Finance

What South Africans spend their money on – rich vs poor

South Africans spend nearly two-thirds of their disposable income on groceries, retail, travel, and fuel. However, spending habits vary depending on their wealth, with richer South Africans not having to replace spending on luxuries with purchasing necessities. 

This was revealed in Discovery Bank’s SpendTrend24 report, compiled in collaboration with Visa. 

The report compiled data from Discovery Bank’s clients in South Africa and data from over 60 million Visa cards worldwide and over 3 billion transactions. 

Discovery Bank CEO Hylton Kallner told a media briefing that the research was aimed at understanding where South Africans spend their money and how they spend it. 

He said the data revealed that spending in South Africa remains resilient and compares well against global peers in emerging and developed markets.

However, it also shows that there is immense financial pressure on South Africans, particularly poorer consumers, who have had to adapt to an environment with persistently high food inflation. 

This has resulted in a shift in spending behaviour, with poorer South Africans substituting spending on luxuries, such as travel, for necessities, such as food and household goods. 

On the other hand, wealthier South Africans are more immune to high inflation as they are able to absorb higher food costs without having to substitute or cut spending in other areas. 

Thus, they tend to spend more money on travelling internationally and within South Africa, as well as spending more in retail stores outside of groceries. 

Interestingly, spending on eating out at restaurants or takeaways makes up a similar proportion of spending across all income categories. 

This is shown in the graphic below.

In the past year, grocery spending continued its strong growth from 2022, taking up a greater portion of the spending of South Africans – particularly among poorer consumers. 

Average grocery spending in South Africa rose 8% in 2023, compared to the 16% increase the previous year. 

This was influenced by high food inflation rates of 12% and 11% over the last two years, respectively. 

In South Africa’s market segments, grocery spending growth ranged from 0% in the mass segment to 8% in the high net worth segment. 

This is consistent with the view that the mass segment has adjusted their purchasing habits or bought less to cope with rising costs – likely worsened by more of their disposable income being used to repay debts due to higher interest rates. 

Overall, consumers visited grocery stores and made online grocery purchases more frequently in 2023. However, the average amount spent per transaction remained the same as in 2022. 

The increase in the average transaction size for online grocery purchases is three times higher than for in-store purchases, with the biggest growth seen in the mass segment.

Spending on eating out and takeout also increased in the last year by 8%, following a 28% surge the year before, driven by post-pandemic recovery. 

However, 70% of South Africans surveyed in 2023 say they cook or bake a prepared meal at least once a week, and 37% said they would pay more for healthy and nutritious food options.

This is reflected in the graphic below. 

In terms of grocery spending, South Africans spend the majority of their money on vegetables, which make up 19% of the total basket. 

This is closely followed by spending on ‘starchy foods’ such as bread, rice, and potatoes. 

Interestingly, Discovery Bank noted that improved financial health strongly correlates with healthier grocery baskets. 

Thus, Discovery Bank clients only spend 5% of their total grocery expenditure on confectionary items such as chocolates, crisps, or biscuits. 

They spend over double of their grocery spending on fruit and protein, respectively. 

The breakdown of the grocery baskets of Discovery Bank clients is shown in the graphic below. 

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