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This is what financially stretched South Africans – even the rich – are cutting back on

Not waving but drowning: All South Africans are feeling the economic pinch and are trying to new find ways to stretch their cents. Picture: Stormseeker/ UnSplash

Not waving but drowning: All South Africans are feeling the economic pinch and are trying to new find ways to stretch their cents. Picture: Stormseeker/ UnSplash

Published Jul 6, 2022

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Durban - While the super rich may be cutting back on business class tickets and opting for ‘cattle class’, the middle class are buying no-name brands and waiting for sales.

Either way, most South Africans are cutting back on spending.

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While what the rich and super rich may be spending less on definitely differs from what the middle class or the poor are cutting back on, South Africans across the board say they are feeling the financial pinch.

Drowning financially as petrol, electricity and food costs mount and a possible further interest rate hike looms, 87% of consumers in the recent McKinsey Global Consumer Sentiment Survey described themselves as economically “stretched”.

Delaying purchases and shopping around for sales are some of the many ways South Africans - with 13% surveyed saying they are in a financial “crisis” - are mitigating the tightening grip on their shrinking cash flow.

It’s not surprising that South Africans are having to rethink their spending habits and 32% of respondents in the recent survey say they are finding it hard to make ends meet while 42% are having to make lifestyle adjustments.

Meanwhile the Consumer Confidence Index (CCI), released quarterly by FNB and the Bureau for Economic Research, has also dropped dramatically. Having already slipped from -9 to -13 index points during the first quarter of the year, the CCI plunged to -25 in the second quarter. See more on this here.

The CCI measures how optimistic or pessimistic consumers are regarding their expected financial situation. This is a record low in sentiment in more than three decades (bar for the Covid hard lockdown era in 2020).

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The CCI is based on the premise that if consumers are optimistic, they will spend more and stimulate the economy but if they are pessimistic then their spending patterns could lead to an economic slowdown or recession.

And, there is not one income bracket that is feeling not feeling some sort of financial discomfort.

Even among the most affluent respondents (household income above R500 000 per annum) in the McKinsey survey, only 28% say they are doing fine or very well.

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In response to economic downturns exacerbated by the anti-Covid-19 pandemic strategies, 61% of South African consumers say they are cutting back on spending.

Even in the highest household income tier, the cut-back rate is still 51%.

So how are South Africans coping?

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According to the NielsenIQ 2022 Consumer Outlook Study, consumers are managing their household spending by budgeting or monitoring the amount of money that spend while shopping.

The study shows that consumers are:

  • No longer showing brand loyalty, but instead selecting the lowest price product;
  • Purchasing larger packs or have started bulk-buying to manage their expenses.

The McKinsey survey shows further that:

  • 70% of respondents are paying more attention to prices;
  • 69% of consumers are looking for sales and promotions;
  • 61% are delaying purchases;
  • 32% are substituting branded products with cheaper alternatives, such as more affordable brands or private labels.

In all these cases, the figures have come down from numbers observed during the Covid-19 crisis, but they are still well above pre-pandemic levels.

According to a TransUnion Consumer Pulse study, which assessed the state of consumer spending and credit in the first quarter of 2022, many households did not expect increases in spending over the next three months.

The study shows that South Africans are also cutting back spending on:

  • subscriptions;
  • memberships;
  • digital services;
  • discretionary spending (53%), such as spending on non-essentials such restaurant meals and entertainment;
  • large purchases, such as appliances and vehicles.

* We would love to hear the innovative ways you are making ends meet in order to share it with our readers to help them make ends meet. Please email [email protected]

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