Tough times for South Africans

South African shoppers spent R181 billion on fast-moving consumer goods (FMCG) in the second quarter of 2024 but still feel the pressure of the country’s high cost of living.

The first NIQ Retail Spend Barometer showed that South African consumers are getting relief from less load-shedding but are still taking strain because of higher prices.

Newly launched in South Africa, the Barometer provides a comprehensive overview of sales trends.

It tracks the food, perishables, home, and personal care categories in the FMCG sector and the technical consumer goods, household appliances, and DIY and home improvements categories in the T&D sector. 

The study, based on real sales data, analyses big data across both categories and will be published each quarter.

The first barometer found two dominating themes in the second quarter of this year: cash–strapped consumers continued to struggle with the high cost of living, and a pause in Eskom load-shedding provided some relief. 

“Across the board, we saw consumers hunt for bargains and switch brands and stores to save money,” said Nikki Quinn, Retail Lead for sub–Saharan Africa at NIQ and GfK.

However, South African consumer spending on FMCG in the second quarter still rose by 4.8% compared with the same period last year. 

NIQ data shows that value growth for the FMCG sector dropped from 7.2% in Q2 2023 to 4.8% in the same quarter in 2024, despite a boost in consumer confidence and a drop in inflation from 5.4% in 2023 to 5.1% in 2024. 

“All categories experienced lower growth year-over-year, except for tobacco,” the company said.

The fresh food, frozen food and personal care categories experienced the most robust growth, growing at 8.2%, 9% and 8.6%, respectively. 

Meanwhile, homecare, snacking, beverages, and ambient food saw a significant drop in growth compared to Q2 2023 as consumers reprioritised their spending.

 “Perishable goods were one of the big winners for the quarter, with consumers spending more on fresh and frozen foods due to a more reliable power supply,” Quinn said. 

“However, persistent inflation, particularly food prices, remained a deep concern for consumers. People are focusing on the basics and keeping their eyes open for specials and promotions.”

The Barometer also tracks spending in the Tech and Durable (T&D) market, valued at R31 billion and experiencing consistent performance in the second quarter of 2024 compared to the second quarter of 2023.

However, the T&D market overall experienced lower growth than in Q2 2023, dragged down by price deflation and lower revenues in the telecom segment. 

Large screen televisions – 74 inches and above – outperformed, selling unusually well for the category outside the Black Friday and festive season windows.

In Q2 2024, home appliances saw a significant turnaround, with an 11.3% increase, compared to the 6.1% decline in Q2 2023. 

However, it is important to note that soft growth in 2023 was due to the market normalising after strong gains in the pandemic when consumers invested in their homes.

Major appliances, especially washing machines and refrigeration, saw double-digit value growth. 

Small appliances like air fryers, food preparation tools, and hair stylers also contributed significantly. With average selling prices remaining flat, growth is attributable to higher unit sales.

Technical Consumer Goods remained nearly flat in Q2 2024, following slight growth in Q2 2023. 

Routers, desk computing, monitors, gaming consoles, and mini or Bluetooth speakers showed significant growth, while core wearables, headphones, and smart mobile phones declined.

“Promotional activity helped to drive growth in the appliances and TV segments,” Quinn explained. 

“Confidence about South Africa’s load-shedding situation may also have helped to inspire consumers to upgrade appliances. While spending remains constrained by stagnant wages and unemployment, we see some bright spots for the T&D sector.”

She said hopes for interest rate cuts later this year could help to reignite consumer confidence. 

“The introduction of the two-pot system for retirement funding might also serve as a tailwind ahead of Black Friday and the festive season,” she said. 

“Early withdrawals of pension funds under the two-pot system are expected to boost household expenditure in the second half of 2024.”