SA Consumer Outlook 2024 – Improving household finances

Our analysis of the state of consumer finances in 2023 reveals a surprisingly positive picture. The total wage bill increased by a stronger-than-expected 11.6% y-y in 2023, driven by almost a million new jobs and wage increases averaging 5.6% y-y. Although debt repayments increased by 14.6% y-y, transport costs were flat and overall, the funds available for retail and discretionary spending increased by a strong 13.3% y-y. Despite solid growth in the Consumer Wallet, retail sales growth was modest at 5.3% y-y, suggesting that consumers may have taken the opportunity to restore their balance sheets by increasing savings or reducing their gearing.

Looking ahead into 2024, the electricity crisis seems to have eased from mid-2023, and while still a risk factor, we think the worst might be over. Retailers’ FY24 results may have relatively soft bases, which could enhance growth rates.

The weak rand made South Africa a more appealing holiday destination for overseas tourists, whose numbers surged by 47.2% y-y in 2023. We think the recovery in tourism will continue in 2024. We expect the Consumer Wallet to expand by 11.8% y-y in 2024, driven by a forecasted 776 000 new jobs and wage increases of 5.0%. Debt service costs and transport costs could moderate and provide relief to the consumer, in our view.

Consumer spending power could also be boosted by the implementation of the Two-Pot retirement system from
1 September 2024. The initial seeding of the savings component could provide a significant stimulus to consumer spending, or contribute to further deleveraging by households. We estimate the initial savings pot could amount to c. R339bn, and cash-outs could be between R34bn and R136bn, depending on the level of participation.

We also introduce a demographic analysis in our outlook for the retail sector, noting how changes in the size of target market populations could impact the retailers.