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JEREMY MAGGS: As the festive season approaches, middle-class consumers are faced with a tough set of challenges. Escalating living costs, increasing debt concerns, and significant economic instability are all at play. The latest inflation data has just been published, creating further apprehension.

Read: Inflation inches up, leaving rate cut hopes intact

However, it’s not all doom and gloom, and I’m eager to share that recent findings from Brand Mapp offer insights into how we’re navigating these challenges. I’d like to reintroduce Brandon de Kock, the director of storytelling at BrandMapp. It’s always a pleasure to have you, Brandon. Your latest results contradict the common belief that consumers are drowning in debt. What have you found?

BRANDON DE KOCK: Hi Jeremy, thanks for having me back. We often find that people generalize the situation. That’s fundamentally the message we aim to convey. While a notable number of consumers are genuinely struggling, especially under stress,

it’s misleading to label all 13 million people in what we call the middle market—those in tax-paying households—as uniformly burdened by debt.

Our society is quite divided, and at least half of those in the middle market aren’t feeling the financial strain as intensely as others, which paints a more positive picture for that segment of the population, if you catch my drift.

JEREMY MAGGS: I suppose it also hinges on how one defines feeling stressed. Your ‘pinch’ threshold might differ from mine.

BRANDON DE KOCK: Precisely, and this is where the debt conversation becomes crucial. Over recent years, we’ve continuously surveyed consumers about their feelings regarding their debt situations. Annually, we find that fewer than 30% of households are genuinely stressed about debt.

This means that while that 30% faces real debt pressure, the rest either manage their debt intelligently or use it to enhance their lifestyle, especially among those in higher income brackets.

Essentially, the pivotal factor is whether individuals are borrowing to improve their lifestyle, and generally, the answer is no.

JEREMY MAGGS: Would you suggest that middle-aged individuals might experience this burden more acutely compared to their younger or older counterparts?

BRANDON DE KOCK: [Chuckle] Yes, both you and I fit into that category. Data indicates that the groups least worried about debt are younger and older demographics. This makes sense. Younger consumers stepping into the market may not have needed to engage with debt yet, while those starting families may find borrowing essential for basics such as housing and childcare. Access to personal loans or credit cards becomes vitally important for family-focused generations.

Interestingly, baby boomers tend to carry the least debt. They may have either cleared their debts completely or adjusted to a different lifestyle after retirement.

This scenario significantly impacts those approaching mid-life; it poses a considerable challenge in today’s economy.

JEREMY MAGGS: Perhaps that explains why baby boomers appear less concerned, Brandon.

BRANDON DE KOCK: [Chuckle] They might just be allocating their spending differently.

JEREMY MAGGS: It’s fascinating to see that soaring food and energy costs are keeping nearly half of South Africans awake at night. Yet, there’s a silver lining. The latest inflation rates have climbed to 2.9% in November, up slightly from 2.8% the previous month, but prices for crucial household food items have continued to drop.

Significant reductions in prices have been recorded. For example, egg prices have decreased by 3.7%, and eight out of eleven categories including vegetables, cheese, bread, and cereals have also experienced price drops. So, there might be a glimmer of festive happiness.

BRANDON DE KOCK: Indeed, just a flicker of hope. The affordability of eggs is a good sign. However, we must acknowledge that we are still living in a highly uncertain environment. The unpredictability of what may improve or worsen remains prevalent. Looking at the year overall, it has been one of the toughest for consumers in recent times.

Considering the water shortages in Johannesburg, ongoing Eskom challenges, and a tense election season, consumers have felt quite overwhelmed this year. As we wrap up the year, it’s difficult to determine how you’re feeling, but there are signs of positive changes, possibly suggesting that the government might be making the right moves, as inflation appears to be lower than before. Consumer confidence indicators are rising, hinting at some renewed optimism for the future.

This past year, individuals have kept considerable sums of money in their wallets. It’s not that there wasn’t any money; the focus has been on wise spending.

JEREMY MAGGS: Brandon, I appreciate you including me in your reflections on sleepless nights. At our age, those wakeful moments become part of our routine.

BRANDON DE KOCK: [Chuckle]

JEREMY MAGGS: Yet, I find your insights on consumer spending habits particularly compelling, especially the trend of delaying discretionary expenditures.

BRANDON DE KOCK: We still have further analysis to conduct in that area, but I can share an interesting trend. Have you followed new passenger car sales recently? I can’t recall if we’ve discussed this before.

JEREMY MAGGS: Yes, we cover that monthly on this program.

BRANDON DE KOCK: You would have noticed a remarkable trend. Monitoring new passenger car sales provides crucial insights into consumer confidence. If you look at the sales data for 2024, it’s unprecedented. It marks the first time that April sales dipped below March’s figures—signifying a substantial decline.

Yet, the last two months have recorded the highest passenger car sales figures in eight years, prompting inquiries about this fluctuation. One theory suggests that a few people capitalized on the two-pot system, seeing it as an ideal opportunity to invest their retirement funds in new vehicles. Furthermore, lower interest rates and a reduced repo rate might have contributed to this trend.

When examining these new passenger car sales statistics, it depicts a year of extreme volatility. It indicates that consumers still had the financial means, as car prices haven’t dropped. I attribute this to a postponement in spending.

For retailers gearing up for the holiday season, I genuinely hope my evaluation is accurate; it’s been a challenging year for retail in South Africa, and there might be pent-up demand for retail therapy ready to be unleashed.

JEREMY MAGGS: Lastly, I’ll keep an eye on time, as it is always precious. Can you clarify what you mean by the “subscription generation”?

BRANDON DE KOCK: Oh, this is a fascinating idea. I wish I had concrete data to share. This concept is one we’re actively exploring, with more analysis set for the future. The data hints at a shift in consumer behavior, especially among younger generations who seem accustomed to avoiding large purchases.

As younger consumers mull over expenses like fuel and insurance tied to owning a vehicle, alternatives such as Uber become appealing. The subscription generation—primarily Gen Z and some Gen X—seems to favor a lifestyle built around subscriptions rather than ownership.

This trend suggests that renting might align more closely with contemporary living than traditional home ownership. It’s a movement that could significantly reshape the market in the years to come.

Does that resonate with you?

JEREMY MAGGS: It makes perfect sense. As this wraps up our final discussion of the year, Brandon de Kock, director of storytelling at BrandMapp, I eagerly look forward to your insights in the new year. Thank you for your time.

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