The Global Consumption Database is probably the world’s most comprehensive source of information on household consumption patterns in emerging and developing countries. The data are based on national household surveys. For each of the countries covered, the resulting datasets have been used to calculate the share of the population at different levels of consumption as well as a breakdown of consumption according to key categories of spending. There is also a split between rural and urban spending as well as age. The data are updated periodically as new information becomes available.
Four levels of consumption are used to segment the market in each country: lowest, low, middle, and higher. They are based on global income distribution data, which rank the global population by income per capita. The lowest consumption segment corresponds to the bottom half of the global distribution, or the 50th percentile and below; the low consumption segment to the 51th–75th percentiles; the middle consumption segment to the 76th–90th percentiles; and the higher consumption segment to the 91st percentile and above.
A breakdown of South Africa’s consumer spending by major category shows that in many respects the South African consumer is similar to consumers in most other major emerging and developing markets. For example, within emerging and developing economies the percentage of consumer income spent on food, transport and housing ranges from a low of about 50% to a high of around 70% (see chart attached). In South Africa’s case the total is a little less than 60%, which is marginally below average but not exceptional.
There are, however, two categories of consumer spending in South Africa that stand-out as being exceptional by international standards. The first is the amount of money spent my low income households on clothing and footwear and the second is the amount spent on financial services by all income groups.
The breakdown of consumer spending by major category and income shows that low income households spent roughly 10% of income on clothing and footwear. While this might not sound excessive, it is the highest proportion out of the 192 countries contained in the Global Consumption Database (see chart attached). Interestingly, this ratio is not reflected in higher income earners, but the overall retail sales performance of the clothing and footwear industry has been consistently high compared with other consumer categories for many years. In fact, South Africa’s clothing retail sales have regularly been the best performing consumer segment and are especially resilient to the downside.
There are a number of factors that help to explain the relative out-performance of clothing and footwear sales for low income earners in South Africa. Some of these factors are structural in nature, and perhaps too complex/lengthy to explain in this discussion. Other factors have become self-reinforcing including the development of store credit at many clothing retailers, greater access to international clothing brands, and a concentration of clothing/footwear stores within the large shopping centres.
South African consumer spending on financial services, (which is easily the highest out of the 192 countries surveyed), primarily reflects the long-term development of South Africa’s financial services industry including banking, insurance, asset management, and other related services. Overall, South Africa’s level of financial market depth/sophistication is exceptionally high by global standards and more aligned to what occurs in a developed market rather than a typical emerging economy. (This links closely to the presentation we did at this year’s Investment Forum at Sun City – presentation was circulated earlier this year).
Overall, having spent some time analysing consumer spending patterns across a range of emerging economies it is clear that while some of the macro spending patterns are similar across the emerging market group of countries, many countries have their own unique spending characteristics at a micro-level. For South Africa it is noticeable that consumer spending patterns are somewhat closer to what occurs in a typical developed market rather than an emerging market, especially amongst higher income earners. It is also clear that housing and transport account for a higher proportion of consumer spending in South Africa than most emerging markets, while South Africans spent proportionately less on food (we have included a chart that shows how South Africa’s consumer spending differs from the total found in emerging and developing countries).
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