The impact of the price hike on South Africa’s consumer spending


Broll’s SA Retail Snapshot Q2:2018 Report highlights a number of key factors affecting the spending power of South Africa’s average consumer and the comparisons in costs in 2018 vs. 2008. 

The report notes that salary increases have slipped behind inflation. An investigation was undertaken whereby salaries of lawyers, accountants, engineers, teachers, administrative assistants in 2018 were compared with earnings from 2008 and it was found that real salaries rose at an average of 4.9% per annum. When adjusted for inflation, salaries should have grown by 6.7% per annum for people to earn the equivalent, in terms of buying power, of what was earned in 2008.

With the 1% increase in VAT which was effective back in April, consumer spending has been set back further with a 52 cents increase in the fuel levy and sin taxes between 6% and 10%, depending on the product. South Africa’s electricity costs are in the higher bracket compared with 95 countries with citizens paying R2.05/kWh compared to the world’s average R1.51/kWh.

The annual increase in municipal rates, taxes and service costs (as well as the re-valuation of properties) also adds pressure to consumers.

In July, the competitive petrol price saw an increase which set a new record hitting R16.02/ litre for 95 unleaded.  Compared to prices in 2008, petrol now costs 49.7% more. This not only impacts the cost of transport but it has spin-off costs in all related industries and particular food.

The cost of basic food such as milk, meat, sugar, bread and cheese were much cheaper ten years ago, with a basket of goods costing 93.4% today. White bread currently costs R13.49 but only cost R5.89 in 2008.

The entertainment industry has been affected by inflation too with a 2D movie ticket costing in the region of R85.00. Back in 2008, a movie ticket cost closer to R25.10 per ticket.

Reduced spending becomes apparent when taking a look at Trading Densities in the Broll managed portfolio. Supporting economic data and reinforcing that consumers are in fact spending less on certain retail categories.

In conclusion, consumer pressure remains high with no sign of abating and with disposable incomes shrinking and how to spend them thought about more carefully, the provision for shoppertainment and offering something unique is more vital than ever.

Read the full report here: Broll – SA Retail Snapshot Q2-2018