Forty-three percent of South African consumers are looking to apply the brakes on their discretionary spending over the next six months, according to a survey by MasterCard released on Thursday.

A correspondingly high percentage of South Africans surveyed said that they expect to save more over the next six months, with 47 percent saying that they were planning to save more and only 29 percent saying that that they were planning to save less compared with what they did in the last six months.

When asked how they expected their discretionary spending over the next six months to compare with their spending over the previous six months, 43 percent of the South Africans who participated in the survey said that they were planning to spend less, and 37 percent said that they were planning to spend about the same amount. Just 20 percent said that they were planning to increase their spending.

However, this is not to say that South Africans are not spending at all.

Fashion fallout

When the participants were asked what they would spend money on in the coming six months, the top three most frequently stated items were fashion and accessories, dining and entertainment, and buying or upgrading/renovating home or property.

"It seems that the 4.5-basis-points interest rate cut since December has started to give South Africans extra purchasing power with their discretionary spending expected to be directed towards items such as clothing, movies, and home improvements," says Anton van der Merwe, vice-president, Commerce Development, MasterCard Africa.

Adds Rodger George, Consumer Business Industry Leader for Deloitte South Africa: "During times like these, consumers tend to buy downwards in terms of product and price selection and they often trade off products within their available spend basket. Value becomes a key driver for purchase decisions which are often prioritised according to needs, and in some cases 'feel good' sentiments."

George believes that it is critical for merchants to understand where their products fit into the "spend basket" of their consumer base and understand how they are likely to act in recessions toward their products. Providing useful, rather than superfluous products, and value for money, rather than mere price appeal will also help to retain margins and attract spend.

Almost all of the other markets surveyed, likewise, anticipate spending on fashion and accessories and dining and entertainment, but the South Africans were nearly alone in their plans to spend on buying or upgrading/renovating home or property. Only in Saudi Arabia were there a larger percentage of consumers planning to spend more on this item.

"Many South Africans consider investing in property a reliable form of long-term investing, and since we're currently in a buyer's market, South Africans who can afford to will be looking to invest in property at this time. Property in South Africa has also consistently appreciated over the years, so it's understandable then that South African's consider investing in or renovating their homes a priority," explains George.

Concern over the economy appears to be fuelling plans for increased saving. The 71 percent of South Africans who are expected to save either more or as much as they had in the previous six months were also asked what their main reason for doing so was. Three out of four South Africans said it was because they perceived the economic outlook to be very uncertain and felt a need to be prepared for unforeseen emergency expenditures.

This behaviour is mirrored throughout the rest of the region where results of the survey revealed that consumers also expected to curb their spending and save more over the next six months.

"In South Africa, as well as throughout the Asia/Pacific, Middle East and Africa region, it was found that the money that is to be set aside over the next six months is expected to be put towards various long-term assets - including various investments, buying or upgrading/renovating home or property, and retirement," says Van der Merwe.

In 20 of the 21 markets surveyed, there were significantly more consumers saying that they plan to spend less and, in addition to South Africa, there were 11 other markets in which the number of consumers expecting to save more was significantly greater than the number of consumers expecting to save less.

The survey also provides information on consumers' charitable giving habits. South Africans seem poised to cut back on their charitable donations. When asked if they plan to make a charitable donation in the next six months, 55 percent said no. Most of the South Africans who do intend to make a charitable donation expect to donate between one percent and two percent of their next year's annual income.

Save more, spend less

The South African survey was conducted amid news of slowing job growth, a precipitous decline in South African manufacturing, and on the heels of an announcement that the economy had lapsed into its first technical recession in 17 years. "It is not surprising that South Africans have opted to save more and spend less over the coming months," commented George.

"The effects of these sentiments will flow through to retailers and merchants who will continue to experience lower sales levels than in recent years. However, some retailers may still do very well if they can manage to respond to consumer needs and sentiments by clearly understanding recessionary type buying behaviours being displayed by consumers during this period," he concluded.

Released twice yearly, the MasterCard Worldwide Survey on Consumer Purchasing Priorities provides insights into consumers' expected saving and discretionary spending patterns over the next six months. This latest survey was conducted between 23 March and 18 April 2009, and involved 9,211 consumers from 21 markets throughout the Asia/Pacific, Middle East, and Africa region.

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