This is what middle class South Africans are cutting out to make it through the month

 ·6 May 2024

Middle-class consumers in South Africa are scaling back on buying everyday items, savings, and spending on healthcare and education to cope with the rising cost of living.

Consultancy Deloitte’s latest ConsumerSignals report for the first quarter of 2024 shows that South Africans are becoming increasingly stressed out about the state of their finances and what lies ahead for the economy.

According to Hannah Marais, acting chief economist for Deloitte Africa, these anxieties are expected to linger for the time being, particularly through the elections – with political uncertainty heightening in the country.

In addition to election stress, economic factors like stubbornly high headline inflation and persistent inflationary pressures are significantly impacting finances.

Add to the mix the weakening rand, potential food inflation and other hikes in living expenses brought on by petrol price hikes, households have had to adjust how they divvy up their budget.

Cutting back spending

Deloitte said that households are increasingly cutting back on spending and focusing their budgets on essentials.

Taking the biggest hit in a month is spending on everyday goods, as consumers turn to more essential food items.

Only 5% of monthly spend is directed at this category, with 87% of survey respondents pointing to the escalation of prices as the reason.

The next biggest hit comes to healthcare, savings and investment, which have an average 6% share.

After healthcare and savings, South African consumers are also dropping spending on education and transportation, which is a worrying metric, Deloitte said.

“Concerning is the shrinking budget allocation on critical items, with only 7% of the share of wallet being used for education and 6% on healthcare. Alarming is that saving and investing remains at the bottom of consumers priorities, only making up 6% of spend,” Marais said.

“Many consumers (are not) able to save, resulting in the country having one of the lowest savings rates in the world – with household savings estimated to be 0.13% of Gross Domestic Product (GDP) in 2022.”

Households indicated they spend 9% of their income on clothing and footwear and 8% on electronics and home furniture.

Deloitte said the survey shows that consumers expect to spend more on essential and non-essential living expenses in the coming weeks and months. This indicates that more financial literacy is required to support people to make smarter financial decisions.

“The overall consumer standing has untold impact on sectors such as retail and consumables. Shrinking disposable income has resulted in retail growth softening to 2.1% in January 2024,” Marais said.

Deloitte said indications are that many consumers are resorting to cost-saving measures, and that “frugal behaviour” remains high.

Shoppers are focusing on essential groceries, reducing food wastage, and 42% of those surveyed are cooking more meals at home. 22% of respondents indicated a growing interest in house brands, and consumers keeping to brands that they know provide value for money.

The consultancy said that food-buying behaviour remains one of the strongest measures of economic health – and current indications are one of tough and uncertain times.

“South Africa must move into an economic recovery mentality. The reality we as a country face is that the next 18 months will prove to be challenging, with consumer priorities and buying behaviour shifting.

“If the current situation persists, we are more than likely to witness a worsening economy and further growth stagnation, impacting investment potential and overall business confidence,” Marais said.

Read: Investors love South Africa: Ramaphosa

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