‘Ramaphoria’ has now completely reversed: economists

FNB has published its latest Consumer Confidence Index (CCI) showing that consumer confidence remains trapped at a two-year low, with the country’s economic prospects expected to worsen before they get better.

The FNB/BER CCI combines the results of three questions posed to adults in South Africa: namely the expected performance of the economy, the expected financial position of households and the rating of the appropriateness of the present time to buy durable goods, such as furniture, appliances and electronic equipment.

Consumer confidence is expressed as a net balance. The net balance is derived as the percentage of respondents expecting an improvement/good time to buy durable goods less the percentage expecting a deterioration/bad time to buy durable goods.

The group’s data shows that the consumer-confidence index stayed at -7 in the fourth quarter, the lowest level since the end of 2017 and well off the record high of 26 when Cyril Ramaphosa took over as president two years ago, dubbed ‘Ramaphoria’.

Bolstered by hopes that President Ramaphosa would be quick to root out corruption and stimulate economic growth, consumer confidence held firm (trading between +2 and +5) during the first half of 2019, despite a significant further deterioration in South Africa’s economic fundamentals, FNB said.

“The CCI finally capitulated to -7 during the third quarter of 2019, only one point north of the -8 recorded in the final quarter before Mr. Ramaphosa’s election as president.

“Consumer confidence remained at this low level during the fourth quarter, suggesting that the confidence gains since Mr. Ramaphosa’s election have now been completely reversed and South Africa’s grim economic reality has become apparent to consumers.”

With economic growth hovering at around 0.5% year-on-year since mid-2018 and the debilitating risk that Eskom’s electricity supply and financial problems poses to the domestic economy, it is not surprising that consumers are now also distressed about South Africa’s economic prospect, FNB said.

It added that heightened concerns about the economy, coupled with a depreciation in the rand exchange rate (from around R14/dollar in December 2014 to closer to R15/dollar at the end of 2019) and high real interest rates, are in turn dampening consumers’ appetite for and ability to afford big-ticket purchases.

“With household budgets and consumer confidence now both under pressure, consumers are likely to tighten the reins on their purchases of expensive luxuries,” said FNB economist Siphamandla Mkhwanazi.

“Instead, the tills of retailers in clothing, footwear, food, beverages and other basic necessities – as well as retailers that are perceived to offer great value for money – are likely to have jingled more frequently during the 2019 festive season.”


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‘Ramaphoria’ has now completely reversed: economists