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South Africa's cautious consumer

2.8% Five-year annual South African growth rate in consumption
To buy what they need, many South Africans have had to dig into savings or make purchases on credit.

Over the past decade, more than 3.5 million South Africans have been lifted out of extreme poverty. As of 2015, the country’s consuming class grew to about nine million households, accounting for $191 billion in private consumption. Yet despite this expansion of the consumer pool, private consumption in South Africa has been growing at a fairly subdued annual rate of 2.8 percent over the past five years and a mere 1.6 percent in the past year—slower than Africa’s other major economies.

South African consumers are under tremendous financial pressure due to higher prices (inflation has averaged 5.4 percent over the past five years, edging up to 6.4 percent in 2016) and low real growth in wages (averaging 1.3 percent in the past five years). To buy what they need, many South Africans have had to dig into savings or make purchases on credit.

Our recent survey of 1,000 South African consumers confirms that most of them are indeed concerned about their financial prospects and thus holding back spending. Almost 70 percent of respondents said they worry about imminent job loss. More than half said they are living paycheck to paycheck. No surprise, then, that they are cutting back on spending, delaying purchases, and shopping around for the best deals.

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