It’s going to be a bleak Christmas

There may be plenty of sparkle on display at malls in South Africa, but consumer confidence is at it lowest point in 20 years, say economists. Picture: Pexels

There may be plenty of sparkle on display at malls in South Africa, but consumer confidence is at it lowest point in 20 years, say economists. Picture: Pexels

Published Dec 10, 2023


Durban — Christmas stockings will probably be light this year as South Africans tighten their belts amid a deepening economic crisis ‒ and the turning point might come after next year’s general elections.

However, high net worth individuals continue to splurge. A second-hand Chanel bag sold for more than R100 000 during Black Friday.

Festive season consumer confidence plunged to its lowest in 20 years, according to the First National Bank(FNB)/Bureau for Economic Research(BER) Consumer Confidence Index released this week, which means retailers, especially in the luxury goods sector, hoping to bank on seasonal spending to boost their sales will probably be disheartened.

“Although consumer sentiment remained higher compared with the very low levels recorded during the first half of 2023, the latest reading of -17 is the lowest festive-season consumer confidence reading in more than two decades,” the organisations said in a statement.

The FNB/BER Consumer Confidence Index (CCI) merges the results of three questions posed to adults mainly living in urban areas: how they expected the economy to perform, the expected financial position of households and how appropriate it was at the moment to buy durable goods, such as furniture, appliances and electronic equipment.

Financial experts said that unless money was no object, those hoping to find their names on exclusive or over-the-top gifts under the Christmas tree would be disappointed.

FNB chief economist Mamello Matikinca-Ngwenya said the low festive-season consumer confidence meant consumers were not in a jolly, high-spending mood.

“However, the fact that the low CCI reading largely stems from consumers’ very negative perceptions about the outlook for the national economy ‒ and to a lesser extent from pressure on their household finances – offers some hope that the all-important Christmas gift-giving period will not be a complete whitewash for retailers.

“Essentials, value-for-money products and affordable luxuries will likely be at the top of consumers’ holiday shopping lists,” said Matikinca-Ngwenya.

A senior lecturer in the Department of Economics and Econometrics at the University of Johannesburg, Ntokozo Nzimande, said confidence drove spending and thereby the economy.

“Generally, the festive season is known as a ‘spending season’, but this year, it will be different. The purchasing power of bonuses or the little that people have has been completely eroded by the high prices.

“This decline in consumer confidence is a concern, but what is even more concerning is its implications. Lower confidence means lower spending in the economy, which would mean the jobs usually created during the festive season might not be on the scale they are generally created; they may be far lower than usual,” Nzimande said.

He said the developments happened against the backdrop of declining business confidence and that the government’s responsibility was to restore confidence in the economy by showing it was serious about addressing issues, such as load shedding, that drove the country to this point.

Instead, it had “dismally failed” to show that it was serious about addressing its failures ‒ corruption, ageing infrastructure and dealing with crime ‒ which made it difficult for business to thrive and the economy to create much-needed jobs.

“I guess, this festive season, consumers will adopt the wait-and-see strategy, postponing consumption they deem not urgent or necessary. They will continue doing so until they have a clear view of what 2024 has in store. The upcoming elections have the potential to change the shape and direction of our economy. So, how quickly the confidence rebounds may be dependent on the outcome of next year’s elections as well,” he said.

Second-hand luxury goods retailer Luxity said its Black Friday sales indicated that even its well-heeled clients were tightening their belts.

Co-owner Michael Zahariev said Luxity’s clients were becoming more price-conscious, moving away from the traditionally popular brands which were more expensive in the resale market and opting for brands that were better priced.

He said most online searches were for Luxity’s cheaper products but at the upper end there was still a spike in interest from high net worth individuals.

“Over Black Friday there was a huge demand for items in the under R10 000 range which we see as our low range, and not much demand in the R10 000 to R100 000 which is the mid to mid-upper range, and then still a very high demand for over R100k items,” Zahariev said.

He said the Christmas season was “quite flat” compared with this time last year because people were more “choosy” about where they spent their money.

“The trend has moved away from saying: ‘I specifically want this Louis Vuitton or this Gucci,’ and more saying, ‘I want something that’s luxury but affordable’. The overriding trend is some sense of affordability,” said Zahariev.

However, over Black Friday the Chanel flap bag they sold was only discounted at 10% to R108 000, while a Cartier bracelet that was sold for more than R100 000 was also only at a 10% discount.

Economist Dawie Roodt warned that this would be a dismal festive season.

“We are not going to get a pink unicorn Christmas.”

He said that over the past decade, all confidence indices indicated that South Africa was on a downward trajectory and the ANC was to blame.

“We’ve got a government with a wrong ideology, they have the wrong policies, they are incompetent in implementing policies and they are quite often corrupt.”

Roodt said the only way to bring about lasting financial change was to vote the ANC out of power but none of the opposition parties seemed capable of the task. In addition, the brain drain was wreaking havoc on the country’s fiscus.

“It’s not just our experts and professionals that are leaving the country; very high-income earners are leaving as well and the minister of finance’s taxes are under pressure because he needs those wealthy people and productive people to tax. We are running out of wealthy people because they are leaving SA because of things like the NHI, corruption and crime.”

Independent on Saturday