Supply chain disruptions have affected South African consumers most significantly by increasing the prices of household goods, longer queues in-store, items being out of stock, and reduced product range availability, says PwC’s third South Africa Economic Outlook report.
Seven out of 10 respondents to the consumer survey indicated that they were frequently or almost always impacted during the three-month survey period by higher in-store prices. Unsurprisingly, shoppers are cutting back on buying: Seven out of 10 South African respondents said they have stopped or are delaying non-essential spending.
The report, part of PwC’s Global Consumer Insights Survey (GCIS) Pulse 5, highlights the challenges currently faced by local consumers and looks at specific results around the impact of supply chain disruptions on consumer shopping behaviour, concern about personal financial situations, and the willingness to pay extra for a product with positive environmental, social and governance (ESG) attributes.
From a macroeconomic perspective, while employment increased significantly last year, the outlook for job creation this year is a lot more conservative due to multiple economic headwinds. PwC expects the South African economy to add only 100 000 jobs this year. At the same time, the buying power of salaried workers is declining quickly due to lower take-home pay, as well as elevated inflation.
“Given the weak outlook for job growth in 2023/2024, the rising cost of living, elevated interest rates, and the decline in buying power over the past year, it is not unexpected that South African consumers are downbeat about their personal financial outlook,” says Lullu Krugel, PwC SA chief economist.
“Results from our survey show that three out of four South African respondents are either very or extremely concerned with their personal financial situation. The dire financial outlook once again heightens our concern about rising social risk.”
Christie Viljoen, PwC SA senior economist, adds: “We see room for the repo rate to start declining late this year as inflation moderates towards the midpoint of the SARB’s 3% to 6% target range.
“The key factor here is the speed at which inflation is able to moderate. There have been many media reports over the past month about consumer goods companies (including food producers) warning of more supply chain price pressure that will need to be passed on to consumers this year.”
For now, with interest rates at the highest since the 2008/2009 global financial crisis, rising debt service obligations are an added burden for consumers.
PwC expects debt cost as a percentage of disposable income to increase from 7,2% last year to 9,1% in 2023. This will further impact the ability of consumers to repay their loans.
From a banking perspective, the collapse of two US-based banks during March raised concerns globally about the stability of banking systems that are already dealing with consumers struggling to repay debt. However, PwC’s Major Banks Analysis report found that higher earnings and optimised capital demand have helped keep local banks’ capital ratios well above the levels required by regulations.