London - On Saturday energy prices rose for millions of British households as the cost-of-living crisis continues to bite and the country faces a bitterly cold winter exacerbated by the twin threat of a resurgent Omicron infection wave, and the competing seasonal flu virus trying to reclaim its winter pathogen pole position.
The reality is that for consumers all over including South Africans, 2022 continues to be an annus horribilis, forcing households to make choices, some of which could be life threatening because they can’t afford the basic necessities of food and fuel due to the dramatic rises in prices caused by the disruptions of the lingering pandemic, the Ukraine conflict and global economic shocks such as rising inflation, subdued GDP growth and the economic slowdown in China.
In the UK, the Truss government scrambled to cushion the energy price by placing a cap on the cost per unit – not on the actual usage of electricity, pre-empting an anticipated 80% increase in domestic gas and electricity bills. But prices are still two to three times as high as last winter, which local charities warn will leave many households struggling given other cost-of-living pressures.
Consumers are beholden to the ability and capacity of their governments to help mitigate their respective plights and well-being. In South Africa consumer sentiment was sub-dued even before the pandemic, given the country’s dire economic situation characterised by rising sovereign debt, higher food and fuel prices, stubbornly low GDP growth, high joblessness and so on.
The latest McKinsey Global Consumer Sentiment Survey shows that South Africa has the highest share of pessimistic consumers (29%), ahead of France (24%) and Japan (23%).
The survey shows that only 21% of consumers were optimistic about the country’s economy, compared with 24% in 2019 and the all-time low of 17% in mid-2020.
As to their current personal economic situation, a staggering 87% of consumers across all income levels describe it as stretched; of these, 13% say they are in crisis, 32% say they find it hard to make ends meet, and 42% say they have had to make adjustments.
Even among the most affluent respondents (household income above R500 000 per annum), only 28% say they are doing fine or very well.
As a cue to President Cyril Ramaphosa and his finance minister Enoch Godongwana, consumer sentiment for 2022 is pretty telling – 35% of South Africans believe that their situation will further deteriorate in 2022, and a whopping 71% of consumers report that their ability to make ends meet has declined over the past 12 months.
Team Ramaphosa should have no doubts about the perception of their compatriots as to the future of the country’s economy.
Consumer behaviour in 2022 has been affected in various ways. South Africa outperforms peer countries in several metrics. A record 61% of compatriots are cutting back on spending compared with China and India.
This translates into shoppers trading down, especially on pasta, household cleaning supplies, cookies, frozen meals, hair care products and even milk; paying more attention to prices; searching for bargains and promotions; delaying purchases; and substituting branded products with cheaper alternatives.
South African consumers are a discerning lot and value is a top consideration. Digitisation is a persistent trend, but not all retailers are taking full advantage of the opportunities. Health and sustainability in eating and carbon consciousness have moved from niche values to more mainstream.
However, while consumers in South Africa care about sustainable options, they don’t want to (and sometimes can’t afford to) increase their spend on them. The challenge for the consumer market and government is to introduce best practices and policies to balance sustainability with affordability.
Parker is an economist and writer based in London
Cape Times