By Zeenat Moorad
Johannesburg‚ September 18 (BDlive) — South Africans spend four times as much on alcohol than on out of pocket healthcare expenditure‚ and 1.5 times more on clothes than on education‚ with almost 10% of the bottom-end of the market spending going to clothing‚ analytics consultancy‚ Eighty20 said on Wednesday (18/09/2012).
The company recently analysed SA’s spending patterns habits‚ using Stats SA’s latest income and expenditure survey.
According to Illana Melzer‚ co-founder of Eighty20‚ a key factor shaping consumption patterns was access to credit.
"More than 18-million consumers have open credit accounts‚ and of these‚ 11-million people have a clothing credit account‚” she said.
In contrast‚ 2.4-million consumers have a mortgage‚ with data on loan origination published by the National Credit Regulator pointing to a shift in the credit market.
"In 2008 mortgages accounted for 47% of all credit granted — they now account for about a quarter. Because mortgage finance is not easily available‚ households prioritise other expenditure above investment in housing‚” Melzer said.
As the country’s main engine of growth‚ consumer spending‚ which has declined‚ accounts for about 65% of gross domestic product.
High unemployment and stunted income growth in SA have checked household expenditure‚ already crimped by soaring utility costs and rising debt.
The slowdown in unsecured lending‚ which had given retail sales a significant boost over the past three years‚ is expected to be one of the major contributors to the decline in spending.
Unsecured lending is the granting of credit without assets being provided as security‚ at higher borrowing rates. Consumers — especially those in the lower living standards measures — have been using such short-term debt instruments to offset the loss of discretionary spending power.
Although there are indications that borrowing for consumption has slowed as lending criteria have been tightened‚ concern remains about the ability of consumers to repay loans and accounts.
Last week‚ research from EY/Bureau for Economic Research (BER) showed that clothing and footwear retail sales growth in SA was losing momentum. This points to the extent of SA’s consumer spending slowdown as‚ historically‚ sales of semi-durable goods have mostly remained buoyant.
Retailers who are heavily reliant on credit sales like Truworths and The Foschini Group have noted the challenging trading environment‚ and warned that economic conditions in SA would remain difficult in the year ahead‚ with the credit environment likely to deteriorate further due to current levels of consumer indebtedness.
According to Stanlib’s chief economist‚ Kevin Lings‚ consumer income growth was slowing‚ reflecting the lack of job growth as well as some moderation in salary adjustments. In addition‚ consumers were still having to cope with a range of cost increases that had systematically eroded their retail spending power.
"Households cannot avoid these increases‚ as they relate to necessities or essential goods. While the rapid growth in unsecured credit provided some support to retail activity during 2012‚ it has slowed significantly in recent months‚ albeit off a relatively high base‚” he said.
According to Eighty20‚ South Africans spend the same on satellite TV subscriptions as on retirement annuities.
"Spending habits of South African households are impacted on by a range of factors‚ not only income. This is especially the case among lower income households. As such‚ marketers in the retail and financial services industries should not only constantly innovate and revaluate their methods of interacting with consumers‚ but also reconsider the use of consumer spending data when evaluating their target markets‚” Melzer said.
While most marketers focus on income it is important to factor in consumers’ access to free services‚ housing subsidies and total household income‚ in order to understand the key drivers of SA expenditure‚ and ultimately‚ the existence of market opportunities.
"Housing is a critical asset‚ which drives consumption patterns directly. In total‚ three and a half million more households are living in proper housing compared to 2001‚ largely because of the state’s housing delivery programme. Government’s primary subsidy targets households earning less than R3‚500 a month‚ and this subsidy value has increased significantly as the minimum housing spec has improved‚” Eighty20 said.
While the trends in income show some upward mobility‚ data on living standards show a much more significant shift‚ primarily because of service delivery. In 2012 about 28% of all South Africans were in living standard measures (LSMs) one to four. In 2004 this was almost 50%. © BDlive 2013