Jasper Raats
The latest report from the Centre for Risk Analysis (CRA) paints a disturbing picture of the state of the South African consumer, who according to the researchers is currently under great financial pressure – with far-reaching implications for the country’s economic prospects.
After a short-lived surge in confidence in the second half of 2024, fuelled by the formation of the Government of National Unity (GNU) and interest rate relief, consumer sentiment fell dramatically in the first quarter of 2025.
The CRA refers to data from the Bureau of Economic Research (BER) which shows that the consumer confidence index fell by 14 points to -20 – the lowest level since mid-2023.
Heavily taxed, weak confidence
The proposed VAT increase and so-called “bracket creep” in personal income tax have put particular pressure on higher-income households, with their confidence falling to -30 index points. Even middle and low-income groups are showing a clear decline in expectations about their financial future and the country’s economy.
According to DebtBusters, a debt counselling firm, online inquiries about debt relief increased by 9% in 2024. Savings levels remain negative and household debt levels are high.
At the same time, the cost of basic food is rising – 27 of the 44 items in the household affordability index have seen their prices rise, with six items showing double-digit inflation.
Household spending – which accounts for almost 65% of GDP – shows a poor outlook. The CRA warns that weakening consumer spending will seriously dent South Africa’s short- and medium-term growth potential unless job creation and income are stimulated through real reform.
The average household income can barely cover essential expenses at present. The average wage of R4 606 per month is insufficient against basic expenses of R4 996, including transport, electricity and food for a family of four.
Rural challenges
The report also highlights the inequality between racial groups. Black households have an average of four dependants per wage earner, with an effective income of only R1 181 per person – compared to R1 771 in white households. This makes it particularly difficult for rural and poorer communities to absorb economic shocks.
In contrast to general consumerism, new vehicle sales for the first quarter of 2025 show an increase of 10.5%, and Absa’s Property Sentiment Index rose to a peak of 87% – possibly due to stable inflation and previous interest rate cuts. So, the overall picture remains volatile.
The CRA warns that without real policy changes and structural reform within the GNU, Finance Minister Enoch Godongwana’s upcoming budget will be a major challenge – with consumer confidence and spending as key risks to a sustainable economic recovery.
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