Fears over South Africa’s economy

 ·7 Dec 2023

South Africans are more confident about their own household finances, but there are serious concerns over the economy.

According to Deloitte’s latest consumer signals report, South Africa’s Financial Wellbeing Index has improved, meaning that consumers are expressing more positive sentiments about their financial future compared to a year ago, even if the index has tapered slightly since June 2023.

Potential factors that have driven more positive year-on-year sentiment include the easing of inflation and a hold on interest rates,” Deloitte said.

“If inflation continues to rise as it has done in the last two months, we are likely to see a persisting downward trajectory.”

However, although anxiety levels dropped over the last year, net anxiety increased by 6% points between September and October 2023.

The direction of the economy continues to be a key driver in anxiety, in turn, driving heightened concern about personal finance,” Deloitte said.

“Interestingly, anxiety about climate change is on the rise – potentially reflecting heightened awareness of the issue.

Not alone

This sentiment was shared in FNB’s Consumer Confidence Index (CCI), which dropped by 1 index point to -17 in Q4 2023.

The slight drop was due to the decline in the economic sub-index, dropping from -22 in Q3 to -28 in Q4.

High interest rates, potential tax rises and a marked degeneration in South Africa’s fiscal position are causing concern and were listed concerns by South Africa’s middle- and high-income respondents.

FNB said that the vast majority of households, especially the rich (those earning above R20,000), are pessimistic regarding the economy’s outlook, whilst a small majority of households, particularly the less wealthy) expect their household finances to improve.

“To be sure, measured from 1994, the average reading for the economic outlook sub-index of the CCI (0) is 11 points lower than the average reading for the household financial prospects index (+11). However, the reading for the economic outlook index is currently a massive 31 index points lower than the household finances index,” FNB said.

“The gap between these two sub-indices widened again in the fourth quarter and is especially large for high-income households (38 index points).”

“To an extent, this suggests that consumers are cognisant of the adverse implications that factors like high levels of load shedding, Transnet’s logistical constraints and a tightening in fiscal policy hold for economic growth in South Africa. However – rightly or wrongly – they do not expect flagging economic growth to lead to an equivalent deterioration in their own financial positions,” FNB Chief Economist Mamello Matikinca-Ngwenya said.

Read: The tide is turning in South Africa

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