Consumer confidence plunges to levels of ‘Rubicon’ era

FNB media statement: 

Consumer confidence crashes to lowest level since 1985

The sudden outbreak of the Covid-19 epidemic and subsequent severe restrictions to almost all non-essential economic activity in South Africa sent the FNB/BER Consumer Confidence Index (CCI) plummeting from an already depressed level of -9 in the first quarter of 2020 to a shocking -33 during the second quarter. The latest CCI reading is now only 3 index points shy of the all-time[1] lowest consumer confidence level (of -36) recorded in 1985 – a year that was racked by violent resistance against apartheid, a partial state of emergency, then president P.W. Botha’s infamous Rubicon speech and South Africa’s subsequent debt crisis.

The second quarter CCI survey was conducted by means of a telephone call survey between 1 and 12 June 2020. The fieldwork for the survey therefore covered the first few days after most retail outlets were allowed to reopen on 1 June, when South Africa switched from alert level 4 of the COVID-19 lockdown to the less restrictive level 3.


The dramatic decline in the CCI during the second quarter of 2020 can be ascribed to a further deterioration in the economic outlook index, and major drops in the household finances and time-to-buy durable goods indices. The economic outlook sub-index of the CCI had already declined notably before COVID-19 struck South Africa – dwindling from +11 in the second quarter of 2019 to -16 by the first quarter of 2020 – and slipped further to -21 in the second quarter. In contrast, the household financial outlook sub-index of the CCI, which had held up surprisingly well over the last year, made a complete turnabout, plunging from +14 to -13 in the second quarter. The majority of households across all income groups now expect their household finances to deteriorate over the next 12 months.


Disconcertingly, the sub-index measuring the appropriateness of the present time to buy durable goods (e.g. vehicles, furniture, household appliances and electronic goods) fell off a cliff, with a massive 38-index-point drop to a historic low of -64. In fact, the latest reading for the time-to-buy durable goods index is far lower compared to the previous record low of -42, recorded in 1984. Importantly, the fieldwork for the second quarter survey only commenced when durable goods retailers (i.e. non-essential goods) were allowed to reopen (i.e. on 1 June). Consumers would therefore have been able to purchase goods that they were unable to buy during lockdown levels 4 and 5, but the record low time-to-buy durables reading points to very little pent-up demand for durable goods.

FNB Chief Economist Mamello Matikinca-Ngwenya said that, “The sharp deterioration in the financial prospects index of the CCI and the complete collapse in the time-to-buy durable goods index suggest that the COVID-19 pandemic and ensuing economic restrictions had a materially negative impact on both consumers’ ability and willingness to spend. Millions of workers were placed on unpaid leave or reduced pay, or even retrenched, as businesses scrambled to survive the lockdown – this severely constrained household income, and therefore consumers’ ability to spend.”

The highly uncertain outlook for the South African economy and intense pressure on household budgets no doubt convinced consumers to postpone their spending on big-ticket items such as passenger cars, household furniture and jewellery. “Not even the cut-price specials offered by durable goods retailers or the substantial interest rate cuts by the SARB seem to be enough to entice consumers to spend their money on durable goods or expensive luxuries,” said Matikinca-Ngwenya. The SARB has cut the repo rate by a cumulative 275 basis points since January, bringing the prime interest rate down to 7.25% – the lowest level in 55 years.

Looking at a breakdown of the CCI per household income group, low-income consumers (earning less than R2 500 p.m.) posted the largest decline in confidence during the second quarter. Low-income confidence slumped by a historic 37 index points, from +2 to -35, during the second quarter. Sentiment among middle-income households (earning between R2 500 and R20 000 p.m.) fell by 26 index points to -30, while the confidence levels of high-income consumers (earning more than R20 000 per month) deteriorated by 16 index points to -33.

The major confidence knock and generally bleak financial outlook for low-income households is despite a considerable increase in social grants expenditure by the government to the nearly 18 million grant recipients in South Africa. In May 2020, the government increased the monetary values of the different grants (e.g. child support[2], old age and disability grants) by between R250 and R300 per month, and also instituted a special COVID-19 grant of R350 per month for unemployed South Africans who do not receive any other financial support from the government. In all, the government projects to spend an additional R40bn to R50bn on social assistance to poor households between May and October 2020. However, the CCI results suggest that the considerable efforts by the government to support vulnerable households have not (so far) fully compensated for the adverse coronavirus-related impacts on their household income. Matikinca-Ngwenya also pointed out that, unlike affluent households, low-income households typically have little savings to fall back on during times of financial hardship and therefore experienced a fairly immediate and significant deterioration in their quality of life when the lockdown commenced.

High-income confidence declined much less than low-income confidence during the second quarter, but high-income earners were already quite pessimistic by the first quarter of 2020. Matikinca-Ngwenya noted that, “While affluent consumers are more likely to have access to credit or savings to soften the financial blow stemming from the COVID-19 related economic restrictions, many high-income households were indeed also adversely affected by reduced salaries, commissions and bonuses, retrenchments, lower rental and interest income, as well as the slump in stock prices on the JSE.”

Bottom line

The fact that consumer confidence dropped to a 35-year low during the second quarter of 2020 underpins the profoundly negative impact of COVID-19 and the related economic restrictions on South African consumers. Although economic activity is gradually resuming now that the government has lifted many of the restrictions, consumers’ willingness and ability to spend have nevertheless been dealt a serious further blow (having already been under significant pressure in 2019). Low income households seem to be especially hard hit, despite a marked increase in social grants expenditure by the government to buffer vulnerable households.

As expected, consumers are responding by cutting back their spending on durable goods and expensive luxuries such as new vehicles, furniture, household appliances, hardware and jewellery. However, the fact that the time-to-buy durable goods sub-index of the CCI crashed to a new record low when the survey was conducted in early June – despite consumers being unable to purchase most of these products in April or May – suggests that durable goods retailers in particular face a long and difficult road to recovery.

Matikinca-Ngwenya said that, “Consumers’ extreme wariness to purchase durable goods, coupled with the substantial increase in financial aid to low income households, should cushion retail sales of basic necessities, such as food, beverages, other groceries, pharmaceuticals and toiletries in the near-term. Nevertheless, given the extent of the blow to consumer income and confidence, as well as the fact that coronavirus infections are now rising faster than ever before in South Africa, the retail sector is still a long way away from firing on all cylinders.”


Consumer confidence surveys provide regular assessments of consumer attitudes and expectations and are used to evaluate economic trends and prospects. The surveys are designed to explore why changes in consumer expectations occur and how these changes influence consumer spending and saving decisions.

The FNB/BER CCI combines the results of three questions posed to adults in South Africa, namely the expected performance of the economy, the expected financial position of households and the rating of the appropriateness of the present time to buy durable goods, such as furniture, appliances and electronic equipment.

Until the second quarter of 2019, the FNB/BER CCI was based on face-to-face interviews of between 2 000 and 2 500 urban adults. Due to weak demand, the three service providers in South Africa – Nielsen, Ipsos Markinor and TNS Kantar – could not always guarantee surveys with a quarterly frequency between 2016 and 2019. Internationally, the majority of CCIs are based on telephone call surveys. As a result, the BER switched to telephone call surveys in the third quarter of 2019.  The 500 respondents are representative of the racial and household income composition of the urban adult population of South Africa.

Consumer confidence is expressed as a net balance. The net balance is derived as the percentage of respondents expecting an improvement / good time to buy durable goods less the percentage expecting a deterioration/ bad time to buy durable goods.

A low level of confidence indicates that consumers are concerned about the future. They may be worried about job security, pay raises and bonuses. With such a frame of mind, consumers tend to cut spending to basic necessities (e.g. food and services) to free up income for debt repayment. If confidence is high, consumers tend to incur debt (or reduce savings) and increase spending on discretionary items, such as furniture, household equipment, motor vehicles, clothing and footwear. Some of these items are often financed on credit. Spending on these items declines when confidence is low, as households can generally delay their purchase without experiencing an immediate deterioration in living conditions.

A rise in consumer confidence reflects an increased willingness of consumers to spend. However, this willingness only translates into actual sales if consumers’ ability to spend improves. Their ability to spend depends on their inflation adjusted after-tax income and the availability of credit. A rise in consumer confidence could therefore result in an upturn in household consumption spending in general and retail and motor vehicle sales in particular. The opposite applies when the level of consumer confidence declines.