Middle-class South Africans are struggling to make it to the end of the month

Two years into the Covid-19 pandemic South African consumers are still facing economic challenges, with finances becoming increasingly stretched as people struggle to make it until the end of the month.

A new report by management consulting firm McKinsey & Company shows South Africans are not only concerned about the economic future of their country, they also worry about their current personal economic situation.

87% of consumers describe it as ‘stretched’, and of these:

• 13% say they are in crisis;
• 32% say they find it hard to make ends meet;
• 42% say they have to make adjustments.

“By and large, this perception cuts across all income levels. Even among the most affluent respondents with a household income above R500,000 per annum, only 28% say they are doing ‘fine’ or ‘very well’,” McKinsey said.

“While only a minority 35% believes that their situation will further deteriorate in 2022, 71% of consumers report that their ability to make ends meet has declined over the last 12 months.”

South Africans are cutting back 

In response to the economic hardship, which has been exacerbated by the pandemic, 61% of South African consumers say they are cutting back on spending.

“This is the highest among all countries surveyed, on par with Brazil, and well above the cut-back rates observed in India (48%), and China (45%),” Mckinsey said.  “All income levels are affected. Even in the highest household income tier, the stated cut-back rate is still 51%.”

• 70% of respondents said they were paying more attention to prices.
• 69% of consumers are looking for sales and promotions.
• 61% say they are delaying purchases.

In all these cases, the figures have come down from highs observed during the Covid-19 crisis, but they are still well above pre-pandemic levels, Mckinsey said.

While brick-and-mortar stores remain the key channel for shoppers in South Africa, online shopping has become much more popular over the course of the past two years.

Online sales in South Africa have more than doubled since 2018 (R 14 billion) and 2020 (R30 billion), surpassing projected growth by R10 billion, Mckinsey said.

13% of consumers in South Africa say they have newly moved online since the pandemic started and the propensity to move online cuts across all income tiers, the group said.

The online channel is particularly popular for purchases of non-perishable products, such as cosmetics, laundry supplies, and household cleaning supplies. The top reasons consumers give for online shopping are convenience (48%), easy price comparisons (38%), avoiding contact with people (33%), and lower prices (33%).

The biggest barriers to ordering grocery and household products online include high cost (57%), worries about receiving faulty items (46%), and the concern that products may differ from how they appear online (43%).

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