How the South Africa consumer class cuts costs?
When Finance Minister Enoch Godongwana delivered the 2025 National Budget Speech on 12 March, the nation wondered if the GNU was really taking the country's cost of living crisis by the horns and wrestling it to the ground. Concerns about the impacts of the value-added tax (VAT) increases over the next two years, rising costs of debt servicing and the lack of decisive strategies to tackle rising consumer costs have risen out of the dust.
Brandon de Kock, director of storytelling at BrandMapp says, 'By the fourth quarter of last year, South Africa's consumer confidence index was at -6 points. It's not the worst it's ever been, -36 points in 1985, and far from the best at 26 points in 2018. But it's a notable recovery from the recent pandemic lows which fell to -33 points in 2020. Take a step back and it looks to be a clear indication of the resilience of South Africa's consumer class who have quite a few tools at their disposal to deal with the rollercoaster of life.'
Shifting demographics in the consumer class
The latest BrandMapp survey, which tracks the behaviours and sentiments of South Africans living in household with disposable incomes, from R10k a month to the millionaire class, provides insights into how the consumer class (which they define as those adults who can freely buy goods and services above their basic survival needs) are financially managing their households.
Despite the sluggish economy and the cost-of-living crisis, De Kock says, 'The important context to bear in mind here is that according to the latest National Treasury data, the consumer class in South Africa grew at about 7.5% last year, which means it outpaced inflation.'
'However, the growth of the consumer class is not spread evenly across the different income brackets. If you divide the personal income earners of SA into the core consumer class earning R10k to R30k per month, the Top Enders earning R30K to R80K and the Millionaires earning R80K or more you start to see some interesting shifts. The core represented 56% of all taxpayers back in 2020, but now it only represents 46%. It means there's a significant rise in the Top End with more than half of the consumer class, 54% now sitting in the R30k to millionaire income brackets. While this is obviously not great for the country's gini coefficient, it appears that while the rich are getting richer, the number of people earning relatively high incomes, living aspirational lives and driving potential growth seems to be increasing at an equally rapid rate.'
What costs are the SA consumer class cutting?
When it comes to strategies to deal with the rising cost of living, BrandMapp shows that there's not much difference between mid-income and top-end earners, the exception being that middle income earners are 50% more likely to be considering getting a second job. Around a fifth of the consumer class are thinking of cancelling Dstv, spending less on alcohol and their mobile data packages, while less than 10% are thinking about cancelling some insurance and downgrading their medical aid.
De Kock says, 'What's interesting is to see that some of the habits we learned during the pandemic are hanging around like long-Covid. 35% of the consumer class are considering cutting back on clothing budgets and 31% say they are likely to go out less to the movies and restaurants. All-in-all, with home grocery delivery, meals-on-wheels and streaming services, a mid-to top-income South African home is a comfortable place to be, and we have learnt that staying home more in our trackie pants is a relevant cost-saving strategy.'
GENERIC:
Does the province you live in shape your cost-saving strategies?
If you live in Gauteng, you're more likely to deal with rising costs by working more with 28% of the consumer class in the province saying they are open to taking on a second job. By comparison, a side-hustle is only attractive to 23% of KwaZulu-Natal respondents and 21% of those in the Western Cape.
Gauteng consumers are also more likely to cancel Dstv and cut back on alcohol. However, their enthusiasm wanes when it comes to going out less to movies and restaurants (31%) or staying home for the holidays (16%). By contrast, these are top strategies for Western Cape consumers with 36% content to go out less and 19% considering staying home for the holidays – perhaps, it helps to live in the country's top tourism region. The top three cost-saving strategies for KwaZulu-Natal are 28% considering going out less to movies and restaurants, 23% getting a second job and 19% cancelling Dstv.
How will the different generations stretch their budgets?
Not surprisingly, South Africa's well-heeled boomers are the least likely to be thinking about any cost-saving measures, and at the other end of the scale, Gen Z and Millennials are the most open to a wide range of ways to cut their expenses.
De Kock says, 'What we see is that going out less to movies and restaurants, staying home more and cutting back on clothing budgets are major strategies across all generations, which mirrors our Covid cost-cutting habits. Millennials are the most likely to cut back on alcohol (24%), get a second job (30%) and spend less on clothing (38%), while Gen Xers are mostly likely to withdraw from their pensions (11%) and cancel Dstv (24%). 36% of Gen Z are hoping that going out less to movies and restaurants will help get them through the month, and 29% are considering staying home more. 28% are thinking about changing where they shop to find the best prices.'
The cost-cutting gender divide – clothes and alcohol
De Kock says, 'There's an interesting story in the differences between the ways that women and men are approaching the cost-of-living crisis. Women are 50% more likely than men to consider cutting their clothing budgets and changing where they shop for groceries. In a switch around, men are 50% more likely than women to be thinking of cutting back on alcohol and withdrawing funds from their home loans. Women are also more likely to be looking for a second job than men, and more willing to clean their own house.'
In the end, lower prices win the day
For retailers and brands wanting to meet the South African consumer in the moment, it's crucial to grasp how important pricing and promotions are across the mid- to top-earning households. 'When we ask them about general shopping habits, 58% of South Africa's consumer class say that they always look out for sales and discounts,' concludes De Kock. '34% say that the lowest price is the top factor when choosing where they shop – more important than convenience, quality and value. The youngest consumers are most hooked on the lowest price with 39% choosing a store on this basis.'
Visit www.Whyfive.co.za for an overview of what's in the new data.
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