Most South African consumers expect to pay more for groceries in the next six months, sacrificing on comfort and luxury items due to economic strain
South Africans speak out about inflation risks, transport options, spending plans and climate concerns in PwC’s consumer survey
PwC South Africa is pleased to share its seventh South Africa Economic Outlook report for 2024. This edition looks at some of the data derived from the local findings of PwC’s Voice of the Consumer Survey 2024 and what this means for the country’s economic outlook.
Specifically, we consider economic aspects around consumers’ risks and fears for the country; spending behaviour and planned changes thereof; views and desires on mobility and transport; as well as concerns about extreme weather and climate change. Consumer opinions and sentiment are integral to the country’s economic outlook—after all, household spending accounts for more than 60% of GDP.
We asked consumers what they see as the biggest potential threats and risks to the country in the coming 12 months. The macro risk factors most frequently identified by South African respondents are inflation, economic growth, unemployment, social inequality, and climate change.
The combination of elevated inflation (the top concern) and accompanying high interest rates at present is placing pressure on household budgets. In 2022-2023, salaries and wages were unable to keep up with consumer price inflation, resulting in a cumulative decline in consumer buying power of 4.6% during the two-year period.
Over half (55%) of survey respondents ranked macroeconomic volatility in their top three risks, with one in five (19%) naming it as their biggest concern. Volatile economic growth in itself is not necessarily a concern for South Africans. Rather, it is the ill effects of business cycle swings on inflation and employment that impacts consumers. When GDP disappoints, households feel this impact via ripples through the labour market.
South Africans’ concerns about inflation, economic and employment growth cut across a significant volume of expectations for the new government. The country’s largest political parties all campaigned for the recent elections with promises of accelerated economic and employment growth. With the Government of National Unity (GNU) now formed, members of the new cabinet’s economic cluster have their work cut out for them. The country needs to create 1.7 million jobs over the next five years just to keep the unemployment rate at its current level, which is already unsustainably high. To achieve this, the economy will need to grow by an average rate of 2.0% p.a. during 2024-2028.
Given the current economic environment, our survey asked South Africans about their spending intentions in the coming six months and how they expect their expenditure on specific product categories to change. The results showed that six out of ten local respondents expect to spend more on essentials like groceries, clothing and footwear in the next six months. Households spend a combined 20% of their money on food, non-alcoholic beverages, clothing and footwear. However, this number ranges from 60% at the lowest income levels and towards 10% in the highest income households.
Only 42% of consumers expect to spend more on comfort and/or luxury goods in the next six months. Due to economic strain, shoppers still do not see the present as an appropriate time to purchase durable goods like electronic devices, sports equipment and toys. Travel services are the comfort/luxury good most likely to see increased spending in the next six months. In fact, official inflation data suggests that domestic holiday options have become more affordable over the past year.
Public transport is a topic frequently discussed by South Africans. At present, one in five passenger journeys are by rail, according to Statistics South Africa. However, our survey shows that eight out of ten South Africans would be willing to use public transport if their area had better public transport infrastructure. Commuters are willing to swap private road transport for public transport options due to increasing congestion, concerns over road safety, and the rising cost of private transport. However, data from the United Nations shows that only one out of five urban South Africans can access a public transport stop that is within walking distance.
Three out of four respondents indicated an appetite to buy a hybrid or electric vehicle. Local sales of these vehicles increased 65% in 2023 and we believe this could rise by 30% in 2024. The rising cost of internal combustion engine (ICE) transport and the declining price entry point of electric vehicles (EVs) has supported this growth. The most affordable full-sized EV currently available in South Africa costs circa. R540,000, down from a market entry price point of around R690,000 in 2022-2023.
Some South African consumers are interested in EVs due to environmental considerations and the contribution these could make to reduce climate change. The country has in recent years seen an increase in the frequency and impact of extreme weather events. Nine out of ten survey respondents are worried about climate change, with over a third of them feeling worried on a daily basis. This worry stems partially from the impact climate change could have on South Africans through income (jobs) and wealth (savings) effects via the business world, among other channels.
Business leaders are aware of the physical dangers of climate change but often have much less of an understanding of the specific impact that extreme weather changes could have on their businesses. Disruption to business operations due to, for example, extreme weather could directly influence employment and remuneration for consumers. If future company financial performance is impacted, changes in stock market valuations will affect the value of their savings and investments.
Key content in this report includes:
- Threats and risks: Consumers are most worried about inflation and macroeconomic volatility.
- Expenditure plans: Most shoppers plan to spend more on essential goods in the next 6 months.
- Mobility options: Strong appetite for better public transport and electric vehicle (EV) ownership.
- Business sustainability: Extreme weather requires companies to think about climate risks and opportunities.
- How PwC is assisting its consumer-facing clients to put the right strategies in place to respond to and service the needs of today’s shoppers.
