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JEREMY MAGGS: As we near the festive season, mid-income consumers are confronting a challenging mix of issues. We are seeing increased living costs, serious debt concerns, and significant economic uncertainty. Fresh inflation statistics have just been released, amplifying these worries.
Read: Inflation inches up, leaving rate cut hopes intact
Nonetheless, it’s not entirely bleak. I’m happy to share that new insights from Brand Mapp are offering perspectives on how we are managing these challenges. I’m glad to welcome back Brandon de Kock, the director of storytelling at BrandMapp. It’s always a pleasure to speak with you, Brandon. Your recent findings contradict the dominant narrative that consumers are bogged down by debt. What have you uncovered?
BRANDON DE KOCK: Hi Jeremy, thanks for having me back. People often tend to generalize situations. That is fundamentally the message we wish to communicate. While there are certainly many consumers facing real hardships, especially stress,
it’s incorrect to assume that all 13 million individuals in what we refer to as the middle market—those in tax-paying households—are uniformly burdened by debt.
Our society is distinctly layered, and at least half of those in the middle market are not experiencing the financial strain as intensely as others. This presents a somewhat optimistic picture for that segment of the population, if you follow my logic.
JEREMY MAGGS: I suppose it also relies on how one defines feeling pressured. Your definitions of a ‘pinch’ could differ from mine.
BRANDON DE KOCK: Precisely, and that’s where the debt conversation becomes relevant. For years, we have routinely queried consumers about their perceptions of their debt situations. Each year, we discover that fewer than 30% of households report actual stress related to debt.
This indicates that, while that 30% genuinely faces debt stress, the rest either have the acumen to navigate debt responsibly or cultivate it into a different lifestyle, particularly among those in the higher income brackets.
Fundamentally, the critical metric is whether individuals are borrowing to elevate their lifestyle, and typically, the answer is no.
JEREMY MAGGS: Would you assert that middle-aged individuals may be feeling this load more than either younger or older generations?
BRANDON DE KOCK: [Chuckle] Yes, you and I both belong to that demographic. The data indicates that those least burdened by debt are in younger and older age groups. This makes sense. Younger people entering the marketplace might not have needed to engage with debt yet, while those starting families may find borrowing vital for essential expenses like housing and childcare. The role of personal loans and credit cards becomes much more significant for family-centric generations.
Interestingly, baby boomers appear to have the least amount of debt. They might have either settled their debts completely or adapted to a different lifestyle post-retirement.
This scenario significantly impacts those moving into mid-life; it’s a major concern in today’s economy.
JEREMY MAGGS: Perhaps that explains why baby boomers seem less worried, Brandon.
BRANDON DE KOCK: [Chuckle] They could simply be allocating their funds to different areas.
JEREMY MAGGS: It’s fascinating that rising food and energy costs are keeping almost half of South Africans awake at night. Nevertheless, there’s some positivity on the horizon. The recent inflation data has risen to 2.9% in November, a slight increase from 2.8% the previous month, yet prices for essential food items have continued to drop.
Significant reductions in prices have been recorded. For example, eggs have decreased by 3.7%, and eight out of eleven categories including vegetables, cheese, bread, and cereals have also seen price declines. So perhaps we can anticipate a touch of festive spirit.
BRANDON DE KOCK: Indeed, just a glimmer of optimism. The fact that eggs are cheaper is encouraging. However, it’s crucial to recognize that we remain in an extremely volatile situation. The uncertainty regarding what might improve or worsen is still prevalent. Looking back over the year, it has been one of the most testing times for consumers recently.
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With water shortages in Johannesburg, ongoing issues with Eskom, and a stressful election cycle, consumers have felt increasingly overwhelmed this year. As we approach year-end, it’s difficult to ascertain how you feel, but there appear to be promising trends as the GNU seems to be making some correct moves, considering inflation appears lower than in the past. Consumer confidence indicators are on the rise, creating a sense of renewed optimism for the future.
This past year, consumers have held on to significant amounts of cash. It’s not that they lacked funds; rather, it’s about making astute spending choices.
JEREMY MAGGS: Brandon, it is generous of you to include me in your reflections about sleepless nights. At our age, those quiet moments in the night become part of our existence.
BRANDON DE KOCK: [Chuckle]
JEREMY MAGGS: However, I find your insights regarding consumer spending trends particularly intriguing, especially how discretionary spending is being postponed.
BRANDON DE KOCK: We still have some analysis to perform on that front, but let me share an interesting observation. Have you noticed the latest trends in new passenger car sales? I can’t recall if we’ve discussed this previously.
JEREMY MAGGS: Yes, we cover it monthly on this show.
BRANDON DE KOCK: You would have seen the notable trend. Analyzing new passenger car sales provides essential insights into consumer confidence. If you look at the sales graph for 2024, it’s unprecedented. This year has recorded the first occasion where April sales were lower than those in March, indicating a notable market downturn.
Nevertheless, the last two months have yielded the highest passenger car sales we’ve seen in eight years, prompting questions about this variation. A possible explanation is that some consumers seized the opportunity presented by the two-pot system, viewing it as a prime moment to invest their pension funds into new vehicles. Additionally, lower interest and repo rates likely contributed to this trend.
When scrutinizing these new passenger car sales data, it reflects a year filled with notable volatility. It suggests that consumers maintained enough financial capability because car prices have not decreased. I attribute this to a deferral in spending.
For retailers heading into the holiday season, I sincerely hope my evaluation holds true; it has been a challenging year for retail in South Africa, and pent-up demand for retail therapy may soon come to light.
JEREMY MAGGS: Lastly, I’ll keep an eye on the time as it’s always precious. Could you explain what you mean by the “subscription generation”?
BRANDON DE KOCK: Oh, this is a really captivating concept. I wish I had solid data to present. This theory is something we are actively working to validate, with deeper exploration planned ahead. There are hints in the data suggesting a shift in consumer habits, particularly among younger generations, who have become accustomed to avoiding large purchases.
As younger consumers consider expenses like fuel and insurance associated with a vehicle, alternatives like Uber seem more attractive. The subscription generation—primarily Gen Z and some Gen X—tends to prefer a lifestyle that revolves around subscriptions rather than outright ownership.
This shift implies that renting might better align with contemporary living than traditional home ownership. It’s a trend that could profoundly influence the market in the future.
Does that correspond with your understanding?
JEREMY MAGGS: It absolutely makes sense. As this will be our last conversation this year, Brandon de Kock, director of storytelling at BrandMapp, I eagerly await your insights in the new year. Thank you for your time.
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