One of South Africa’s biggest banks warns of South Africans’ poor financial health

Two years since the onset of the Covid-19 pandemic, an array of lockdowns and disruptions in various forms resulted in extremely volatile spending behaviour from consumers, says Isana Cordier, head of consumer goods and services sector coverage at Absa.

Cordier said that while the reality of job losses and economic pressure on consumers was anticipated, Absa struggled to see evidence of this in its merchant spending and card issuing data. However, patterns are now starting to emerge.

“Looking at mobility data specifically, we can see a clear trend starting to emerge. It is evident from this data source that the overall retail footfall to malls has been on a downward trend for the past two years since January 2020, whilst online retail search has stabilised since the initial increase witnessed, albeit at a higher level than at the onset of the pandemic.”

Data from Absa’s Merchant Spend Analytics up to March 2022 tells a story of a consumer that was holding firm, with increased spending in categories across the board since lockdowns eased, the consumer expert said.

“However, we recognise the gap in the data is the cash trading in the system, and that cash is more difficult to track, bearing in mind that South Africa has a large cash economy.

“In our Absa Cash Collection business, we have however identified a similar trend to that witnessed in the mobility data, showing a decline in cash volumes processed, giving rise to a potential warning sign pertaining to the consumer’s financial health.

And, during the month of April Absa picked up on negative growth in its merchant spending data in some categories including groceries, “raising a further flag to our concern,” said Cordier.

“The data, although still very limited, could suggest that economic pressure on consumers is mounting. Further pressure in terms of the fuel price hikes and the cost pressure building in the supply chains as a result, certainly paints a bleak picture on consumer health and economic outlook for South Africa.”

Absa said that South Africa’s recovery from the impact of lockdowns looks like it might be a difficult one for the majority of consumers, especially because of the compounding effect of the interest rate hikes as well as the increasing fuel and energy prices.

“In summary, it seems the chicken has come home to roost,” said Cordier.

The table below shows the total percentage change in spend per category. This is derived from our Merchant Spend Data:

YTD April 2020-2021 2021-2022 CAGR Full Year (2020-2021)
Games and Gaming 644% 109% 294% 432%
Nightclubs 66% 50% 58% 71%
Fast Food 54% 19% 35% 46%
Electronics and Computers 65% 7% 33% 23%
Transportation -21% 114% 30% -4%
Building and Hardware 61% 0% 27% 20%
Home and Garden 70% -5% 27% 21%
Clothing 45% 9% 26% 20%
Stationary and Office Furniture 42% 11% 26% 25%
Automotive 43% 9% 25% 23%
Gambling 13% 33% 23% 39%
Tourism -17% 78% 22% 39%
Garages 16% 13% 14% 26%
Education -17% 33% 5% 5%
Grocery Stores and Supermarkets 4% 0% 2% 4%
Health and Beauty 7% -2% 2% 12%

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One of South Africa’s biggest banks warns of South Africans’ poor financial health