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SA Consumer, Healthier than you think
9 July 2021



BHP revised its proposed bid for Anglo American (AGL), the updated terms include:

There is a general negative perception that South African consumers are under strain, and this is flowing through into suppressed valuations of consumer-focused cyclical stocks in general and the apparel retail and bank stocks specifically.


While 2020 was a very disruptive year, the SA consumer has come out of it better positioned than it was going into the pandemic.

  • Disposable Income is 6.7% higher than 2019 levels.
  • Household Savings have increased to 1.9% of GDP, up from 1.2% on average levels.
  • Households have added R121bln to short-term cash deposits since Jan 2020, which amount to about 26.8% of disposable income. This results in excess cash deposits of about R121bln or 2.3% of GDP.
  • Debt affordability has improved significantly. Debt service costs have fallen to 7.7% of disposable income, from 9.5% in 2019.
  • Net Wealth was up 5% Y/Y in December 2020.
  • Social grants have increased 28% per beneficiary from March 2019 levels.

What this all adds up to, is a consumer that is in a pretty good position relative to pre-pandemic levels with the capacity to drive spending and retail sales above normal levels. If confidence levels pick up as vaccinations become more widespread and households choose to loosen their wallets; this could add almost 1% to GDP growth, 3.5% to retail sales and potentially 22.3% to clothing sales going forward.

Our positive view the SA retailers is not premised on a ramp up in sales above normal trends, however this analysis gives us confidence that our expectations are conservative, and the consumer is well placed to continue spending going forward.


While the pandemic driven lockdown caused a temporary spike in unemployment, disposable income (Income less Taxes) has remained resilient, increasing 1.6% Y/Y in March 2021. When comparing disposable income to pre-pandemic levels, current disposable income is up 6.7% versus March 2019.
Looking at BankservAfrica’s Take Home Pay data, monthly take home pay continued to grow at 4% plus Y/Y all through the crisis. Take Home Pay is up over 8.3% from pre-pandemic levels.
Despite 2020 experiencing one of the worst recessions in history, the SA consumer has come out the other end seeing very little impact to take home pay and with more disposable income than when it started.


Clearly the SA consumer battened down the hatches during lockdown. Gross savings increased to 1.9% of GDP, peaking at 2.4% in Sept 2020 from average levels of 1.2%.
Likewise, Short Term Deposits at the Banks ramped up 16.3% or R121bln from Feb 2020 to April 2021. To put this into perspective, short term deposits currently represent 26.8% of annual disposable income which is more than 3 percentage points above the typical savings levels. Excess savings are now more than 2.3% of GDP. SA consumers are sitting on a lot of dry powder!


Not only are households earning more money, but their net worth is also increasing as property prices move up and financial assets recover.
Additionally, Households have reduced their debt levels as a percentage of disposable income and service costs have never been this affordable. This means Households have plenty of capacity to borrow, should they choose to do so.


Given that more than 11.5mln South Africans receive a social grant of some form, it is important to keep them in consideration when discussing the SA consumer environment. Social grant beneficiaries have not been left behind, excluding any additional Covid benefits, social grants are up 28% since March 2019 and a whopping 41% when including Covid benefits. This suggests that the spending power of grant beneficiaries remain in place.
Pulling all these data points together, paints a picture of a healthy SA consumer that is in a better financial position now versus pre-pandemic levels. Add increased confidence levels as well as some job growth, and there is the potential for a strong cyclical rally.