{"id":818030,"date":"2025-03-25T11:04:35","date_gmt":"2025-03-25T09:04:35","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=818030"},"modified":"2025-03-25T14:37:55","modified_gmt":"2025-03-25T12:37:55","slug":"big-trouble-for-south-africans-earning-over-r20000-per-month","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/818030\/big-trouble-for-south-africans-earning-over-r20000-per-month\/","title":{"rendered":"Big trouble for South Africans earning over R20,000 per month"},"content":{"rendered":"\n

Confidence among South Africans earning over R20,000 per month has tanked, with many now expecting the economy and their finances to worsen over the next 12 months.<\/p>\n\n\n\n

This is according to the latest FNB\/BER Consumer Confidence Index (CCI), which has dropped from -6 to -20 index points in the first quarter of 2025.<\/p>\n\n\n\n

The fieldwork for the first quarter CCI was done days after Finance Minister Enoch Godongwana’s aborted 2025 National Budget was revealed in February, where a two percentage point hike in VAT was proposed.<\/p>\n\n\n\n

The Bureau for Economic Research (BER) said that this, along with other negatives around the same time, led to the index tanking.<\/p>\n\n\n\n

“The prospect of significantly higher taxes\u2014either via VAT hikes or further bracket creep on the personal income tax front\u2014likely alarmed many consumers,” the BER said.<\/p>\n\n\n\n

“Even though the March Budget softened the VAT hike, it still places a significant tax burden on consumers, which would have weighed on sentiment too.”<\/p>\n\n\n\n

In addition to the tax-heavy budget, the diplomatic fallout between South Africa and the United States and the knock-on effects of US President Donald Trump’s trade war also hit local sentiment.<\/p>\n\n\n\n

The BER noted that the 14-point plunge in the CCI during Q1 2025 is on par with the dramatic drop in consumer confidence when South Africa entered stage 6 load shedding for the first time in Q1 2023.<\/p>\n\n\n\n

Speaking of load shedding, the brief return of stage 6 load shedding during the period also contributed to the drop in sentiment.<\/p>\n\n\n\n

The first quarter reading of -20 is also the lowest CCI reading since the first half of 2023 and points to an alarming deterioration in the outlook for consumer spending following the strong end to 2024.<\/p>\n\n\n\n

All the CCI’s sub-indices declined significantly during the first quarter, with the economic outlook sub-index dropping from -9 to -32 index points.<\/p>\n\n\n\n

This reversed all the gains from the electricity supply improvements and the establishment of the GNU following the 2024 elections.<\/p>\n\n\n\n

The household finances sub-index of the CCI also slumped from 11 to -1. The sub-index measuring the appropriateness of the present time to buy durable goods dropped from -21 to -28.<\/p>\n\n\n

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Pain for those earning over R20,000 per month<\/h2>\n\n\n\n

A breakdown of the CCI per household shows that sentiment worsened significantly across all income groups.<\/p>\n\n\n\n

The confidence levels of high-income households earning more than R20,000 per month dropped the most, with the confidence reading plummeting from -4 to -30.<\/p>\n\n\n\n

Most high-income households expect South Africa’s economic performance and finances to deteriorate over the next 12 months – a complete turnaround from three months prior.<\/p>\n\n\n\n

The confidence levels of middle-income households\u2014earning between R5,000 and R20,000 per month\u2014dropped from -7 to -19.<\/p>\n\n\n\n

Low-income households\u2014earning less than R5,000 per month\u2014also dropped from -7 index points to -17.<\/p>\n\n\n\n

The outlook for household expenditure has notably deteriorated following a surge in retail sales during the 2024 festive season.<\/p>\n\n\n\n

\u201cThe boost from two-pot retirement fund withdrawals will be significantly less during 2025 compared to the roughly R40 billion paid out in 2024,” said FNB Chief Economist Mamello Matikinca-Ngwenya. <\/p>\n\n\n\n

“Trump-triggered trade wars and rising global uncertainty are also reducing the likelihood of further
interest rate cuts.”<\/p>\n\n\n\n

“The withdrawal of all United States aid to South Africa and the rapid deterioration in diplomatic relations with the US would also have knocked consumer confidence.”<\/p>\n\n\n\n

However, Matikinca-Ngwenya said the most significant blow to consumer sentiment likely emanated from the National Treasury\u2019s tax proposals and the fighting among GNU members. <\/p>\n\n\n\n

“Although the 2%-point VAT hike option has been shelved, the budget tabled on 12 March still calls for a 1%-point VAT hike over two years and no inflation adjustments to income tax brackets and medical aid tax credits,” she said.<\/p>\n\n\n\n

“Above-inflation increases to social grants and the expansion of the zero-rated VAT basket should partially shield low-income households.”<\/p>\n\n\n\n

“But, if implemented, these tax proposals will deal a significant blow to the financial positions of high-income households.\u201d<\/p>\n\n\n

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Bottom Line<\/h2>\n\n\n\n

The drop in consumer confidence is a deep concern given that it has been the growth engine of the South African economy over the last decade.<\/p>\n\n\n\n

Real consumer spending grew by 11.2% (cumulatively) between 2015 and 2024, while real GDP, excluding consumer spending, showed no growth.<\/p>\n\n\n\n

Rising inflation, tight monetary policy and higher real taxes will also erode households’ ability to spend while dropping confidence levels will signal a decline in willingness to spend.<\/p>\n\n\n\n

Furthermore, the confidence levels of high-income consumers declining the most will only compound concerns, as this group easily has the greatest spending power.<\/p>\n\n\n\n

Although the fall in the CCI may be an overreaction as the 2%-point VAT hike has been muted, the outlook for consumer spending and South African GDP growth has deteriorated. <\/p>\n\n\n\n

“Structural economic reforms and other confidence-boosting policies are required to spark new growth drivers for the South African economy,” Matikinca-Ngwenya said.<\/p>\n","protected":false},"excerpt":{"rendered":"

Confidence amongst South Africans earning over R20,000 per month has nosedived. <\/p>\n","protected":false},"author":95,"featured_media":810442,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[14829,76],"class_list":["post-818030","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-ber","tag-fnb"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/818030","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=818030"}],"version-history":[{"count":7,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/818030\/revisions"}],"predecessor-version":[{"id":818099,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/818030\/revisions\/818099"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/810442"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=818030"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=818030"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=818030"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}