South Africans count their rands as downturn bites
But despite belt-tightening, some consumers still spending on big-ticket items
FOOD prices are rising, pensions are under threat and even McDonald’s has become a treat.
South Africans have just entered an economic downturn — and it’s not going away any time soon.
The rand has plunged to R14 to the dollar, which has hit consumers such as groom-tobe Jan-Louis van der Walt. He and fiancée Mathilda van der Merwe are planning to spend their honeymoon in Greece. “If we had paid for the entire honeymoon a month ago, we could’ve saved at least R7 000. That’s a month of rent,” said Van der Walt.
South Africans are adapting their appetite for travel, choosing cheaper tickets and shortening their stay.
“Leisure clients are staying closer to home and for shorter durations,” said Flight Centre MD Andrew Stark.
Overall, with the plunge in the oil price, ticket prices have dropped significantly from a year ago and 14% more people are taking to the skies. “In this environment, any overseas destination is carefully planned around where the rand goes the furthest,” said Stark.
No more leaving it up to the travel agent. Stark said 90% of clients would have done extensive online and telephonic research before coming into the agency, and trips were now booked just weeks in advance instead of six to nine months.
Consumers are increasingly concerned by the government’s recent announcement of negative growth. The high cost of living has seen the price of maize, a staple, nearly double over a year.
“Food prices have become like petrol prices, where we have no control,” said fatherof-two Ricky van der Berg. “I thought bread and milk were subsidised, but look at the prices. When McDonald’s is a treat, then you know there’s a problem.”
Widespread drought caused a big increase in the maize price, with similar increases in the cost of feeds for livestock, which trickled down to the cost of meat and chicken.
“The country is not in crisis, but the consumer will definitely be affected by food price increases as inputs have increased by 35%,” said Grain SA economist Wandile Sihlobo.
Farmers have just started to plant for the new harvest, despite the drought.
“We’re in the middle of an El Niño effect and it will continue into January and parts of February,” said Cobus Olivier of the South African Weather Service.
El Niño will affect the summer rainfall areas — the Free State, Mpumalanga and North West, the large-scale maizegrowing areas.
There is a glimmer of hope for farmers, though, with some rainfall expected on the Highveld at the beginning of September. “Chances are that you may just get enough to get by, but we can’t say exactly how much,” said Olivier.
Despite all this, the most recent statistics indicate that South African spending is at a record high. Tills have been ringing with big-ticket items such as furniture, large appliances and equipment.
Fortunately, the increased spend has not increased household debt as South Africans have reined in their debt in the past seven years.
Pension funds have been a concern, with revised forecasts of what people will be able to retire on. “When you have the good times, people get used to that and start living like it’s always going to stay that way,” said Stanlib economist Kevin Lings.
In recent years pension funds have enjoyed doubledigit growth but are now stagnating or even declining.
“The real risk is that if this downturn is prolonged, people won’t be able to live off their income,” Lings said. He advised consumers to cut out luxury items such as overseas holidays or new cars.
People won’t be able to live off their income