South African spenders have been more resilient than their global counterparts despite a constrained economic environment, 2023 data shows.
The SpendTrend24 report by Discovery Bank and Visa — which analysed credit card spending behaviour across cities in South Africa, emerging markets and developed markets — showed that South Africans were more consistent in their spending habits.
“South Africans, I think, are well known for the resilience that we exhibit in sort of everything that we do. Spending is exactly the same,” said Hylton Kallner, CEO of Discovery Bank.
“We kind of are consistently increasing spenders compared to the counterparts that we see across the rest of the world.”
Following a surge in consumer spending after the Covid pandemic in 2022, which outpaced inflation by 19 percentage points, spending growth steadied in South Africa in 2023, falling behind inflation by two percentage points.
Average annual consumer inflation was 6% in 2023, down from 6.9% in 2022 but at the upper end of the 3% to 6% target range of the South African Reserve Bank.
In Johannesburg, Durban and Cape Town, spending rose among the top 5% of clients based on spend per active credit card.
But spending fell in the bottom 50% of active credit card users, largely as a result of the rising cost of living. Spending in the two middle segments was relatively constant.
Lineshree Moodley, Visa South Africa’s country manager, said consumers had been spending more money on essential items such as groceries and fuel, reflecting cost pressures.
South Africans prioritised groceries, fuel, retail and travel
South Africans prioritised groceries, fuel, retail and travel. Groceries accounted for the largest component of the basket of spend across all segments except high net worth individuals, where retail took the largest chunk out of their wallets.
Travel was also a high-spend basket for this segment. This, Kallner said, the data showed, was more aligned to developed markets. After pandemic-induced lockdowns ended, spenders engaged in “revenge travel”, but 2023 data showed this habit had settled both globally and locally. Travel spending is, however, increasing due to rising costs, specifically in emerging markets.
The data also showed that South African consumers are adopting a more digital-savvy way of spending by increasingly tapping their phones, tablets and wearables to pay.
The use of digital wallets in South Africa jumped nine percentage points in 2023. The report showed that South Africa’s growth in spending and frequency of using digital wallets exceeded that of their global counterparts where digital wallets are available.
“I think as South Africans we often take it for granted how advanced our financial services and banking systems are, but you see it reflected in a global analysis like this very, very strongly,” Kallner said.
The use of digital payments is likely to continue, Discovery Bank and Visa said.
SA consumers showed more stable year-on-year spending patterns and less segment volatility than their global counterparts, the study found.
“In fact, you don’t see the wild swings that we are observing in some of the other markets where consumer spending tends to be much more volatile.”
Kallner said South Africans' spending resilience is reflected in the overall GDP performance.
In February 2024, the National Treasury estimated real GDP growth of 0.6% in 2023.
“Other markets globally are in technical recessions; in South Africa we continue to see moderate growth. It does need to be faster, but it tends to be more resilient.” Kallner said.
Globally, interest rates have been hiked in recent years to address persistently sticky inflation. This has made it more expensive for consumers to borrow money and eats away at their disposable income.
The report noted that as the impact of high interest rates persists, consumers will continue moving towards value-based spending, which could boost the use of rewards and loyalty programmes.
Some market watchers have forecast interest rate cuts in South Africa from July.
Interest rate cuts would alleviate some of the pressure on consumers and encourage spending, the report said.
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