South Africans are cutting expenses to make it to the end of the month

 ·20 Sep 2022

The 2022Q3 Retail Survey from the Bureau of Economic Research (BER) shows that the retail sector in South Africa is proving resilient in the face of the many economic pressures facing the country.

But other data from the Association for Savings and Investment South Africa (ASISA) shows that households remain under pressure and are cutting down on financial products – among many other things – to make ends meet each month.

The BER survey shows that although general business conditions are down relative to Q3 last year, confidence levels have remained elevated and above the long-term average.

Just over half (51%) of respondents reported being satisfied with prevailing business conditions, compared to 49% of respondents last quarter. Sub-categories within the retail sector, however, reveal varying trends, with confidence among retailers of non-durable goods  – like food and beverages, pharmaceuticals, etc – most affected by constraints on consumer spending.

Elevated confidence levels may partly be driven by the boost to turnover resulting from high selling prices, the BER said. “Overall, sales volumes are down slightly, which suggests that prices, rather than volumes, could be driving confidence,” it said.

The BER Retail survey also asks respondents whether the rate of increase in average prices is up/down/the same as last year. While inflationary pressure remains severe, there are early indications that the rate of selling and purchase price increases for non-durable goods might be reaching a turning point.

Cutting back

Despite a slight boost in consumer confidence in certain retail markets, ASISA noted this week that severe market volatility and a steep increase in the cost of living for consumers had tested consumer financial resilience.

Financially stressed consumers are getting rid of long-term risk protection such as life and disability cover as harsh economic realities take their toll, it said.

When compared to last year, consumers not only bought fewer risk policies in the first six months of this year – they also lapsed a higher number of policies. A lapse occurs when the policyholder stops paying premiums for a risk policy with no accumulated fund value,” the association pointed out.

At the start of 2022, there were 34.3 million recurring premium risk policies in force. However, while consumers bought 4.4 million new risk policies in the first six months of this year, 4.3 million risk policies lapsed, and claims against 199,023 policies were submitted.

The deputy chair of ASISA’s life and risk board committee, Hennie de Villiers, said that consumers have had to absorb unprecedented fuel price increases as well as higher food prices and rising interest rates in the first half of this year.

He noted that 64% of South Africans between the ages of 25 to 34 were also unemployed, according to the latest Quarterly Labour Force Survey from Statistics South Africa.

“South Africans in this age group are meant to be economically active and under normal circumstances be concerned with buying risk cover to offer financial protection to their growing families as well as cover credit purchases such as mortgage bonds,” said de Villiers.

He added, however, that many of those who are employed are likely to be reluctant to commit to monthly premium payments while living costs are at an all-time high.

Even credit life policies failed to achieve meaningful growth in the first half of 2022, which indicates that consumers were struggling to access credit or practising greater restraint when buying on credit, said De Villiers.

Data from the latest Old Mutual Savings and Investment Monitor survey (OMSIM) shows that consumers have learned a hard lesson over the last two years, sparked by the Covid pandemic, and are being more cautious with their spending.

The OMSIM tracks shifts in financial attitudes and behaviour of the country’s working population. For the report, the financial services company interviewed 1,505 respondents of various ages, personal income ranges, and genders.

Following the damage brought on by Covid-19, almost 9 in 10 (86%) of working South Africans have changed how they manage their money.

Old Mutual’s report found that respondents are increasingly turning to loyalty programmes and discount rewards to push their money further, while also switching to cheaper food brands, mobile packages and entertainment options to save.

There has also been a move to cut ‘luxuries’ like domestic workers and gym contracts and to hold off on big purchases.

Earlier this month, Walmart-owned wholesale group Massmart reported an increase in demand for private label brands as cash-strapped consumers opt to entertain at home and look for more affordable foods.

Read: Rand eyes R18.00 to the dollar as load shedding and rate uncertainty bite

Show comments
Subscribe to our daily newsletter