South Africans feel the pain

South African consumers are under increasing financial pressure, as shown by declining retail trade sales in February.

Stats SA released South Africa’s retail trade data for February, which showed that sales fell by 0.8% year-on-year after contracting by 2.0% y/y in January.

Investec chief economics Annabel Bishop explained that this was due to consumers being financially constrained and still typically battling with the extra spending over the festive season.

Only four of the seven sectors surveyed recorded positive contributions to the overall outcome on a three-month, deseasonalised basis.

The largest sector, general dealers, also made the largest contribution as consumers focused on necessities in a tough environment.

Minor positive contributions came from sales of food, beverages, and tobacco products in specialised stores, pharmaceuticals, household furnishings, and appliances.

Clothing – footwear, textiles and leather goods – and all other retailers’ sales saw declining contributions.

South Africa’s CPI inflation rate climbed from 5.3% in January to 5.6% in February, while retail sales’ actual rand (nominal) value saw a 3.7% acceleration from 3.0% in January. However, if adjusted for inflation, it contracted.

Bishop said inflation is having a key effect on consumer affordability in South Africa.

In addition, the South Africa Reserve Bank (SARB) recently reaffirmed its resolve to continue to combat high inflationary pressure in South Africa through high interest rates.

The SARB said interest rates will only be cut once CPI inflation achieves and then remains around 4.5% – the midpoint of its target range.

Bishop’s concerns have been echoed by Debt Rescue’s Annenaline van der Poel, who told Newzroom Afrika earlier this month that South Africa’s high cost of living has pushed many consumers to turn to credit to cover their basic necessities.

She said the average South African consumer is facing an “onslaught from all directions”.

Consumers are not only battling high inflation and high interest rates but also facing electricity and fuel price hikes.

The latest inflation print for March saw CPI at 5.3%, and the inflation rate has been above 5% since September last year.

Van der Poel said this increases the price of basic goods and services, affecting South African consumers’ cost of living.

The country’s high inflation has seen the South African Reserve Bank hike interest rates to a 14-year high, with the repo rate currently at 8.25%.

This means many South African consumers are paying far more on their mortgages and other loans than they did just two years ago.

FNB economists recently revealed that South Africans are paying almost R100 billion more a year to service their debt compared to 2019 due to the country’s high interest rates.

In addition, South Africans have seen both the price of fuel and electricity skyrocket this year.

Consumers have seen two consecutive fuel price hikes in February and March, with another expected in April.

Eskom also implemented a massive 12.74% price hike on its electricity at the start of April, meaning the price of electricity has risen by 33.8% in the last two years.

“It’s just coming from all angles and affecting affordability,” Van der Poel said. “It’s affecting people’s ability to put food on the table without looking at credit. It’s very, very dire out there.”

She said this high cost of living has also changed consumers’ spending habits, which Debt Rescue has been monitoring since before the festive season.

“For the festive season, consumers already indicated dramatic changes in budget, in habits of spending, etc,” she said. 

Now, consumers are still spending on their household goods and necessities, but many are turning to credit to do so. 

“That is a big concern. If we’re turning to using credit cards, store cards, payday loans, and the likes to put food on the table and buy necessities, that’s a definite change, but it’s not a good change,” she said.