Consumer confidence in Africa dropped by six points in February as the index moved from 12 to 6 points. This was caused by a drop in the indices of future expectations and current conditions, which tumbled by 6 and 5 points respectively.
Unlike in January where the performance of household indices was mixed, in February household indices performed poorly. Whereas the personal finance index rose by one-point, discretionary spending and household spending indices both dropped by a staggering 12 points, and the index of household income faltered by three points. Additionally, while the job prospects index improved by three points, the general country economic conditions index and the general city economic conditions index both dropped by 8 points.
Considering the performance of individual countries, consumer sentiment declined in four out of the seven countries tracked. These include Kenya, South Africa, Nigeria and Tanzania. The worst performer was South Africa as its index went down with a staggering 42 points from 32 to -10 points. Interestingly, consumer confidence in Cameroon improved for the first time in six months by 10 points from -6 to 4 points.
During the second month of the year Kasi global CCI continued to drop. This is the third consecutive month that the index has faltered. The dampening of consumer confidence is caused by a fall in both the indices of current conditions and future expectations, meaning consumers are not upbeat about their respective economies today and in the future.
African countries are still experiencing inflationary pressures which seem to be contributing to the drop in consumer sentiment. For example, the rising cost of food and fuel in Kenya is putting a strain on household budgets. According to the Kenya National Bureau of Statistics (KNBS) the overall year on year inflation rate as measured by the Consumer Price Index (CPI) was 9.2 per cent, in February 2023. This was largely due to the increase in prices of commodities under food and non-alcoholic beverages (13.3%); housing, water, electricity, gas;(7.6%) and transport (12.9%).
The cost of living continues to rise, and households are feeling the pinch.
In February, there were some changes in the financial and economic conditions. The personal finance index improved slightly by one point, which is a positive sign. However, several other indices showed a decline. These included the general economic conditions in the country, household income, purchasing power, general economic conditions in the city, and discretionary spending indices. The drop in these indices reflects the impact of the high cost of living that is negatively affecting African countries after the holiday season. It seems that households are feeling pessimistic about the general economic conditions. Both the country and city economic indices dropped by eight points, indicating that Africans are skeptical about the improvement of their future economic conditions.
Although there was a small improvement of one point in personal finance, both purchasing power and household income indices dropped significantly by 12 and 3 points respectively. This suggests that households are facing challenges with their purchasing ability and income levels. Interestingly, the job prospects index showed improvement for the second consecutive month, with a three-point increase from -49 to -46. This indicates that there is some optimism regarding job opportunities among households. On the other hand, the discretionary spending index continued to decline for the fourth consecutive month, dropping by 12 points from 5 to -7. This suggests that households in February focused more on finding better jobs and managing their finances carefully.
Load shedding in South Africa suppressed consumer confidence while inflation slowdown continues to buoy consumer sentiment in Cameroon.
The February 2023 drop in South African sentiment was a significant setback for the country. The previous few months had seen a steady improvement in sentiment, but this was brought to an abrupt halt as the country became the worst performer with a staggering drop of 42 points. This was primarily caused by ongoing load shedding, resulting in various negative consequences. Businesses had to close or operate at reduced capacity, leading to job losses and a decline in economic activity. The cost to businesses in lost output was $1.5 billion in 2022. Households were inconvenienced and had to spend extra on alternative power sources, costing an average of $100 per month. Overall, load shedding has cost the country’s economy $24 billion in lost output since 2015, according to the World Bank.
In February 2023, consumer sentiment in Cameroon improved by 10 points from -6 to 4 points. This was due to a number of factors, including rising oil prices, declining inflation, government reforms, and strong economic fundamentals. The improvement in sentiment was also reflected by the Cameroonian Ministry of Economy in its Consumer Confidence Index (CCI), which rose to 100.5 in February 2023, from 98.5 in January 2023. The total value of shares traded on the Economic and Monetary Community of Central Africa (CEMAC) in February 2023 was $1.2 billion, up from $900 million in January 2023. This is the highest level of trading volume on CEMAC since February 2020.
Retailers should provide affordable and value-for-money products.
To cater to the priorities of households in February, which were focused on obtaining better jobs and budgeting their finances, retailers can adopt a number of strategies. They should focus on understanding their core consumers and tailoring their product offerings, pricing strategies, and marketing efforts accordingly. This involves identifying whether consumers prioritize affordability or quality and adjusting their approach accordingly. Retailers can raise awareness of their value and premium brands through advertising, social media, and public relations, highlighting the benefits and value of their products to attract consumers seeking affordable or high-quality options. It is vital for retailers to develop distinct strategies for their value and premium brands, emphasizing competitive pricing, cost-saving promotions, affordability, and quality for value brands, while highlighting unique features, superior quality, and prestige for premium brands. Lastly, retailers must adapt to the changing consumer shopping habits by offering flexible payment options, exploring online platforms, and providing convenient delivery services to accommodate consumers’ evolving needs and preferences.
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