Poor prospects for employment for 2016

Between 2006 and 2011, the proportion of the country’s population living in poverty fell from 57,2 per cent to 45,5 per cent.

Standard Bank economist, Mr Zaakirah Ismail analysed South African consumer behaviour and trends from a macroeconomic perspective in the bank’s Consumer Outlook for 2016.

He says despite the decline, South Africa has one of the most unequal societies in the world – the Gini coefficient declined only slightly between 2006 and 2011, from 0.72 to 0.69.

The emergence of the middle 60 per cent of the population contributed to these improvements, while the poorest 20 per cent saw a decline in the share of national income, he says.

“Nevertheless, poverty levels are slowly declining. Between 2006 and 2011, the proportion of the population living in poverty fell from 57,2 per cent to 45,5 per cent. We believe that this could be attributed partly to the aggressive expansion in the social grants programmes.”

In 2016 Standard Bank expects cyclical consumption to slow, while non-cyclical consumption may be more resilient than in previous downward phases of the business cycle due to increased support from the public sector.

“The extent of the countercyclical support from the government will be limited with respect to employment expansion.”

Households in the lower income groups, many of whom rely on social grants for income, contributed approximately 32 per cent of total expenditure in 2015.

The bank further expects wealth-backed spending to be constrained. Upper income households deriving significant incomes from investments contributed over seven per cent of total spending in 2015.

Demand for credit remains healthy, although over half of all credit applications are rejected. Standard Bank believes that growth in employment in 2015, particularly in trade, finance and the public sector supported demand for credit.

Lower commodity prices and the effects of the ongoing drought will weigh on employment prospects in 2016, which could affect debt-servicing.

Notwithstanding the high number of accounts in arrears or impaired, the credit profile of the South African consumers has improved marginally relative to the same time last year, as depicted by rising capital and interest repayments as a ratio of debt stock, and a declining number of individuals with impaired records.

According to Stats South Africa, poor households spend 33,5 per cent on food, while the non-poor spend 10,8 per cent. Food inflation is expected to peak around 12 per cent year on year.

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