Global Advisors | Quantified Strategy Consulting

South Africa
Staples of bread and meat dominate consumer expenditure on food in South Africa

Staples of bread and meat dominate consumer expenditure on food in South Africa

Staples of bread and meat dominate consumer expenditure on food in South Africa

Expenditure on food, beverage and tobacco accounted for 13,9% of total consumption expenditure in South Africa

There are significant differences between population groups and their expenditure on food as a percent of total expenditure:

  • Black African households spend 19,9%
  • Coloured households spend 18,6%
  • Indian/Asian households spend 7,4%
  • White households spend 7,2%

Bread, buns and rolls are the primary driver of traffic for food retailers

Although the percentage of total consumption differs amongst population groups and amongst income deciles, the staples in the consumer basket remain consistent

Consumer goods producers might benefit from focusing on staples and providing a range of products that meet the taste and budget for each population and income group

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White meat consumption has grown with increases in per capita income and growth of the middle class

White meat consumption has grown with increases in per capita income and growth of the middle class

White meat consumption has grown with increases in per capita income and growth of the middle class

  • South Africa has experienced rapid growth of middle-to-upper-class citizens fuelled by the parallel increase in disposable income of this socio-economic group
  • The GDP per capita of South Africa has grown by 54% in real terms from R45 580 in 1981 to R70 184 in 2013
  • As the poor emerge from poverty and the emerging middle class consumers are able to afford more protein in their diets, chicken, being the most affordable and versatile, has emerged as the meat of choice for this burgeoning population group
  • The result has been growth in white meat per capita consumption ahead of red meat coupled with added benefits of being easy to produce and with less cultural constraints than pork
  • White meat consumption per capita has grown by 223% from 11,93 kg/capita in 1981 to 38,5 kg/capita in 2014
  • Consumption of white meat has also been fuelled by the growth of QSRs like KFC and to an extent, people trading down for a cheaper source of protein
  • Red meat, being more expensive, is growing at a slower pace
  • Pork and sheep meat i.e. Lamb (the most expensive of all red meat) and mutton consumption have remained fairly flat while beef consumption has grown since 2001
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3,6% of South African retirement funds make up 80% of total value

3,6% of South African retirement funds make up 80% of total value

The South African retirement industry is highly concentrated with 80% of the total fund value being held by less than 4% of registered retirement funds.

Of these approximately 3000 are active, most of which are small – 70% of funds have assets of less than R6m.

Membership in the system is voluntary, with only around half of formally-employed workers participating, and balances are low, partly because few members preserve their funds for retirement.

There has been a substantial move to umbrella funds due to the focus on retirement fund costs and the audit requirements of underwritten funds.

Underwritten funds used to be exempt from submitting audited returns to the Pension Funds Registrar, as they were effectively registered by the insurance division of the FSB.

This exemption has now been revoked and so underwritten funds are also required to submit audited results which incurs significant compliance costs.

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Mining’s contribution to South Africa’s GDP has declined while financial services has increased its dominance

Mining’s contribution to South Africa’s GDP has declined while financial services has increased its dominance
Mining is the only sector to have experienced an overall decline in contribution to South Africa’s GDP since 1993 with a negative CAGR of -1,3%.
The decrease in mining’s contribution to GDP has been a result of an increase in secondary and tertiary industries as well as a continuing decline in gold – and recently platinum – production over the years.
Mining companies have faced a myriad of obstacles including inadequate transport and logistics, electricity rationing warring unions and increasing labour costs – labour costs per kilogram of gold have more than quadrupled in the last decade.2
Going forward, government efforts in developing the downstream or beneficiated minerals industry could increase mining’s indirect and thus overall contribution to GDP.
Financial services however has grown from 17% of 1993 GDP to 24% of 2012 GDP and has outstripped growth of every sector bar communication.

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Global Advisors | Quantified Strategy Consulting