As we head into the holiday season, after a tough year filled with water shortages, elections and global crises, the big question for retailers and brands must surely be whether there is light at the end of the tunnel.
A major factor in answering that question is knowing exactly what’s going on in the hearts, minds and bank-balances of consumers. And right now, in the media, there is a cacophony of alarm bells ringing out over rising debt, cost of living crises and the financial constraints that the South African middle class is facing.
Income growth, the story goes, is outpaced by significant cost increases and consumers must resort to credit and loans to make up the shortfall. And there’s also chatter in the media that the major banks are recording an increase in the numbers of their clients who are living pay cheque to pay cheque.
But according to BrandMapp’s director of storytelling, Brandon de Kock, all this doesn’t necessarily mean that most of the country’s formally employed income earners are feeling pessimistic over finances.
He says, “Our research, which measures what’s going on in the lives of the 13 million South African adults living in taxpayer households, give us the deepest, widest view of this critical segment that anyone’s ever seen, and what’s clear is that a true understanding of where things are at requires one to separate the baby from the bathwater, so to speak!”
Consider, for example, the levels of debt stress these consumers express over the past four years. The percentage of people saying they have no debts at all, or are not at all worried, has shrunk from 60% to 51% in the past four years, with the biggest jump coming in 2023.
Not all bleak
However, the story isn’t all bleak. When you look at the BrandMapp audience, fewer than 30% are actually ‘debt-stressed’, and that number drops to just 13% for households earning R1 million or more a year. More importantly, a massive 51% of all consumer-class adults are either debt-free or not at all concerned about their debt.
Age dynamics also play a significant role. Gen Z and Boomers stand out as the least debt-stressed, with about 45% having no debt at all, while 35-55-year-olds bear the brunt of debt stress, with 35% in this cohort feeling burdened by its weight.
De Kock comments, “The reality is that more highly educated, employed adults know how to deal with debt and use it as a tool to achieve their preferred lifestyle rather than a necessity. Yes, there are certainly new-to-category consumers borrowing themselves into a lifestyle, but the data indicates that it’s a minority, not the majority.”
So, what keeps SA’s mid-to-top earners awake at night?
Financial concerns loom large, but they are not the sole worry for South Africa’s middle class.
De Kock says, “BrandMapp 2023 shows that 47% of adults say that the thought of ‘rising food and energy costs’ keeps them awake at night. Other significant stressors include weak economic growth for 40% of the BrandMapp audience. But they are still more concerned with crime and corruption than either of those.”
Despite these challenges, resilience shines through. De Kock points out that: “Almost 60% say they are the same, or better off than they were two years ago, with only 15% saying they are ‘much worse off’.”
Encouragingly, South Africa’s high-income earners are growing at twice the rate of inflation, while the millionaire class – those earning R1 million or more annually – is expanding at a staggering rate of 20% or more.
“This isn’t just about the rich getting richer,” De Kock explains. “There’s a rapidly growing economic elite forming at the top of the country’s income pyramid. It means that the tax burden on the super-wealthy is actually getting better not worse, and it also means that if we can turn things around on a macroeconomic level, there’s a highly skilled, educated and motivated group ready to pull the country into a brighter future.”
Shifts in spending behaviours
Financial constraints are reshaping spending patterns, though not uniformly.
“At the middle and bottom of the income pyramid, consumers are driven by survival and don’t really have much choice,” De Kock says, “But the higher up the tree you go, the more choice consumers have. This indicates that discretionary spending, such as dining out or purchasing new cars, is being postponed rather than abandoned.”
Interestingly, aspirations remain steady with 37% of adults wanting to buy or change their car this year. 22% are looking to buy a house and that’s only a slight drop from 28% three years ago.
De Kock comments, “Affordability is obviously an issue, but I think this also reflects increasing numbers of incoming-earning younger adults, the ‘subscription generation,’ who see things like home loans as anchors tying them down rather than steps up the ladder.
“And they’re also living in a new consumer world with all kinds of novel behaviour-influences, so there’s a growing trend toward ‘staying at home more,’ fuelled by streaming services and home delivery options that continue to radically transform consumer behaviour.”
Attitudes towards wealth and resilience
Facing economic uncertainty and soaring cost of living, South Africa’s middle class remains cautious and measured in their approach to wealth-building. When asked about how they describe their attitude towards investments, only 28% of the BrandMapp audience say they are ‘bold’, 41% are ‘conservative’, and the rest are unsure.
De Kock says, “This conservatism indicates a ‘treading water’ sentiment, particularly among higher-income groups who can afford to play the long game.”
A tale of two economies
South Africa’s financial landscape reveals stark contrasts.
De Kock says that, “What we are seeing is the the ongoing expansion of a stratified society, and we do need to be extremely concerned at plight of the ever-expanding number of individuals who sit in the 70% of adults in the country and live in a world of very limited choice below the tax-paying threshold.
“But, at the same time, we shouldn’t lose sight of the fact that the group of consumers who do have choice is growing at exactly the same pace, and the group at the very top is growing faster than anything else. It is not a tiny elite, it’s now somewhere around five or six million adults who live in a country within a country – one full of dreams that can actually be reached.”
De Kock sys it’s a story about evolution, not revolution. “And it’s one that we have specialised in understanding for the past 11 years,” he continues. “I can’t wait to see what the new BrandMapp data that’s about to be released is going to show us. But if you take rising levels of consumer optimism into account, I really believe it’s going to be another chapter with a happy ending!”
BrandMapp 2023 insights are now available directly from the BrandMapp team at WhyFive Insights and by subscription via Telmar, Softcopy, Nielsen and Eighty20. For data access email Julie-anne@whyfive.co.za
Visit http://www.whyfive.co.za/ for an overview of what’s in the new data.
