Over the past year, overarching factors such as geopolitical unrest, a weaker rand, and persistent and escalating load shedding have elevated food price inflation in South Africa – resulting in most consumers spending almost 50% more on groceries since 2019.
This is according to Discovery Bank’s SpendTrend23 report in partnership with Visa, which analysed consumer spending before, during, and after the Covid-19 pandemic for Discovery Bank clients and the rest of South Africa.
The report looked at the spending data across four main client groups:
- Mass – clients who typically earn less than R100,000 per annum;
- Mass Affluent – clients who typically earn between R100,000 and R350,000 per annum;
- Emerging Affluent – clients who typically earn between R350,000 and R850,000 per annum; and
- High Net Worth – clients who typically earn more than R850,000 per annum.
Middle class South Africans are generally regarded as mass or emerging affluent.
According to the data, a few categories account for a significant portion of total spend across all client groups – including groceries, services, and travel.
While groceries covered the typical food basket of each client group and travel accounts for fuel spend and air tickets, services accounted for a wide range of items, from construction to beauty services, said Discovery Bank.
However, among these categories, South Africans’ largest spending category is groceries.
According to the report, grocery spend as a proportion of total spend has increased for both Discovery Bank and South Africa owing to rising food prices that have outstripped general consumer price indices.
South Africans experienced food inflation of 12% in 2022, almost double the national inflation rate, which eased to 6.9% in January 2023.
As a result, the report noted increased spending across all client categories compared to 2019, but some are struggling more than others.
In South Africa, the increase in food costs is especially felt by the mass market, spending almost 50% more on groceries than they did in 2019, said Discovery.
This is followed by the affluent mass market (14%), emerging affluent (12%), and the high net worth market, seeing the smallest increase in spend on groceries, of only 4%.
While total spend on groceries and basket size is directly correlated to income, the data shows that affluent markets are still affected by food inflation.
“Affluent client groups feel the pinch of rising food costs but are able to better manage food inflation by substituting for lower-priced items and by taking advantage of promotions or bulk savings.
Mass consumers are at a disadvantage in this regard. There is no substitution option for the group, and this explains why the impact of food inflation is so much more significant for this client segment,” said Discovery.
A concerning trend highlighted by the latest Household Affordability Index by the Pietermaritzburg Economic Justice & Dignity group (PMBEJD) shows that food prices in South Africa continued to rise in 2023.
The group noted that food and non-alcoholic beverages inflation tracked at 13.4% year-on-year in February 2023 – driven by bread and cereal, meat, and vegetable products.
According to the PMBEJD, bread and cereal products reached an annual rate of 21.8% in January, while meat inflation increased to 11.2%, and vegetables such as onions and potatoes rocketed up by 75% and 41%, respectively, year-on-year.
Given the current trend, mass market clients will continue to feel the brunt of food inflation. As active spenders in this category, a tightening budget will prompt lower-income earners to redirect their spend to where they find value, particularly in essentials, said Discovery.