Wednesday, January 26

South African consumers remain anxious but optimistic about their financial future


FIFI PETERS: In terms of what consumers are concerned about, a Deloitte survey has been conducted showing that 86% of South Africans are concerned about rising prices; that’s the Deloitte Consumer Opinion Survey. I suppose this is not entirely surprising, given the increase in gas prices we have paid during the year. They have practically doubled. Food is much more expensive, as is water and electricity. The list goes on.

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Rodger George, Africa Consumer Industry Leader at Deloitte, is here to further discuss the survey and other things that are a priority for consumers. Rodger, thank you very much for your time. I see that your survey was quite extensive. You looked at 23 other countries. So how do our concerns about inflation and higher prices stack up to consumer concerns elsewhere?

RODGER GEORGE: Fifi, thank you so much and great to be on the show. You’re absolutely right. We surveyed consumers in 23 countries and, in terms of concerns about inflation and rising prices, South Africa, out of 23 countries, topped the list with 86% of consumers actually concerned. This is a forward-looking view. We ask, ‘In the next month or two or three, what are your expectations?’

We also asked them, looking back, where they had experienced price increases in the last month. Overwhelmingly, they found nearly every category, particularly the grocery category, where 78% of the consumers we surveyed said they experienced real month-over-month increases. The same at closing …… 1: 47 to 58%; restaurant increased by 61% and alcohol and tobacco by 59%.

However, what was interesting to me is that if you look at the income levels of the respondents who responded, those with higher incomes were actually experiencing higher price increases than those with middle and lower incomes. Although, having said that, everyone experienced it. It can probably be attributed to the channels in which high-, middle- and low-income people buy their groceries as well as their clothes, and which restaurants they choose to eat in.

FIFI PETERS: How are consumers reacting to this increase? How are you shaping their behavior, in the sense that you are seeing that you are causing many more consumers to tighten their belts or live beyond their means?

RODGER GEORGE: I must say that there were a couple of things that came up through our survey. The only topic is around finances, consumers who have had liquidity problems since we conducted the survey, which is almost at the beginning of Covid worldwide. South African consumers have undoubtedly been emphasized; They have concerns about credit card balances, the worry about making the next payment has always been there and is still there.

I think that environment, where they are cash-strapped and have a very angry view of potential rising costs, will slow down their speeding and divert items from their wallets into nondiscretionary spending.

FIFI PETERS: Three out of four South Africans in the survey are quite financially anxious. I suppose, again, this is not a surprise given what has happened to the economy. Just yesterday we saw the level of unemployment in the country, very shocking and worrying. But again, how does this financial anxiety compare to the days leading up to the pandemic?

RODGER GEORGE: I think that in terms of financial anxiety we are very, very above the world averages. In the case of making future payments, we are 10 percentage points more than the global average. So South Africans, 39% of them, say they are worried about making the next payment at the end of the month.

For concerns about not saving enough, we are 29 percentage points ahead of the world average. If you look at South Africa, this has been pretty consistent: the type of cash flow, the financial constraint. We have checked the data against Covid and, where globally we see the movement, that is where the Covid spike occurs; in South Africa it’s been pretty flat. I think the reason is that there is an underlying financial crisis that is being masked by the Covid health crisis. South African consumers are definitely tied up.

What is really making their lives worse is that the Covid pandemic is causing many other cost and input cost increases in supply chains, product chains, and import chains, making products more expensive. If you find a cash-strapped customer who has no money and is already financing a large portion of credit card purchases, that doesn’t bode well for retailers for the upcoming season.

FIFI PETERS: It’s a bit of an anomaly in the survey though, in the sense that while South African consumers are extremely financially anxious, particularly because of their short-term plight, the longer-term looks a bit brighter in that regard. Do you know why they are so much more optimistic about their long-term finances?

RODGER GEORGE: I must say, Fifi, this puzzled us, because we sat as a team trying to figure out what the background might be. To put it in context, South Africa, in terms of the 23 countries, showed the third highest level of optimism in terms of improving its financial situation in the next two years. That is almost three out of four consumers are expecting their financial situation to improve, so they have either plunged to the bottom or alternatively, I think people expect vaccine programs to be implemented and the economy to recover, and I think I hope increase.

Interestingly, if you look at the most optimistic countries, India is the highest with Brazil and South Africa. [next] – and they’re all very close to the mid-70% mark; And then China and Mexico are slightly behind that, which to me also indicates an emerging market phenomenon where people in emerging markets are much more optimistic about the growth of their economy. And if you look at optimism, that decreases significantly as you move up the list and hit the more established markets, with countries like Italy, France, Japan, and Belgium at the bottom of the list; they are actually less optimistic about the improvement of the financial situation in the next two years.

FIFI PETERS: So issues related to climate change: how is that affecting consumer behavior?

RODGER GEORGE: This was very, very surprising to us, because for several years we have been conducting these surveys, and every year when I ask people if buying a sustainable product is important to you, they all say yes. And then a couple of questions later, when you ask what drives your buying behavior, most people put ‘price’ and ‘availability’. This year, for the first time, South Africans said that in the last month 75% of the nation has bought a product that is sustainable and paid more for it.

So what I’ve seen a lot is a change from saving to actually doing. If you look at …… 7:25 around the world’s climate and resource sustainability, South Africans rank fourth in terms of their concerns about climate and third in terms of their concern that climate change is an emergency.

Again, if you look at the countries that are most concerned, those types of Brics emerging market countries are really concerned and some of the more established markets are perhaps less concerned, albeit a lot of concern, but less than emerging markets.

FIFI PETERS: What is interesting, however, is that if we look at how companies are responding to consumers, even though the situation is quite bleak in South Africa, we are seeing quite a bit of interest, particularly from foreign companies looking to buy companies. South African. in the consumer space. What do you think it is a function of?

RODGER GEORGE: If you look at retailers and consumer manufacturers, South Africa is a fairly well established market with fairly mature formal retail channels in the market. So I think there is a market that companies can enter and play in.

And then there is also the opportunity of the wider informal market and the surrounding countries and neighboring countries as a gateway to Africa. So I think the fundamentals are good. I think our financial institutions are good, as is the rule of law.

So there are a lot of positives in South Africa, and when you compare it to various emerging markets, we seem to offer a lot of opportunities. Of course, if you look at the numbers across the entire African continent, these are growing middle-class populations, with many consumers that you can now reach through many digital channels, for example. I think it offers many opportunities for companies on the continent to expand in terms of foreign investment, and the returns are much better than putting your money, I suppose, in a bank.

FIFI PETERS: Rodger, thank you very much for giving us that information. We leave it there. Rodger George is the Africa Consumer Industry Leader at Deloitte.


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