain muted, spurred on by a sluggish economy and continued high levels of unemployment. Uncertainty around the general elections -- expected between May and August 2024 – are also weighing in on confidence levels. Electricity shortages continue to form part of the daily lives of South Africans, further impacting confidence and contributing to weak output growth and higher costs.

The growing reality of state owned logistics infrastructure failing to cope with current levels of imports and exports, has resulted in producers and manufacturers slowing down operations and adjusting their output. In January, the South African Reserve Bank’s Monetary Policy Committee (MPC) alluded to ports and rail issues having become a serious constraint. “These constraints are expected to persist, severely limiting the potential growth of the economy,” said SARB Governor Lesetja Kganyago on January 25, as he announced the MPC decision to hold interest rates at 8.25% per year. Kganyago also noted that household consumption and investment have eased significantly while government spending has been sustained.

Interest rates are expected to decrease as inflation slows down to within the threshold targets set by SARB. This could incentivise greater household spending, particularly on previously postponed larger-ticket items. Essential spending – food and non-alcoholic drinks, clothing and footwear, housing and utilities, communications and transport – will however still account for the majority of total household spending in 2024. Stimuli to boost the economy, create jobs, address current infrastructure challenges and the easing of rates are needed to stimulate growth.