South Africans are finally starting to splurge again

Sentiment in South Africa is improving, with consumers shifting their spending away from essentials.

Despite several global crises, it seems that South Africans are more optimistic about the future.

Deloitte said that the formation of the GNU, a slight loosening of monetary policy and the stabilisation of the electricity supply that saw an end to load shedding in March have contributed to a more positive outlook for many South Africans.

Inflation has also fallen continuously, with Stats SA reporting inflation below the target band at 2.8% for October.

Overall consumer price inflation and food inflation for October this year are roughly half of what they were in October 2023.

The drop in food price inflation, which is at its lowest since November 2019, also sends a positive signal to consumers and gives much-needed relief, especially for low-income households.

“Households with little money tend to allocate a disproportionally large share of their spending towards food and hence had a much harsher inflation experience compared to high-income households,” said Deloitte.

“The improvement in sentiment is also reflected in Deloitte’s Consumer Signals data. The data, which tracks consumer sentiment including financial well-being and spending intention, has shown improvements throughout the year.”

“While household spending on essential items such as food and housing remains high, our data shows that spending on non-essential items has seen an uptick.”

Deloitte’s Food Frugality Index, which looks at consumer behaviour at grocery stores in response to financial pressure, has also improved in recent months.

This highlights a slight easing of price pressures and the emergence of more wiggle room for consumers to spend on items they want.

“This is good news for retailers as we have entered the busiest period for many of them,” said Deloitte.

“While in the first few post-pandemic years, South African consumers were strongly focusing on groceries during the Black Friday period, preliminary results from this year’s Black Friday show that consumers have shifted their spending towards big ticket items such as electronics and household appliances and other non-food items.”

“This shift away from groceries is also reflected in our Consumer Signals data. We have seen more South African consumers indicating that they would treat themselves to clothing and accessories when making a splurge purchase:

“In the past food and beverages dominated splurge purchases among South African consumers.”

That said, South Africans should not get too optimistic, with electricity price increases scheduled for 2025 and disappointing GDP numbers for Q3 2024 dampening the outlook.

While many economists expected a 0.5% increase in GDP in Q3 2024, the economy actually recorded a 0.3% contraction on the back of poor agricultural figures.

Moreover, in Eskom’s latest multi-year price determination applications, the state-owned entity announced the massive electricity price hikes it is seeking over the next three years:

• 36.15% from 1 April 2025 to 31 March 2026
• 11.81% from 1 April 2026 to 31 March 2027
• 9.10% from 1 April 2027 to 31 March 2028

“Thus, it is important that focus is put on structural changes that will allow South Africa to turn the current positive sentiment into reality. A reality that results in economic growth, job creation and poverty reduction. After all, you can’t eat sentiment,” said Deloitte.

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