South Africans are cutting spending to make it to the end of the month

The Bureau of Economic Research (BER) Third Quarter 2022 Retail Survey shows that South Africa’s retail sector is proving resilient in the face of the numerous economic pressures the country faces.

But other data from the Association for Savings and Investment South Africa (ASISA) shows that households remain under pressure and are cutting back on financial products – among other things – to make ends meet each month.

The BER survey shows that although general economic conditions are down from the third quarter of last year, confidence levels have remained high and above the long-term average.

Just over half (51%) of respondents said they were satisfied with the prevailing business conditions, compared to 49% of respondents last quarter. Sub-categories within the retail sector, however, reveal varying trends, with confidence among non-durable goods retailers, such as food and beverages, pharmaceuticalsetc. – most affected by the constraints on consumer spending.

The increase in confidence levels could be partly due to the increase in turnover resulting from the high selling prices, BER said. “Overall, sales volumes have declined slightly, which suggests that prices, rather than volumes, could drive confidence,” he said.

The BER Retail survey also asks respondents if the average price increase rate is up / down / the same as last year. Although inflationary pressure remains strong, there are early indications that the rate of increase in selling and buying prices for non-durable goods could reach a tipping point.

Cut back

Despite a slight increase in consumer confidence in some retail markets, ASISA noted this week that severe market volatility and a sharp rise in the cost of living for consumers have tested consumers’ financial resilience.

Financially stressed consumers are getting rid of long-term risk protection like life and disability coverage as harsh economic realities take their toll, he said.

Compared to last year, consumers not only bought fewer risky policies in the first six months of this year, they also lapsed more policies. A forfeiture occurs when the policyholder stops paying premiums for a risk policy with no accumulated fund value, “the association stressed.

At the beginning of 2022 there were 34.3 million recurring premium risk policies. However, while consumers bought 4.4 million new risk policies in the first six months of this year, 4.3 million risk policies lapsed and claims against 199,023 policies were filed.

ASISA’s Vice Chair of the Board on Life and Risks Board, Hennie de Villiers, said consumers have had to absorb unprecedented increases in fuel prices, as well as rising food prices and rising interest rates in the first half of this year.

He noted that 64% of South Africans between the ages of 25 and 34 were also unemployed, according to the latest Statistics South Africa quarterly labor force survey.

“South Africans in this age group are bound to be economically active and under normal circumstances they worry about buying risk coverage to offer financial protection to their growing families, as well as to cover purchases of credit such as mortgage bonds,” he said. stated de Villiers.

He added, however, that many of those employed are likely reluctant to commit to monthly premium payments while the cost of living is at an all-time high.

Credit life policies also failed to achieve significant growth in the first half of 2022, indicating that consumers were struggling to access credit or were practicing more restraint when buying on credit, De Villiers said.

Data from the latest Old Mutual Savings and Investment Monitor (OMSIM) survey shows that consumers have learned a hard lesson in the past two years, triggered by the Covid pandemic, and are more cautious with their spending.

WHO tracks changes in the financial attitudes and behavior of the country’s working population. For the report, the financial services company surveyed 1,505 respondents of various ages, personal income groups, and genders.

Following the damage caused by Covid-19, almost 9 out of 10 South Africans (86%) have changed the way they manage their money.

The Old Mutual report found that respondents are on the rise by turning to loyalty programs and discount rewards to push their money further, while also switching to cheaper food brands, mobile packages and entertainment options to save.

There has also been a move to cut “luxuries” like domestic workers and gym contracts and to keep big purchases at bay.

Earlier this month, Walmart-owned wholesale group Massmart reported increased demand for private label as cash-strapped consumers choose to hang out at home and search cheaper foods.

Read: Rand bets R18.00 on the dollar as load shedding and rate uncertainty bite