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JEREMY MAGGS: As we near the holiday season, middle-class consumers are facing a tough set of challenges. Rising living costs, increasing debt concerns, and significant economic uncertainty are all hitting hard. Fresh inflation numbers have just come out, causing further alarm.
Read: Inflation inches up, leaving rate cut hopes intact
Despite these challenges, not all news is bleak. I’m excited to report that recent findings from Brand Mapp offer insights into how people are navigating these pressures. Let’s welcome back Brandon de Kock, the director of storytelling at BrandMapp. It’s always a pleasure to speak with you, Brandon. Your latest findings counter the common belief that consumers are drowning in debt. What have you discovered?
BRANDON DE KOCK: Hi Jeremy, thanks for having me back. People often generalize such situations, which is the crux of our message. Although many consumers are indeed facing serious challenges and stress,
it’s misleading to lump all 13 million people in the so-called middle market—those in tax-paying households—into one category of struggling debtors.
Our society is quite varied, and at least half of those in the middle market don’t feel financial strain as intensely as others. This actually paints a more positive picture for that segment, if you catch my drift.
JEREMY MAGGS: I guess it also hinges on how one interprets feeling pressure. Your definition of ‘pinch’ could be different from mine.
BRANDON DE KOCK: Exactly, and that’s where the conversation about debt takes shape. Over the years, we’ve persistently asked consumers about their feelings regarding debt. Annually, we find that fewer than 30% of households feel genuinely burdened by debt.
This suggests that while that 30% is under real debt strain, the rest either possess the knowledge to manage their debt astutely or use it to enhance their lifestyle, particularly among higher-income groups.
Ultimately, the main factor is whether people are borrowing to improve their lifestyle, which is generally not the case.
JEREMY MAGGS: But would you argue that middle-aged individuals might feel this burden more than younger or older adults?
BRANDON DE KOCK: [Chuckle] Yes, you and I fall into that category. The data shows that the demographics least stressed by debt are the younger and older segments. This makes sense. Younger individuals may not have yet encountered the need for debt, while those in family-starting phases may find borrowing necessary for essentials like housing and childcare. Personal loans and credit cards become much more crucial for those focused on family.
Interestingly, baby boomers tend to be the least indebted. They might have entirely cleared their debts or adapted to a different lifestyle after retirement.
This situation considerably affects those approaching mid-life; it’s a major concern in today’s economy.
JEREMY MAGGS: Perhaps that explains why baby boomers seem less troubled, Brandon.
BRANDON DE KOCK: [Chuckle] They might just be investing their funds in other areas.
JEREMY MAGGS: It’s fascinating that rising food and energy prices are causing nearly half of South Africans sleepless nights. However, there’s a silver lining. Recent inflation rates ticked up to 2.9% in November, slightly from 2.8% the previous month, yet costs for food staples essential to household budgets have consistently fallen.
Notable decreases in prices are being recorded. For example, egg prices have dropped by 3.7%, and eight out of eleven categories, including vegetables, cheese, bread, and cereals, have also seen price reductions. So maybe there’s a touch of festive cheer after all.
BRANDON DE KOCK: Absolutely, just a flicker of hope. The drop in egg prices is a positive indicator. Nevertheless, it’s vital to acknowledge that we still operate in a very unstable environment. The uncertainty of what may improve or worsen is still prevalent. Overall, this past year has been one of the toughest for consumers in recent memory.
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With water shortages in Johannesburg, ongoing Eskom challenges, and a stressful election period, consumers have indeed felt quite overwhelmed this year. As we near the year’s end, it’s tough to gauge the current emotional landscape, but positive changes might be on the horizon with the GNU seemingly making some right moves, as inflation rates appear to be stabilizing. Consumer confidence indicators are on an upward trend, signaling a sliver of renewed hope for the future.
This year, individuals have been holding onto significant amounts of cash. It’s not that they were devoid of money; it’s more about spending smartly.
JEREMY MAGGS: Brandon, how kind of you to include me in your insights about sleepless nights. At our age, being awake becomes part and parcel of life.
BRANDON DE KOCK: [Chuckle]
JEREMY MAGGS: I’m particularly intrigued by your findings regarding consumer spending patterns, especially concerning the deferment of discretionary spending.
BRANDON DE KOCK: We still have some analysis to do on that front, but let me share an interesting trend with you. Have you kept tabs on new passenger car sales lately? I can’t remember if we’ve touched upon that topic before.
JEREMY MAGGS: Yes, we review that monthly on this program.
BRANDON DE KOCK: One would have noticed the striking trend. Examining new passenger car sales provides valuable insights into consumer confidence. If you look at the sales figures for 2024, it’s unprecedented. It marks the first time on record where sales in April dropped below those in March—signifying a substantial market decline.
Yet, the last two months have produced the highest passenger car sales figures in eight years, raising questions about this volatility. One theory posits that some consumers took advantage of the two-pot system, seeing it as the perfect opportunity to invest their retirement savings in new vehicles. Additionally, lower interest rates and a drop in the repo rate likely influenced this situation.
When delving into these new passenger car sales data, the volatility of the year becomes apparent. It indicates that consumers still possessed financial resourcefulness since car prices have not diminished. I attribute this to a postponement in spending.
For retailers heading into the festive season, I truly hope this interpretation holds true; it has been a tough year for retail in South Africa, and there may be significant pent-up demand for retail experiences to express themselves.
JEREMY MAGGS: To wrap up, I’ll be mindful of the time, as it is always crucial. Can you clarify what you mean by the “subscription generation”?
BRANDON DE KOCK: Oh, this is a fascinating concept. I wish I had solid data to share. This theory is something we are currently working to validate, with more research on the horizon. There’s an emerging hint in the data indicating a shift in consumer behavior, especially among younger generations, who have grown accustomed to avoiding large purchases.
As younger consumers weigh costs like fuel and insurance related to vehicle ownership, alternatives such as Uber become attractive. The subscription generation—predominantly Gen Z and some Gen X—appears to prefer a lifestyle based on subscriptions rather than ownership.
This shift suggests that renting may fit modern living more appropriately than traditional home buying. It’s a trend that could significantly shape the market going forward.
Does this resonate with you?
JEREMY MAGGS: It makes complete sense. As we conclude our discussions for this year, Brandon de Kock, director of storytelling at BrandMapp, I eagerly anticipate your insights in the coming year. Thank you for your time.
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