(Image source: Ventures Africa)
August 9th, 2021-
KASI’s global CCI rose by 4 points in June after stalling last month. This uptick in consumer confidence is associated with increases in the index of current economic conditions and the index of future expectations both of which advanced by 4 and 5 points respectively.
With the exception of the purchasing power index which remained unchanged for the month, all other indices tracking the economic and financial situation for households strengthened. The largest gains were in the household income and personal finance indices which climbed by 9 and 8 points respectively.
Examining the countries tracked by the index, South Africa, Kenya, Ghana, and Tanzania all recorded growth in their consumer confidence with South Africa registering the largest expansion of 16 points. Cameroon and Ivory Coast posted reversions in their consumer confidence with Ivory Coast being the worst performer for June as its index declined by 7 points. Meanwhile, consumer confidence in Nigeria stagnated for the 2nd consecutive month.
Consumer confidence in Africa picked up pace in June ascending by 4 points after flatlining last month. This acceleration in consumer sentiment can be attributed to the index of current economic conditions and the index of future expectations both of which progressed by 4 and 5 points respectively.
Africa entered into another wave of Covid-19 in June following the ease of restrictions in several countries and the emergence of new variants of the virus which are deemed to be more contagious. Additionally, due to the inequity in vaccine access and distribution, the inoculation rate in the continent is much lower compared to developed regions. According to the African CDC, as of 28th July 2021, the continent had received a total of 89.4 million vaccines, primarily from the COVAX facility. These quantities are certainly inadequate for a continent whose population stands at approximately 1.3 billion. Out of the 89.4 million vaccines received, 72.75% have been administered with 3.42% of the population having received the 1st dose and 1.43% of the population having received both doses. As it stands, Africa has reported about 6.8 million cases with 172,836 deaths.
Despite such gloomy indications on the continent’s fight against Covid-19, confidence in the region was not affected at least for the month of June. According to some reports, there have been some signs of revival in the tourism industry due to the global vaccine rollout that has increased travel and with tourism being of economic importance for the region, households are indeed optimistic. For example, the Bank of Tanzania said that services receipts increased to $189.6 million in May 2021 compared to $109.7 million in the previous year and this is attributed to an increase in tourism which is good news for households dependent on the sector. However, the recovery of tourism remains to be extremely fragile as the global vaccine rollout is asymmetrical and the emergence of new variants has warranted some countries, including Kenya, to extend lockdowns.
The performance of the economic and financial situation indices indicates positivity among households in the month of June.
Households were much more optimistic about the economic and financial situation in June compared to last month. After deteriorating in May, both the job prospects and discretionary spending indices rebounded by 3 points with the job prospects index climbing to -46 from -49 and the discretionary spending index rising to 9 from 6. This upward trajectory was also witnessed in the general city and country economic conditions indices which moved up by 4 and 5 points respectively after stalling last month. Moreover, the personal-finance and household income indices maintained their positive momentum from last month as the indices grew by an additional 8 and 9 points respectively. The purchasing power index was the only index that failed to register any movement in June as the index languished at last month’s level. Evident from this performance of the household indices is that, unlike previous months where households had mixed feelings on the overall economic and financial situation, households were clearly bullish this time around.
South Africa’s consumer confidence index moves into positive territory while consumers in Ivory Coast continue to have a pessimistic outlook.
Countries considered in our index once again posted mixed performance in June akin to the preceding months. Whereas Ghana, Kenya, South Africa, and Tanzania all experienced gains in their consumer sentiment, Cameroon and Ivory Coast saw their consumer sentiment indices disintegrate while Nigeria’s consumer confidence index maintained the same level observed in the previous two months.
Among the gainers, South Africa had the best performance as its index soared by 16 points from -6 to 10 making this the first time since September 2019 that the country has recorded a non-negative consumer sentiment level. This surge in consumer confidence is fully attributed to the index of future expectations which shot up by 23 points while the index of current economic conditions remained unchanged. South Africa has been undergoing civil unrest since the Constitutional Court ordered the arrest of former President Jacob Zuma on the 29th of June 2021. Despite, Zuma rejecting the court’s sentence, he handed himself over to the authorities making him the first South African leader to go to prison in the 27 years since apartheid ended. With the rule of law triumphing, there was a renewed sense of jubilation among South Africans and Africa at large. This occurrence though is not the only reason for the resurgence in South Africa’s consumer confidence. The country has embarked on a series of measures to continue its fight against Covid-19 including financial packages to locally produce the J&J vaccine, an official loan guarantee scheme to provide bank loans, guaranteed by the government, to eligible businesses to assist them with operational expenses. Furthermore, the revenue administration authority has accelerated reimbursements and tax credits, allowing SMEs to defer certain tax liabilities, and issued a list of essential goods for a full rebate of customs duty and import VAT exemption. All these measures have been welcomed by South African households as the discretionary spending, purchasing power, personal finance, and household income indices elevated by 18, 24, 45, and 40 points respectively. At the same time, the city economic conditions index strengthened by 9 points. Unfortunately, the country’s general economic conditions and job prospects remained feeble as the indices sunk by 3 and 18 points respectively.
Similar to last month, Ivory Coast was once again the worst-performer among our countries as its consumer confidence index slid by another 7 points in June falling from 5 to -2. This slump in its consumer sentiment follows from the dwindling of its index of future expectations and index of current economic conditions both of which slipped by 8 and 7 points respectively. Cocoa prices continued plummeting in June with the International Cocoa Organization (ICCO) monthly report indicating that the front-month cocoa futures contract prices declined by 4% in London whilst in New York, a 3% plunge was recorded. The negative outlook for cocoa prices is concerning for the cocoa producer and this is reflected in the underwhelming performance of the household indices. General country and city economic conditions indices both shrunk by 5 points while the discretionary spending, personal finance, household income, and purchasing power indices diminished by 13, 11, 10, and 7 points respectively. Lastly, after falling by a single point in May, the country’s job prospects index did not change and remained in negative territory at -43.
A dynamic pricing model is recommended for retailers with operations in several countries across the continent.
The performance of consumer confidence in June certainly points towards some level of optimism among households at the continental level which is an improvement from what we have observed in recent months where there has been no clear indication on households’ perception of the economic and financial situation. Nevertheless, performance at the country level continues to be foggy as shown by the varied performance in consumer sentiment for individual countries. The mixed results at the continental level and country level complicate decision-making for retailers with operations in several countries within Africa as it does not offer a precise direction on the way forward. As such, these retailers need to adopt a dynamic pricing model tailored towards their business context, objectives, and ways of working. The model needs to consider, among others, the differences in customer price elasticities and preferences, competition, and distribution costs across the various countries to ultimately come up with prices that fit the specific market rather than a ‘blanket price’ that covers all the markets. With such dynamic pricing models, retailers can effectively drive and maintain profitability while achieving customer satisfaction and loyalty.
“In spite of the positive momentum witnessed in consumer confidence this month, the disturbingly low and uneven immunization rate among countries in Africa means that economic recovery is imbalanced across the continent. Therefore, it would be prudent for retailers with multiple operations in the continent to adopt a dynamic pricing model that is contextual to a particular area of operation due to this heterogeneous nature of economic recovery and consumer sentiment.”
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