Photo: (Delwyn Velassamy/M&G)
South African consumers are bracing for rising inflation and food prices over the next 12 months, but most still want to save and put aside any excess income.
These were some of the findings from PwC's 2024 Voice of the Consumer survey, released on Thursday, which surveyed the opinions of 20,662 consumers across 31 countries and territories – including 1,009 South Africans – on a range of issues including seeking value for money, caring for the environment, using artificial intelligence (AI) and social media, open data and caring for health.
Speaking at a webinar announcing the survey's local chapter findings, PwC Africa retail industry leader Anton Hugo said the survey was conducted in an “extremely challenging environment” with consumers around the world facing slowing GDP growth, high unemployment and low disposable income.
He said six takeaways emerged from the survey, including businesses effectively managing price increases while meeting consumer expectations, striking a balance between leveraging social media as a sales platform while keeping in mind its limits of trustworthiness, building bonds with environmentally conscious consumers and experimenting with AI without losing the human touch.
Companies must also protect personal data when they use it to provide personalized services and deliver products that reflect consumers' health, nutrition and sustainable food production preferences.
The survey found that while consumers generally accepted price increases during the pandemic, they have little tolerance for continued price hikes since shifting their attention to rising non-discretionary spending such as electricity and transport bills.
“The first key takeaway from the survey is the importance of juggling competing priorities in a rising price economy and effectively managing price increases while meeting consumer expectations for value,” Hugo said.
He said 77% of consumers surveyed expect to spend more on groceries over the next six months, while about 60% said they will spend more on clothing, footwear and home improvements.
44% of consumers said they shop online or through a mobile app to check prices and switch to a general household or discount brand based on affordability. Most consumers prefer to go to a brick-and-mortar store for their purchases.
“Consumers are expecting higher inflation and this poses a challenge for them,” Hugo said.
He said the survey ranked the risks facing South African and global consumers over the next 12 months, with inflation coming out on top.
“Interestingly, 75% of South Africans surveyed rated inflation as the highest risk, compared to 65% globally,” Hugo said.
Other risks consumers expect to face include macroeconomic instability, such as changes in economic growth and unemployment rates (55%); social inequalities based on income (40%), gender, race or ethnicity (36%); climate change and health risks, such as pandemics, chronic disease and mental health burdens (33%); and geopolitical conflicts, such as resource or trade disputes or terrorism (26%).
“The survey found that almost 70% of consumers said they would save or invest their excess income, with only 7% saying they would buy luxury items. This reflects the tough environment consumers are facing and suggests that if they had extra income, they would use it to save, pay down debt or support their family,” Hugo said.
Jesse Tumu-Boafo, head of customer transformation in Africa at PwC, said 41% of local customers use social media to buy products directly, lower than the global average of 46% but higher than the 21% pre-COVID-19 situation.
Influencer Social media
“41% of consumers say they have been persuaded to make a purchase by an influencer, which can be seen in the context of the formalisation of the influencer profession.
“However, social media advertising is also proving to be more successful, with 45% of people saying they may have been influenced by some form of advertising on social media,” said Tom Boafo.
“83% of consumers use social media as a way to discover new brands and 82% use it to see if companies actually deliver on their promises. This is well above the global average of around 67% and 70%, showing how engaged local consumers are,” he said.
The survey also found that Gen Z is highly likely to be influenced by their digital interactions with consumer companies.
Lulu Krugel, chief economist for PwC Africa in Southern Africa, said the survey also revealed a growing trend towards more environmentally conscious consumers as climate change directly impacts people's lives.
“93% of South African consumers say they are aware of the impact that climate-related disruptions are having on their daily lives, with a third saying it is a major impact,” Krugel said.
“That's a pretty shocking statistic, it's a lot higher than the global average of 85, and for South Africans it makes a pretty big difference in how this really impacts our lives,” Krugel said.
These include school and business closures, supply chain disruptions and people being unable to go to work.
“Four in 10 consumers say climate change is one of the top three trends that will affect the country over the next 12 months. Climate change is no longer a risk. The risk we have to address is the impacts of climate change. Climate change is not a risk because it is real,” she said.
Krugel said 52% of consumers said they would buy more sustainable products, while 41% said they planned to reduce their overall consumption to save money and mitigate climate change.
Additionally, 88% of consumers are willing to pay extra for sustainably sourced products and would be willing to pay a premium of up to 11.9% for products that meet certain environmental criteria, such as “locally produced,” “made from recycled or environmentally friendly materials,” or “produced in a low-carbon supply chain,” higher than the global average of 9.7%.
“I think what's coming through very strongly here is the voice of young South African consumers saying, 'we are making different decisions,'” Krugel said.
Factors that companies should consider to attract these consumers include eco-friendly packaging (41%), reducing and recycling waste (37%), and having a positive impact on nature and water conservation (37%).
The survey also found that consumers are “highly willing” to change their travel behaviour to reduce their carbon footprint.
“However, the challenge for South African consumers is that some of these options are not yet freely available, with 76 percent saying they would like to drive an electric or hybrid car,” Krugel said.
However, the cost of electric vehicles and uncertainty about charging infrastructure are barriers to switching to renewable energy fuelled transport, something manufacturers need to take note of.
Dave Ives, consulting leader at PwC Africa, said AI will have a “huge impact” not only on how products are made and supplied, but also on how consumers use them in the future. However, he said 92% of consumers surveyed were concerned about the risk of cybercrime, such as hacking or identity theft, when using AI technologies such as chatbots.
“We will see more use of AI in chatbots, but I believe it's important that customers want faster response times and be able to resolve their issues quickly. Over 54% of customers want to know they can escalate to a potential agent to resolve a particular issue,” he said.
Tom Boafo said a high level of trust is needed when dealing with AI and consumer data online. He said 89% of consumers said it was important to know if their data was being kept private, and 92% said protecting their personal information was “extremely important.” Only 56% were confident they understood how their data was being shared.
“Globally, only 80% of consumers are concerned about the privacy of their information, so South Africans feel stronger about privacy,” he said.
Marsul du Plessis, PwC Africa Future Workforce Platform Leader, said consumers were also becoming more health savvy and health-conscious.
“Consumers are very health conscious and we expect this to intensify over the next six months, with a greater focus on plant-based diets and eating more fruit, vegetables and fish. But interestingly, it's not just about health, it's also about the environmental impact.”
“Consumers are very conscious about food production and are buying less red meat because they know the impact it has on the environment.” [in terms of] and increased greenhouse gas emissions,” she said.
“This is also spilling over into the workforce, where workers are saying they want to not only buy from consumers who have sustainable practices, but also work for employers who have sustainable business practices.”