South Africa’s consumer – signs of resilience and reallocation
Consumer activity is a significant driver of South Africa’s GDP. Last year, in particular, restrictions to control and contain the spread of Covid-19 and the knock-on effects to employment and retail sales were stark. The country’s GDP contracted 7%; around 600 thousand jobs were lost, and, in constant rand terms, 2020 retail sales (R890.7bn) effectively backtracked to the level reached in 2016 (R893.7bn).
With 4 “lost years” of retail sales, the most recent Statistics South Africa (StatsSA) retail trade sales report makes for interesting reading. Encouragingly, the South African consumer is demonstrating resilience and a propensity to spend. The report indicates a 2.3% year-on-year increase in retail sales and a 7% uptick month on month. The consumer spending categories showing the strongest growth were 1) household furniture, appliances and equipment (17.3%) and 2) textiles, clothing, footwear and leather goods (12.3%).
While the performance is encouraging, post-pandemic consumer behaviour looks set to differ, fundamentally in certain instances, from that apparent before the arrival of Covid-19. For a start, more consumers are buying online. Rand Merchant Bank reckons e-commerce will grow 150% over the next five years. In addition, Deloitte’s latest State of the Consumer Tracker sheds light on where consumers are likely to spend more or less time and money after the pandemic. According to respondents, home-based activities and associated spend are likely to increase from cooking to DIY. However, respondents to Deloitte’s tracker indicated that they plan to spend less time traveling, attending live events, eating out and engaging in person-to-person services.
Taking the StatsSA and Deloitte reports together, consumers have money and they are willing to spend it, but it will be important for consumer-based companies to align their offerings to tap a change in consumer outlook and behaviour that may very well outlast the pandemic.