by: Michele Vollaro | April 5, 2024
Consumer spending growth in South Africa has stabilized in 2023 following the previous year’s post-pandemic surge. However, interest rate cuts are expected to encourage more buying in 2024, executives at Visa and Discovery Bank said yesterday.
Indeed, recent results from the retail sector indicate that consumers are under financial pressure due to high interest rates, which increase the cost of debt, and inflation, which raises food prices. In their latest report SpendTrend24, Discovery’s banking unit, and Visa revealed that although consumer spending in South Africa outpaced inflation by 19 percentage points in 2022, the two indicators were closely aligned last year.
Spending on food, including groceries, takeaways and restaurants, increased in most South African cities, averaging 8% in 2023 compared to a 16% increase the previous year, according to the report.
More generally, in South Africa and four other emerging market countries included in the survey – Nigeria, Ghana, Brazil and Vietnam – more of the household budget was allocated to essentials such as food and fuel, while less was spent on non-essential goods such as travel.
The report also highlighted that spending is increasing among affluent and high-net-worth consumers, with a slight decrease in the mass segment due to rising costs of living.
South Africans are increasingly using their mobile phones to pay for goods instead of physical cards, with adoption rates matching or exceeding those in international cities.
South Africa’s central bank halted its tightening cycle in July for the first time since November 2021 and economists expect interest rates to fall from the second half of this year.
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