Big shift for consumer spending in South Africa as stressed-out shoppers hunt for spare cash

Consumer insights group NielsenIQ has published its latest Consumer Outlook report for 2023, highlighting the current plight of consumers in South Africa and how they are shifting their behaviour to deal with the rising cost of living.

The report is based on the group’s consumer survey and provides a deep dive into consumers’ sentiments and habits when it comes to maintaining their financial health.

According to the responses, 41% of South Africans say they are in a worse financial position than a year ago.

Widespread volatility has created a group of “unsettled consumers” who have had to face spikes in inflation and multiple interest rate hikes throughout the last 12 months.

As a result of this volatility, consumers are acting with extreme caution – a mindset that is likely to linger for some time, said NielsenIQ.

To make it until the end of the month with enough money for essentials such as food and housing, consumers are changing the way they spend – chasing promotions, taking advantage of discounts, and cutting discretionary spending.

Some of the items being cut from monthly budgets are things like out-of-home dining (23%), out-of-home entertainment (32%) and clothing (36%), NielsenIQ said.

South African consumers have taken to bargain hunting, with almost half the respondents looking for discounts (49%), shopping promotions (36%) and buying in bulk (50%).

This has also seen a big boost for loyalty programmes, with 56% of South African respondents eager to turn to these schemes for further savings.

In another move to save costs, more consumers are buying goods online to get better deals (32%) – this saves money on petrol and minimises the number of shopping trips needed, NielsenIQ said.

Worryingly, 48% of surveyed consumers said they do not have enough money for food, shelter and other basics. 74% point to the increased cost of living as the driver for their recent financial struggles.

South African consumers are increasingly worried about the higher product prices of groceries and household items (48%). The Bureau for Food and Agriculture Policy (BFAP) recently reported that food inflation is likely to go against the international trend and remain higher for longer.

The organisation said that this is a direct result of load shedding wreaking havoc on the local economy, particularly in the food and agricultural sector. Extra costs incurred in the agricultural sector are relayed to the consumer.

Transport costs are among the top category that consumers plan to spend more on (29%) in 2023 compared to the previous year, NielsenIQ reported.

Motorists should brace for more pain, with petrol prices likely to increase again in March.

The latest data from the Central Energy Fund for 8 February shows that petrol prices are set to increase by over R1.20 per litre and diesel by around 40 cents per litre.

Consumers’ financial health is front of mind, with the report showing a shift in spending towards maintaining contributions to mainstays such as financial services (50%) and paying off debt (35%), said Lauren Fernandez, the global director at NIQ Thought Leadership.

“42% of those surveyed mentioned that financial health and job security are on par with mental and physical wellness (40%) as the leading areas of greater importance, while equally important is the fact that 25% state that they are planning to spend more on Health/Wellness products in 2023”, said Ged Nooy, NielsenIQ managing director in South Africa.

NielsenIQ noted that 37% of consumers expect the economic downturn to last for 12 months or more, with 26% claiming they only have enough money for food, shelter, and other basics.

Read: South Africans have realised that no one is coming to help: economist