Judging by their credit card spending patterns, urban consumers in South Africa have generally coped better than those in other countries in dealing with the economic challenges of the post-pandemic years.
This is a key finding of the Discovery Bank/Visa SpendTrend24 report, released last month, which analysed credit card data from 14 cities around the world: three in South Africa (Cape Town, Durban and Johannesburg); five in emerging economies and six in developed economies.
Credit card users were divided into four categories based on amounts spent per card: High Net Worth (top 5%); Everyday Affluent (next 20%); Mass Affluent (next 25%); and the Mass segment (remaining 50%).
In 2023, South African consumers in the Mass segment reduced their spending by 3-4% compared with 2022 while HNW consumers increased their spending by 3%. On the other hand, in the two US cities surveyed, Los Angeles and San Francisco, the Mass segment increased its credit card spending by over 10%, indicating heavier reliance on credit. HNW individuals in these cities showed prudence, reducing their spending by between 5% and 10% compared with 2022.
The report notes: Despite a challenging macro-economic environment, South Africa has proven to be highly resilient compared to global peers based on spend data. South African cities showed more stable year-on-year spend shifts and less segment volatility compared to many global counterparts a good indication of overall resilience.
Other trends highlighted in the report are as follows:
Globally, consumers are focusing on budgeting, value and trade-offs in their spending behaviour. The tightening of monetary policies by central banks limited consumer access to finance and increased debt servicing costs, negatively impacting consumer confidence and spending behaviour. Consumers are clearly becoming more conscious and cautious about their spending habits as global nominal disposable income growth falls behind inflation rates, the report says.
Groceries, retail, travel and fuel make up nearly two-thirds of South African credit-card spending. Overall, emerging-market cities spend a higher share on groceries and fuel, and a lower share on travel compared to developed market cities, which also spend a higher share on eating out and takeouts. Global travel volumes have largely returned to pre-pandemic levels, but at a higher cost.
Urban consumers are rapidly adopting digital payment options, increasingly making online purchases and using digital wallets. South Africa benchmarks well against global counterparts, with an impressive nine percentage point increase in digital wallet usage over the last year, the report says.
Predictions versus reality
Based on 2022 data, the previous report, SpendTrend23, made a series of predictions about South Africans spending trends in 2023. This is how they panned out:
Prediction: Continued growth in online spending, especially groceries. Reality: In 2023, South Africans shopped online more, with a 10% rise in spending per card and a 3% rise in transactions per card compared to 2022. Online grocery spending per card grew by 10%, fuelled by more options and better delivery services.
Prediction: Increased adoption of contactless payments. Reality: More consumers prefer contactless payments, which now make up the majority of transactions in South Africa. This surge is driven by the increasing popularity of digital wallets.
Prediction: Sustained spending on eating out and take-outs, supported by the convenience of food delivery platforms, and spurred on by load shedding. Reality: Average spending on eating out and take-outs rose by 8% in 2023, highlighting its enduring popularity and convenience.
Prediction: Continued expansion of hybrid working models. Reality: Hybrid work arrangements vary by city and industry, but remain common. Discovery Insure reports that over 75% of clients who are office workers now commute at least three days a week.
Prediction: Continued growth in local travel. Reality: In 2023, domestic travel in South Africa exceeded pre-pandemic levels, despite significantly higher costs. The airline industry expanded flight options on existing routes and opened new ones for increased traveller choice and accessibility.
Ahead of the curve
The report shows that South Africa is ahead of many countries in reaping the benefits of technological progress in the payments space. Says Lineshree Moodley, the Country Head of Visa South Africa: From the study, we have observed how the growth in online and digital transformation has given rise to opportunities for economic growth and financial inclusion. In practice, weve seen this play out remarkably well at home: South Africa stands out as a leader in the global shift towards digital wallets, online purchases, and contactless payments.
