Discretionary spending maintained, according to MasterCard

Some 37% of survey respondents are expecting to decrease their discretionary spending compared to 38% a year ago. Few respondents are planning on increasing their discretionary spending with only 15% citing so, down 3% from a year ago.

The latest survey was conducted from 13 September to 11 November 2010 and involved 10 502 consumers from 24 markets. Data collection was via internet surveys, personal, telephone and computer aided telephone. The index and its accompanying reports do not represent the company's financial performance.

"These cautious results mirror those of our latest Worldwide Index of Consumer Confidence, which saw a decrease in confidence levels for South Africans from 59.8 a year ago, declining to 58.6 six months ago, to a current cautiously optimistic score of 54.7," says Anna Jones, area head, Southern Africa for MasterCard Worldwide.

Fashion still high, wining and dining next

In terms of what discretionary items consumers are planning to spend their money on, fashion and accessories remained the top purchasing priority category (up 32% to 59% - from 27% a year ago) followed by dining and entertainment (up 14% to 38% - from 24% a year ago).

Consumer electronics is the third-most important purchasing priority (24% versus 21% a year ago), slightly ahead of buying or upgrading a home (23% versus 24% a year ago) and fitness and wellness (21% up from 7% a year ago).

Travel, white goods, cars lowest

Conversely, the three categories where South Africans are planning on spending the least over the coming months include travel (7%), which, albeit the lowest, has more than doubled since a year ago, white goods (15%), and buying a car/motorcycle (15%).

A year ago, the bottom three spend categories were travel (3%), fitness and wellness (7%) and continuing education (13%).

Wellness trend

According to Rodger George, consumer business industry leader for Deloitte South Africa, it is not surprising that increased spending on wellness and fitness is on the lists of consumers.

"This is typical anti-recessionary spending behaviour, as consumers seek to hedge their bets," says George. "The strong rand coupled with the depressed global economy has also resulted in cheaper consumer electronics being available to consumers, which explains the increased appetite for these goods. New technology ticket items such as the Apple iPad, for example, will also convince consumers to part with their hard-earned money this year."

Savings fall further

While discretionary spending forms a large part of this survey, savings patterns also play a significant role in determining how consumers will be utilising their disposable income.

The survey found that fewer South Africans plan on increasing their savings in the coming six months with 31% citing so. This figure reflects a sharp decline from 42% a year ago.

38% of those surveyed plan on maintaining their current savings level, a slight increase from 36% a year ago. The remaining 31% (8% up from a year ago) said they planned on saving less.

Of the combined 69% of South Africans, who are expecting to save either more or as much as they had in the previous six months, the majority cited uncertainty over the economy and the need to be prepared for unforeseen emergency expenditures as their reason for saving.

"Although there are some short term signs of a consumer recovery, it will take some time for the mindsets and spending habits of South African consumers to shift back to pre-recessionary behaviour. The current global events in MENA and Japan and looming food price increases, will re-enforce the cautionary behaviour that consumers have exhibited in the survey," explains George.

Africa increases spending

Looking further afield into Africa: Nigeria, Kenya and Morocco were included in the survey for the third time. Consumers in Kenya (49% compared to 21% a year ago) and Nigeria (64% compared to 55% a year ago) intend on increasing their discretionary spending, while Morocco's score decreased slightly from 13% a year ago to 12%.

Spending priorities are varied across the different markets in the African region. The top three purchasing priorities for Kenyans over the next six months are consumer electronics (61%), continuing education (60%) and tuition (58%). These differ slightly from a year ago, when Kenyans selected tuition (49%), continuing education (46%) and buying or upgrading a home (44%) as their top three priorities.

Nigerians are more likely to spend on tuition (52% compared to 49% a year ago), continuing education (49% compared to 43% a year ago), or fashion and accessories (48% compare to 46% a year ago), while those in Morocco plan to spend on fashion and accessories (90% compared to 52%), dining and entertainment (70% compared to 61%) or fitness and wellness (24% compared to 40% a year ago).

"This reflects the fact that Africa is full of diverse markets and reinforces the importance of ensuring that companies doing business in Africa must recognise and understand these differences and adapt and customise their approaches to each market appropriately," says Jones.

Africa saves, consumer market grows

The majority of the markets in the African region expect savings to either remain the same or increase over the next six months; however, Kenya and Nigeria have a significantly higher disposition for saving more compared to South Africa and Morocco.

79% of Kenyans and 91% of Nigerians plan on increasing their savings in the next six months, while 64% of Moroccans are planning on keeping their savings the same rather than making any increases.

"Selected African regions and markets offer strong consumer growth prospects over the next five years and certain regions of sub-Saharan Africa are expected to be among the fastest growing regions on the planet. The African market investment strategies of global consumer business companies such as Walmart re-enforces this view," concludes George.