The broad-based nature of the decline in retail activity illustrates fragile consumer sentiment

Consumers will trade down or delay discretionary spending as rising interest rates and unemployment curtail purchasing power

South Africa’s size and sophistication mean it remains an indispensable consumer market for MNCs despite its muted growth outlook. MNCs should focus on growing market share among resilient consumer segments, including high-income households that purchase premium and super-premium goods in Johannesburg, Cape Town, and Durban. In saturated segments, consider boosting marketing spending and running promotions to ensure offerings remain top of mind for consumers. Firms selling low-priced products, such as FMCGs, to price-sensitive low- and middle-income households should consider reviewing product portfolios or package sizes in tandem with pricing strategies to protect sales. To protect margins amid stagnant sales, firms should also consider ways of cutting costs to protect margins.


  • Retail sales (adjusted for inflation and seasonal variations) were ZAR 1.4 billion (US$ 75 million) lower in May 2023 compared to May 2022, equivalent to a 1.4% YOY contraction. 
  • The fall in sales was largest for retailers of hardware, paint, and glass (-8.7% YOY) and household furniture and durables (-5.8% YOY). Contractions were also recorded by pharmaceuticals, cosmetics, and toiletries (-4% YOY), specialty food, beverages, and tobacco (-4% YOY), and supermarkets (-3.7% YOY). Growth was registered only for textiles, clothing, footwear, and leather goods (+10.3% YOY). 
  • Consumer confidence, as measured by the FNB/BER Consumer Confidence Index, fell from -8 in December 2022, to -23 in March 2023, and then to -25 in June 2023. (A negative figure means consumers expect economic growth to deteriorate and believe it is not a suitable time to purchase durable goods).

Our View

The outlook for retail activity is subdued, because most households will curtail discretionary spending. Rising unemployment, weak civil service wage growth, and chronic power shortages will constrain consumer purchasing power. Additionally, interest rates are now at their highest level since May 2009, which will raise costs of borrowing and suppress demand for products usually financed with credit such as durable goods. However, day-to-day spending will also suffer, because more than one-third of South Africans have active credit accounts. However, high-income households will remain a resilient (if not growing) customer segment given their job security and often above-inflation wage increases. Looking to 2024, consumers will benefit from moderating inflation, but this will be counterbalanced by rising anxiety over the political outlook as the country heads toward the May 2024 election. Consumers are likely to curtail or postpone large and discretionary spending until the composition and policies of a new coalition government become clear.

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