The Mastercard index which surveyed 1 000 banked South Africans, showed that fashion is a priority when it comes to discretionary spending.
Although 58% of those surveyed spent around more than half of their income on household expenses like food, clothing and medical bills, when it came to discretionary spending fashion, eating out and electronics were the top favourites. But travel has taken a big knock with only 4% of those surveyed planning on spending money on travel over the next six months.
In this survey the purchase of electronic goods took over from buying or upgrading a home as a spending priority compared to last year.
When it comes to savings the top priorities were investment, retirement and then saving for a car. This was a significant change to last year where saving to buy a home had been the third top saving priority.
The shift in both categories away from spending on homes to electronic goods and cars should not be seen as a move to frivolity but rather an affordability issue. If you can’t afford a house you spend on less expensive items like electronics or a car.
Leila Fourie, head of card at Standard Bank, says people are still nervous about their futures and do not have the psychological appetite for a home loan, so they are opting for smaller purchases.
Many people also postponed car purchases over the last two years, which is why we saw the bottom fall out of the car market last year. So possibly car as a priority is simply a delayed purchasing decision.
Nomonde Thethe of FNB says one can also buy a second hand car for between R30 000 to R50 000 so people could realistically save towards this rather than taking on further debt, especially if they would not qualify for finance.
Although typically one would expect fashion to be a female spending priority with men spending on electronics, the figures were not that different. Of those planning to spend on fashion, 48% were women and 40% men, while those planning on spending on electronics 25% were men and 20% were women.
Perhaps concerning for retailers is that 45% of those surveyed planned on reducing their discretionary savings over the next six months. In the last survey only 38% of people planned on cutting back which suggests that even though we are moving out of the recession, people are still very nervous.
Deloitte economist Kay Walsh says consumers have also probably overspent during the World Cup and are feeling the need to cut back over the next few months. Consumers will only really start to spend once we see growth in employment which will take at least another year of recovery.
But the good news is that it appears that most people are focusing on repaying debt, so although they are not saving in the traditional sense, they will be saving by reducing their debt re-servicing costs.
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