Assurance, advisory and tax services firm PwC South Africa’s ‘South Africa Economic Outlook’ report for 2023 indicates that supply chain disruptions have affected South African consumers significantly through higher prices for household goods, longer in-store queues, items being out of stock and reduced product range available.

Seven out of ten respondents to PwC’s 'Global Consumer Insights Survey (GCIS) Pulse 5' report consumer survey, which ran in November 2022 and informed the report, indicated that they were frequently or almost always impacted during the three-month survey period by higher in-store prices.

Unsurprisingly, shoppers are cutting back on buying, with seven out of ten South African respondents saying they have stopped or are delaying non-essential spending.

This edition focuses on the consumer and their financial outlook. It features insights from PwC’s newly released ‘Global Consumer Insights Survey (GCIS) Pulse 5’ report that highlight the challenges currently being faced by local consumers.

PwC looked at specific results around the impact of supply chain disruptions on consumer shopping behaviour, concern about personal financial situations and the willingness to pay extra for a product with positive environmental, social and governance (ESG) attributes.

From a macroeconomic perspective, while employment increased significantly last year, the outlook for job creation this year is a lot more conservative owing to multiple economic headwinds.

PwC expects the South African economy to add only 100 000 jobs this year. At the same time, the buying power of salaried workers is declining quickly owing to lower take-home pay, as well as elevated inflation, it points out.

“Given the weak outlook for jobs growth in 2023 to 2024, the rising cost of living, elevated interest rates and the decline in buying power over the past year, it is not unexpected that South African consumers are downbeat about their personal financial outlook.

“Results from our survey show that three out of four South African respondents are either very or extremely concerned with their personal financial situation. The dire financial outlook once again heightens our concern about rising social risk,” PwC South Africa chief economist Lullu Krugel says.

On a positive note, headline inflation is on a declining trend towards the central bank target range of 3% to 6%, while interest rates are peaking with an expected final 0.25 percentage point increase in March.

PwC’s baseline expectation ahead of the second Monetary Policy Committee (MPC) meeting of the year is that the tightening cycle will end after this week.

It posits that, in light of the “disappointing” gross domestic product (GDP) data released for the fourth quarter of 2022, which brought the full-year economic growth rate of 2% in 2022 notably below the South African Reserve Bank (SARB) forecast of 2.5%, it is highly unlikely that the central bank will have appetite for additional rate hikes this year beyond the March decision.

“We see room for the repo rate to start declining late this year as inflation moderates towards the midpoint of the SARB’s 3% to 6% target range. The key factor here is the speed at which inflation is able to moderate.

“There have been many media reports over the past month about consumer goods companies (including food producers) warning of more supply chain price pressure that will need to be passed on to consumers this year,” PwC South Africa senior economist Christie Viljoen points out.

For now, with interest rates at the highest since the 2008/9 global financial crisis, rising debt service obligations are an added burden for consumers, PwC avers.

The firm expects debt cost as a percentage of disposable income to increase from 7.2% last year to 9.1% this year.

This will further impact the ability of consumers to repay their loans, it notes.

From a banking perspective, the collapse of two US-based banks during March raised concerns globally about the stability of banking systems that are already dealing with consumers struggling to repay debt.

However, PwC says its newly released ‘Major Banks Analysis’ report found that higher earnings and optimised capital demand have helped keep local banks’ capital ratios well above the levels required by regulations.

According to the report, there is better-than-expected jobs data for the fourth quarter of 2022, but weak 2023 forecasts owing to ‘GDP-shedding’.

Continued disruption is expected in supply chains, causing higher retail prices and out-of-stock frustrations.

In terms of the cost of living, consumer price inflation keeps slowing down and will soon re-enter the target range.

The report shows that interest rates are peaking and could start coming down before year-end.

It highlights, however, that a considerable decline in consumer buying power is contributing to further social risks.

The report also shows that consumers are willing to pay a higher-than-average price for a product that promotes ESG considerations.