Sandton City is a madhouse. The reports are disturbing: gaggling crowds of teens everywhere, shops heaving with bodies, zombies wandering from store to store, gift lists clutched in clammy hands. Some of my hollow-eyed acquaintances report that they didn’t even make it beyond the parking lot. Christmas is coming, and apparently South Africans are shopping with a vengeance.
Which is interesting, because we probably shouldn’t be, not if various reports on levels of savings, consumer debt and provision for retirement are to be believed. We are quite literally spending like there’s no tomorrow (and when it comes to Christmas gifts, we’ll willingly blow the budget, according to recent surveys).
Is the South African consumer something of a bumblebee then? In our ability to keep spending despite reality tapping us on the shoulder and reminding us that the wallet is emptying fast, are we like the fabled insect that flies even though it’s said to be aerodynamically impossible?
Overall, it doesn’t sound good. Back in October, the Financial Mail informed us that consumers are “drowning in debt”. The month before, Stanlib economist Kevin Lings said: “Looking forward, SA consumer activity is likely to facing increasing strain. This is due to a range of cost-push factors that are systematically eroding the household sectors spending power — these include higher energy costs, transport costs, food costs, education fees, medical service costs and water costs.”
The latest results of Unisa’s Consumer Financial Vulnerability Index show that South Africans are feeling more financially vulnerable than before. This is driven as much by perception as reality, so the continuing gloomy news out of Europe will not have cheered anyone up. “It’s very clear the South African economy and the South African consumer is not out of the woods yet,” said Carel Van Aardt, head of Unisa’s Bureau of Market Research.
Trevor Manuel cited Reserve Bank figures which suggested that after-tax income is 75.9% of household debt. “The middle classes are in way above 100% — all of next year’s earnings are already spent,” Manuel told a consumer conference. The Festive Season Savings Campaign launched by the South African Savings Institute in November is clearly falling on deaf ears, though chances are nobody has heard about it. (I certainly hadn’t)
Actually, the most disturbing piece of news I have read recently was buried in a report about how Woolworths decided to take their advertising in-house as a cost-saving measure in anticipation of difficult trading conditions in 2012. Herman Manson, referring to comments by the MD of the jilted ad agency, wrote: “Woolworths expects exceptionally tough market conditions in 2012 and that it is preparing for considerable fallout from the financial turmoil in Europe.”
If Woolworths is worried, I’m worried.
Let’s not all rush out and slit our wrists, though. Kevin Davie has a different view. Digging into the figures, he reaches the conclusion that reports of the South African consumer’s hopeless spiral into debt are greatly exaggerated. “We are, it appears, both drowning in debt and wallowing in wealth” Davie observes, before concluding that “Overall the picture is one of rude health.”
I’m not quite so sanguine but then I work in an industry entirely devoted to the selling of stuff — which means relying heavily on disposable income. I must confess that I have long been staggered by the lifestyles that so many South Africans are able to maintain as salaried employees. Only the executives at the top of the corporate food chain are coining it, after all. How on earth are mere mortals able to service a bond on a house worth a couple of million (pretty average in Joburg these days), pay off two vehicles (one for husband, one for the wife), fork out for private school fees, pay rates and taxes, put aside money for investments, employ domestic workers, eat out, buy groceries, go on holiday and still clog the malls at Christmas?
It doesn’t add up.
And yet, somehow it does, and people keep showing up at the mall. Will South African consumers really keep on finding the money for things we don’t need, even as petrol prices increase, the cost of food skyrockets and the chunk of income taken by electricity and water and other forms of tax, like toll fees, ratchets up higher and higher?
As it turns out, the bumblebee is perfectly capable of flight and like the huge number of Eskimo words for snow, this is a myth that persists more thanks to its poetic appeal than any basis in reality.
Perhaps consumers are in better shape than the media would suggest. So, like that inoffensive member of the genus Bombus, there’ll be a perfectly good explanation for our ability to defy economic gravity and parking on a Saturday at Sandton City will always be impossible to find.