Why SA’s spending boom isn’t what it seems

South African consumers remain under financial strain, despite data that may suggest a rebound in spending, according to a new strategy research report by Simonis Storm Securities, a 100% Namibian-owned stockbroker and wealth management company.

Titled “The Illusion of Rebound: Underneath the Spend, the Strain Persists”, the May 2025 report indicates that a year-to-date consumer spend increase of just 0.6% year-on-year is being misinterpreted as economic recovery. When compared to March’s inflation of 2.7% and a cumulative CPI increase of 52% since 2017, the report concludes that the modest increase reflects spending compression and reallocation rather than growth.

South African consumers, Bloomberg

Consumer spending patterns indicate deeper issues. Grocery sales, traditionally resilient, fell by 0.3% in April despite a slowdown in food inflation. Retailers are responding with margin-sacrificing promotions and smaller pack sizes, yet volumes remain weak. Meanwhile, food producers are showing signs of recovery due to softening input costs in dairy, grains, and sugar. Companies like AVI and RCL Foods are benefiting from this shift, with earnings upgrades now on the horizon.

Discretionary spending, such as in restaurants and apparel, appears to be recovering—up 8.4% and 5.3% year-on-year respectively in April—but Simonis Storm attributes this to temporary increases like early pension withdrawals and Easter timing. Discovery data shows nearly 45% of early pension payouts are being used for daily expenses or to settle debts.

“This is liquidity stress disguised as discretionary participation.”

Moreover, even affluent households are tightening their belts. Spending on international e-commerce slowed to 3% in 2024 from 10% in 2023, and airline spending decreased by nearly 15% in April. “The premium consumer is not defaulting—but they are disengaging,” the report states.

Fuel spend was the only category to see significant relief, declining 12.1% year-on-year. However, the freed-up liquidity has not translated into broader consumer confidence or a spending rebound. Spending on essentials such as utilities and telecoms has also dropped, signalling widespread cost-cutting across all income brackets.

Simonis Storm maintains a cautious view on discretionary retail, favouring food producers and banks instead. Banks are currently trading at around 6.8x forward earnings—well below discretionary retail’s 11.5x—and are showing early signs of stabilisation in loan growth and deposits. In contrast, retailers continue to struggle with low volume throughput, making current valuations difficult to justify.

Preferred picks include food producers Anheuser-Busch InBev (ANH) and Astral Foods (ARL), and retail names like Mr Price and Truworths, but only for short-term tactical exposure.

SA Reserve Bank, Reuters

With the South African Reserve Bank expected to cut rates by another 25 basis points in the second half of 2025, monetary policy is entering a more supportive phase. The South African repo rate is forecast to end the year at 7.25%. The report projects the rand to strengthen to ZAR 19.00/USD by the end of 2025 and further to 18.40 in 2026, helped by declining inflation and resilient fundamentals.

Still, Simonis Storm warns that while a stronger rand may benefit importers, it will not be enough to reignite consumer demand in the absence of real wage growth. Looking forward, South Africa’s real GDP is projected to grow by 1.5% in 2025, driven by steady commodity output and restrained fiscal pressures. Yet the quality of that growth remains in question.

“Consumer pain has not worsened, but neither has the foundation healed,” the report concludes. “This remains a phase of relative—not absolute—opportunity.”