South African consumers, after a year of unleashed spending in 2022 as pandemic restrictions eased, adopted a more cautious approach in 2023. Rising living costs put a strain on wallets, with groceries becoming a more prominent expense than ever before. However, there’s a potential ray of sunshine peeking through the clouds: anticipated interest rate cuts in the latter half of this year could reignite consumer spending.

A recent SpendTrend24 report released by Discovery Bank’s banking unit, Discovery, and Visa, sheds light on these consumer trends. The report reveals that while South African consumer spending significantly outpaced inflation by 19 percentage points in 2022, the two metrics grew at a more comparable rate in 2023.

Food spending, encompassing groceries, takeout, and dining out, witnessed an increase across most South African cities in 2m023, averaging 8%. This growth, however, pales in comparison to the 16% surge observed the year before.

The report’s findings extend beyond South Africa. It encompasses data from four other emerging markets – Nigeria, Ghana, Brazil, and Vietnam. The study reveals a common thread: a larger portion of household budgets in these countries is being allocated towards essentials like groceries and fuel, while spending on non-essentials like travel has declined.

An interesting trend highlighted by the report is the increase in spending among affluent and high net worth consumers. Conversely, the mass market segment exhibited a slight decrease, likely due to the rising cost of living.

“Our latest research underscores the complex path navigated by global economies throughout 2023,” commented Hylton Kallner, Chief Executive Officer of Discovery Bank. “Persistent inflation and high interest rates were defining factors in this post-pandemic recovery, pushing up the cost of living and prompting consumers to adjust their spending habits.”

The report also emphasizes the growing adoption of mobile payments in South Africa. Consumers are increasingly opting for their mobile phones over physical cards to make purchases, with adoption rates reaching or even surpassing those observed in major international cities.

The South African central bank paused its interest rate hike cycle in July 2023, marking the first such pause since November 2021. Economists predict that interest rates will start to decrease in the second half of this year. Kallner suggests that these anticipated reductions would translate into higher disposable income for consumers, although value for money is likely to remain a primary concern.

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