Rich South Africans lose confidence in the economy

South Africa’s highest earners saw their confidence worsen to the lowest level on record on concerns about the economy’s prospects and their finances.

A quarterly index measuring sentiment fell to -25 in the second quarter from -23 in the previous three-month period, First National Bank said in an emailed statement Thursday.

That’s the same level as the second quarter of 2022, when the economic fallout from the Ukrainian war became clear.

Confidence for the highest earners, those making over R20,000 a month, fell to a record low of -40.

“Further interest-rate hikes, rand depreciation and concerns about South Africa’s diplomatic relations with the rest of the world in all likelihood compounded the negative impact of the electricity crisis on high-income confidence,” said FNB Chief Economist Mamello Matikinca-Ngwenya.

“Affluent consumers are also more inclined to have debt that is tied to the soaring prime interest rate.”

FNB said the deterioration in confidence doesn’t bode well for the retail sector, as affluent consumers have the greatest spending power among the different income groups.

Sales of expensive durable goods such as new vehicles, jewellery, furniture and household appliances, and potentially even semi-durable goods such as clothing and footwear are therefore likely to suffer, as high-interest rates and the cost of alternative power supply erodes spending power.

All three consumer confidence sub-indices fell, with economic outlook falling the most by 3 points to -37.