Growing Economic Pressure
South African consumers continued to weather the ongoing economic crisis. Since the beginning of 2022, consumers have seen inflation soar from 5.7% to 7.6% in October, peaking at 7.8% (a 13-year high) in July. Non-durable goods price inflation accelerated from 9.8% to 14.4% in Q2 2022.1 Sharp fuel and food price increases primarily contributed to consumer goods inflation. Prices for diesel and inland 95-octane petrol increased to R 25.4/litre and R 26.74/litre in July. By the beginning of November, diesel (R 25.49) was 48% higher than the corresponding month in 2021 (R 17.19). Petrol was 17% higher for the same comparative period.2
The significant rise in fuel prices led to notable increases in food product prices. Meat prices increased 9.4% year-over-year (YoY); bread and cereals up 13.7%; and oils and fats up 36.2%.3 Oil and fats price increases were related to the conflict in Ukraine as the country was previously a dominant exporter of oil seeds.
Cutbacks to Discretionary Spending
With the economic headwinds putting pressure on household disposable income, two out of three (67%) consumers surveyed indicated they reduced discretionary spending (i.e., dining out, travel and entertainment) over the past three months. Further cutbacks can be expected on discretionary expenditures, retail shopping and large purchases. These sentiments will have significant implications for the South African retail sector — which was already feeling the strain at the end of Q3, declining by 1.9% in sales volume.4 Retailers were hopeful for a resurgence
in consumer spending during the festive season. However, with the cost of goods increasing dramatically, affordability will be top of mind for consumers.
Signs of Financial Stress Emerging
Even with cutbacks in discretionary spending, at least 1 in 3 consumers were unable to pay any of their bills and loans in full. At the same time, household income levels remained stagnant. A continued high inflationary environment coupled with future interest rate hikes will likely tip more consumers into default.
1 StatsSA, Consumer Price Index, October 2022
2 Automobile Association of South Africa Fuel Pricing
3 South African Reserve Bank, Full Quarterly Bulletin – No 305 – September 2022
4 StatsSA, Retail Trade Sales (Preliminary) September 2022