AS the country prepares for its first value-added tax (VAT) increase in seven years, new research reveals a consumer class under unprecedented financial pressure, forced to make painful spending cuts just to stay afloat.

Finance Minister Enoch Godongwana delivered his National Budget Speech on March 12, as South Africans listened with bated breath, wondering if the Government of National Unity (GNU) was really tackling the country’s cost-of-living crisis head-on.

The somewhat anticipated announcement of incremental VAT hikes over the next two years, coupled with rising debt servicing costs and a lack of decisive strategies to curb consumer expenses, has left many questioning if relief will ever come.

Director of storytelling at BrandMapp, Brandon de Kock, provided crucial context: “By the fourth quarter of last year, South Africa’s consumer confidence index stood at -6 points. While this is significantly better than the -36 points recorded in 1985 or the pandemic low of -33 points in 2020, it is a far cry from the 26-point high we saw in 2018.”

This rollercoaster of confidence levels painted a picture of a consumer class that had learnt to adapt to economic turbulence but was clearly feeling the strain.

The latest BrandMapp survey, which tracks behaviours and sentiments across households with disposable monthly incomes from R10 000 up to the millionaire bracket, revealed fascinating insights into how South Africans were coping financially. “The important context here,” De Kock emphasises, “is that according to National Treasury data, the consumer class grew by about 7.5% last year — outpacing inflation. But this growth isn’t benefiting everyone equally.”

A deeper dive into the numbers revealed a troubling trend. When segmenting income earners into three categories — the core consumer class (R10 000-R30 000 per month), top enders (R30 000-R80 000), and millionaires (R80 000+) — we see dramatic shifts. “Back in 2020, the core represented 56% of all taxpayers,” De Kock said. “Today, that’s shrunk to 46%. Meanwhile, more than half (54%) of the consumer class now falls into the higher income brackets.”

This concentration of wealth at the top has significant implications. “While it’s encouraging to see more people moving into higher income brackets and living aspirational lives,” De Kock said, “this trend does nothing to improve our already worrisome Gini coefficient. We’re essentially seeing the rich get richer while the middle class struggles to maintain its footing.”

The survey revealed significant differences in how various demographics were responding to financial pressures. Across the board, about 20% of consumers were considering cutting back on alcohol, cancelling DStv, or reducing mobile data packages. However, fewer than 10% were willing to compromise on insurance or medical aid — protections that many viewed as essential.

Regional differences were particularly telling. Gauteng residents led the charge in austerity measures, with 28% considering second jobs (compared with 21% in the Western Cape and 23% in KwaZulu-Natal). They would also be more likely to cut alcohol spending (36%) and cancel DStv (22%). Meanwhile, Western Cape residents (36%) embraced the homebody lifestyle as their primary savings strategy, perhaps finding solace in their province’s natural beauty during these financially constrained times.

Generational divides were equally pronounced. “Our well-heeled boomers are largely insulated from these concerns,” De Kock observed. At the other extreme, millennials would be making tough choices: 38% would slash clothing budgets, 30% would take on extra work, and 24% expected to cut back on alcohol. Gen X finds itself caught in the middle, with 11% considering pension withdrawals and 24% ready to cancel DStv.

Meanwhile, Lee-Ann Nagel, accountant at Tax Consulting South Africa, sounded the alarm about the impending VAT increase: “Come May 1, consumers need to be vigilant. Vendors can legally charge the new 15.5% rate without updating individual price tags, provided they display prominent notices.” This temporary measure, while practical for businesses, creates ample room for confusion at the till.

The compliance burden would be expected to fall heaviest on small businesses. “Large corporations with sophisticated accounting systems like Sage or Xero will adapt relatively easily,” Nagel said. “But smaller operations using manual systems face an enormous challenge in updating their pricing structures and accounting practices.”

The situation is expected to be further complicated by newly zero-rated items such as edible offal and canned vegetables, which would require special attention.

Nagel warned of a potential administrative logjam: “The eFiling system may be overwhelmed with verification requests and corrections, which could significantly delay VAT refunds — a lifeline for many small businesses.” She also highlighted the cash flow challenges that would be posed by “timing differences” — where orders placed before the rate change are invoiced afterward, creating accounting complexities.

The situation is reshaping household financial dynamics in unexpected ways. “Women are 50% more likely than men to reduce clothing budgets and change where they shop for groceries,” De Kock revealed. “In an interesting reversal, men are 50% more likely to cut alcohol spending or withdraw from home loans.”

The data also showed women were more open to taking second jobs and taking on additional domestic responsibilities to save money.

The survey underscored a fundamental shift in consumer behaviour. “58% of South Africa’s consumer class now consistently looks for sales and discounts,” according to De Kock. “For 34%, price is the primary factor in choosing where to shop — more important than convenience, quality, or perceived value.” This trend is most pronounced among Gen Z consumers, with 39% prioritising low prices above all else.

This discount mentality is reshaping the retail landscape. “We’re seeing the pandemic’s lasting impact,” De Kock noted. “With streaming services, home deliveries, and meal kits readily available, many consumers are finding that staying home isn’t just safer — it’s financially smarter.” About 35% are cutting clothing budgets, while 31% are going out less to restaurants and cinemas.

As the country navigates these challenging economic waters, the divide between those who are comfortably adapting and those struggling to keep afloat grows ever wider. The VAT hike, while necessary for government revenue, threatens to exacerbate existing inequalities and place additional strain on already stretched household budgets.

For businesses, the message is clear: Understanding these shifting consumer priorities is crucial for survival. For consumers, the choices become increasingly difficult: Work more, spend less, and make painful compromises. As De Kock succinctly puts it: “The rich get richer, the savvy adapt, and the rest just survive.”

In this new economic reality, resilience comes at a price — and for far too many South Africans, that price is becoming increasingly difficult to pay. The question remains: How much longer can the consumer class continue to absorb these shocks before reaching breaking point?

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Consumer class faces perfect storm as VAT hike collides with cost-cutting crisis