New data shows that cash-trapped South Africans will be conscious of what they spend their money on, with many saying they intend to cut back on non-essential spending as they battle to pay bills and service credit – which will impact the retail sector over the upcoming festive season.
This was flagged by TransUnion’s Q4 Consumer Pulse Study, which highlighted the financial standings of South African consumers and how they intend to utilise their disposable income over the next three months.
According to TransUnion, only 59% of households expect to be able to meet their current bills and loan obligations.
A larger proportion of Gen Z (born 1995-2004) and Millennial (born 1981-1996) respondents indicated that they were struggling the most and would not be able to meet their credit commitments in the coming quarter – 34% and 42%, respectively.
As a result, the credit reporting agency added that 34% of respondents will dip into their savings to service their debt in the short term, while 31% plan to make at least partial payments within their means.
The report also noted that strained consumers would adapt their budget strategies over the next quarter.
Nearly half (47%) of consumers said they would cut down on dining out, travel and entertainment and spend less on retail shopping and big purchases in the next three months.
This cut in spending is mainly targeted towards clothing and electronics, while other cuts include cancelling memberships – such as the gym – and cancelling digital services and subscriptions.
TransUnion further noted that South Africa’s retail trade rose by 0.9% from a year earlier in September 2023, following a downwardly revised 0.3% decrease in the prior month and better than market forecasts of a 0.1% increase.
“Retailers are hoping for a further recovery in spending during the festive season, but with the cost of goods having risen by 5.4%, consumers are mindful of affordability,” it said.
The strain on consumers and retail spending was also highlighted after Black Friday and Cyber Monday in 2023, with data showing a decline in sales.
“The rand value on average over the extended Black Friday period was – in real terms that strips out inflation – behind the past few years. This shows the pressure consumers are under,” said Product Manager at Ecentric Payment Systems.
“Companies that use Ecentric’s payment dashboard to monitor sales, which includes South Africa’s largest retailers, processed more than R1.1 billion in deals.
“However, there was a 5.06% decline in transaction volume, and, in real terms, value dropped 12%,” the company added.