(Image source- Christensen Institute)
June 28th, 2021-
Consumer confidence in Africa was stationary in May after rising last month. The inertia of the global CCI is attributed to the divergence in the movement of the index of future expectations and the index of current economic conditions where the former increased by 2 points while the latter fell by 5 points.
Households reported an overall improvement in their purchasing power, incomes, and budgets for the month of May. Despite this, the discretionary spending index contracted and so too did the job prospects index. Meanwhile, both the general country and city economic conditions indices remained unchanged in May.
Among the countries tracked, Kenya, Tanzania, Cameroon, and South Africa were the only countries to witness advancements in their confidence indices with Kenya realizing the largest growth of 8 points. On the contrary, consumer confidence in Ivory Coast and Ghana stumbled by 13 and 11 points respectively while Nigeria’s consumer confidence index stalled at April’s level.
In a rather mundane fashion, KASI’s global CCI flatlined at 4 after moving up by 6 points in April. This sluggishness of the index stems from the fact that the sub-indices making up the overall index moved in opposite directions with the index of future expectation climbing by 2 points while the index of current economic conditions dropped by 5 points.
Africa continues to grapple with its Covid-19 immunization program with less than 1% of the continent’s population being fully vaccinated. Many countries have failed to prepare adequately before receiving the vaccines and as a result, the rollout has been lethargic. With the vaccine distribution being slow, thousands of doses have been destroyed in African countries because they have exceeded their expiry dates and others are being returned by countries as they will be unable to use them before they expire. Furthermore, with the new variants of the virus, some countries like South Africa have decided not to use the vaccines citing their inefficacy in offering sufficient protection from the variant prevalent in the country. Therefore, these doses have been passed on to other African countries through the African Union but with a very short shelf-life remaining so, the recipient countries have limited time to make use of the doses. Health officials have also pointed out slow vaccine approvals by legislators and delays in training health care workers as additional reasons for the poor pace of inoculation in the continent. According to Africa CDC, as of 26th June, the continent had reported 5,382,790 cases with 140,682 deaths and 4,728,804 recoveries.
City economic conditions fail to budge for the 4th consecutive month while the momentum in the job prospects ceases.
The positive momentum seen in recent months for the job prospects index came to a sudden halt in May with the index declining by 7 points from -42 to -49 hence wiping out all the gains made in the previous months of March and April. In a similar disappointing fashion, the general city economic conditions index failed to shift as the index languished at the same level it has maintained for the past 3 months at 12. After its explosive bounce back in April, the general country economic conditions index did not change in May stalling at 11. Households revealed an improvement in their financial situation as the household budget, personal finance, and household income indices heightened by 3, 5, and 3 points respectively. In spite of this improvement in households’ financial situation, discretionary spending contracted with the index losing 2 points falling to 6 from 8. Clearly, these indices focusing on households’ economic and financial situation are not all moving in the same direction and this mixed performance of the indices is akin to what we have in recent months.
Consumer confidence in Kenya escalates with the return of the World Rally Championship to the country while Ivory Coast erases some of April’s gains in consumer confidence.
Analysis of consumer confidence for the countries tracked in our index reveals a mixed performance across the board. Cameroon, Kenya, South Africa, and Tanzania recorded positive moves in their consumer confidence whereas for Ivory Coast and Ghana, consumer confidence slipped. Meanwhile, consumer confidence in Nigeria remained unchanged from last month. Focusing on the gainers, Kenya registered the largest increase among this group with its consumer confidence index advancing by 8 points from -7 to 1. The boost in Kenya’s consumer confidence is primarily associated with the expansion in its index of future expectations which rose by 10 points while its index of current economic conditions moved up by 2 points. For the first time in 19 years, the World Rally Championship (WRC) race will return to Kenya in June causing a massive buzz in the country. Hoteliers and those in the hospitality sector are exhilarated by the event especially given the massive setbacks they experienced due to Covid-19. As tourists are expected to arrive from all over the continent and the world, June is certainly a promising month for the sector. With respect to the country’s sub-indices focusing on households’ perception of the economic situation, all the sub-indices soared in May apart from the purchasing power index which shrunk by 3 points. The general economic conditions for both city and country surged by 14 and 16 points respectively while the job prospect index climbed by a modest 3 points. Additionally, the personal finance, household income, and discretionary spending indices strengthened by 10, 15, and 2 points respectively.
Turning our attention to the laggards of the month, Ivory Coast was the worst performer in the group. This comes after Ivory Coast led as the best performer in the month of April where its consumer confidence index rocket by 22 points. Fortunately, despite this month’s slip, the country still managed to hold onto some of its April gains as the confidence index slid by 13 points. The downturn in consumer confidence follows from the weakening of its index of future expectations and index of current economic conditions both of which sunk by 13 and 11 points respectively. Unfortunately for Ivory Coast, cocoa prices have struggled as the commodity missed out on the inflation rally experienced by other commodities including soybeans and copper. Consequently, income receipts for one of the world’s largest producers have been disappointing. This could also be the reason why Ghana, another large cocoa producer, has seen its consumer sentiment plummet by 11 points this month. Moving on, the scrutinization of Ivory Coast’s sub-indices for households reveals that the only index to progress in May was the personal finance index which ticked up by 5 points. All the other indices deteriorated in May with the household spending index experiencing the largest collapse of 37 points followed by the discretionary spending index which faltered by 21 points. In a similar fashion, the general economic conditions indices for city and country dwindled by 14 and 8 points respectively. Lastly, the household income index crumbled by 10 points while the job prospects index diminished by a single point.
Retailers should take a more contextual approach in analyzing the consumer market as the overall picture for the continent continues to be hazy.
From this month’s assessment of the consumer confidence indices, it is evident that households continue to have a mixed perception of the economic environment and their financial situation. However, disaggregating the data down to the country level provides a much clearer indication of how consumers in a given country feel about the current and future economic situation.
With this in mind, rather than paying critical attention to the overall perception of consumers at the continental level, it would be more prudent for retailers to consider taking a more contextual approach in understanding their consumers and the market. For example, borrowing from this month’s analysis, retailers in Kenya could consider taking a more aggressive approach in marketing their products (and take advantage of the rally event) as households’ income and purchasing power have improved and at the same time, the economic conditions in the country and city are better. On the contrary, retailers in Ivory Coast, particularly those planning to launch new products, may have to take a “wait and see” approach because while consumer sentiment rose in April, it regressed this month with both the household spending and discretionary spending indices severely disintegrating.
“The current terrain of economic uncertainty in the continent is certainly not favorable for economic agents including households, retailers, and suppliers. Compounding onto this is the fact that the continent’s fight against Covid-19 appears to have a long way to go. Given this, it is certainly sensible for agents to take a more contextual approach in their decision-making and, in addition, review their strategies especially their risk-management strategies in preparation for any eventuality.”
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