Tracking Nigerian and SA consumer sentiment

Nigerians overall are far more positive than South Africans about economic recovery from the economic impact of COVID-19 lockdowns which shuttered business across the continent. South Africans are extremely pessimistic and believe it will take more than a year for the economy to recover.

In a special McKinsey report as part of its global surveys of consumer sentiment, consumers in Africa’s two largest and most sophisticated markets, Nigeria and South Africa, were polled to; “gauge how people’s expectations, incomes, spending, and behaviour change throughout the crisis”. The authors of the report, Damien Hattingh, a partner in McKinsey’s Johannesburg office and Yaw Agyenim-Boateng, a partner in McKinsey’s Lagos office; with consultants Sian Kiri and Puso Thahane; found that consumers still expect reduced income and expenses as shutdowns continue in these two key markets. However, they report that consumers are also increasing spending in other areas; as well as adopting new brands, channels and behaviours during this global pandemic, which they expect to continue into the future post-lockdown.

Nigeria: Lockdown 30 March

In April when the survey was concluded, Nigeria was still in the early stages of the COVID-19 contagion and a 14-day lockdown from 30 March to 14 April 2020, in three major states: Lagos, Abuja and Ogun. “Nigerian consumers are more optimistic about the economic recovery of their country than consumers in the UK, US, and South Africa. Despite the global oil crisis impact and risk of currency devaluation, consumers are optimistic about economic recovery following the coronavirus situation,” the authors of the report say. “Nigerians are more concerned about public health, safety of family and health of vulnerable relatives than the economy during the COVID-19 crisis. Although four out of five Nigerians are concerned about the economy, this ranks lower in their list of concerns compared to countries such as South Africa. Two-thirds of Nigerian consumers have already experienced a drop in income; however, consumers expect to increase spending on household essentials, home entertainment, and fuel.”

McKinsey predicts that most retail categories will see a relative shift to online channels, but that consumers will continue to shop in store for groceries. These are the key takeouts:

• Almost half of Nigerians are optimistic about the country’s economic recovery after COVID-19: 48% said the economy will rebound within two to three months and grow just as strong as, or stronger, than before the virus; 39% were unsure and believe the economy will be impacted for six to 12 months or longer and will stagnate or show slow growth thereafter; and 13% were pessimistic that the coronavirus will have a lasting impact on the economy and show regression/fall in to lengthy recession.
• Nigerian consumers are rapidly adjusting their behaviour during the crisis, with more than two-thirds cutting back their spending: 54% said their ability to make financial ends meet had been negatively impacted; 70% said they were cutting back on spending; 83% said they were being very careful how they spent their money; and 66% said uncertainty around the economy was preventing them from making purchases or investments that they would otherwise make.
• Two-thirds of Nigerian consumers surveyed have already lost income, yet most consumers expect to increase spending on household essentials, home entertainment and fuel.
• As far as ecommerce goes, Nigerians expect to shift spending on home entertainment, media, and children’s products to online channels. The expected change in shopping behaviour happened within two weeks of lockdown.
• Being under lockdown, time spent on consuming online media, news and connecting with others remotely online, was expected to increase, with 71% reading more news online; 67% spending more time on social media; 63% watching more news; 60% spending increased time on messaging apps; 55% watching more TV; 51% consuming more video content; 48% watching more movies or shows; and 31% gaming more.
• Nigerians are also realistic, with two-thirds believing that the personal and financial impact of COVID-19 will last longer than two months: 63% believe it will take more than two months before routines can return to “normal” before the pandemic hit; and 66% of respondents believe their finances will be impacted for more than two months.
• Brands take note: these are the top concerns of Nigerian families: public health, personal and family safety, and the health of vulnerable relatives. In fact, 92% of Nigerians are extremely concerned about the overall public health.

South Africa: Lockdown 27 March

When South Africa entered lockdown, there had not yet been any recorded deaths from the coronavirus, COVID-19; and the main concern of South African consumers centred around the economy in the early stages of #lockdownSA. The authors noted: “South Africa is in the early stages of the COVID-19 contagion, with the government implementing a three-week nationwide lockdown on March 27. Consumers’ views of the potential for a swift economic recovery from COVID-19 are not rosy. More than half have already experienced a drop in income, and more than two-thirds say they are cutting back spending.”

After four weeks however, consumers’ already low optimism levels about the economy had decreased even further, with 81% of South Africans either uncertain or pessimistic about the country’s economic recovery after COVID-19. The authors of the report noted than 60% of South Africans have experienced a loss of income during the crisis and consequently expected to cut back aggressively in all categories, except groceries and home entertainment. “They are also saving less or dipping into savings to make ends meet. With most ecommerce shut down, consumers are not shifting to online channels as rapidly as other markets. They are, however, trying new stores and new brands. Looking ahead, consumers do expect a slight recovery in their incomes as lockdown is eased.”

This data set was collected towards the end of April and these are the key takeouts from McKinsey:

• As the crisis continues, South Africans are feeling less optimistic and more pessimistic about the economy: only 28% are optimistic that the economy will rebound within two to three months’ time and grow just as strong or stronger than before COVID-19; 49% are unsure and believe the economy will be impacted for six to 12 months or longer and will stagnate or show slow growth thereafter; and 23% are totally pessimistic, believing that COVID-19 will have a lasting impact on the economy and show regression/fall into a lengthy recession.
• The majority of South Africans are feeling the financial impact of the crisis and are cutting back on spend: 87% are being very careful with how they spend their money; 75% are cutting back on spending; 66% say their ability to make financial ends meet has been negatively impacted by the virus pandemic; 65% say uncertainty about the economy is preventing them from making purchases or investments that they would otherwise make; 63% say their ability to work has been reduced by the virus; 62% say their income has been negatively impacted; and 58% are worried about job security.
• Consumers are expected to decrease spending across all categories except groceries and at-home entertainment, with an increase in online shopping only expected for home entertainment, as lockdown in South Africa under levels five and four does not include ecommerce and online shopping.
• As far as personal habits and behaviour change under lockdown to allow the country to prepare for the pandemic as it is expected to escalate in severity during the winter months, consumers say they will spend more time cooking, watching movies and using social media, with an increase in the following activities at home: 65% in cooking; 56% in watching moves or series; 56% more social media; 55% more on message apps; 54% on DIY at home; 52% will watch more live news; 51% more will read news online; 51% will increase remote learning; 48% more will watch videos online; 45% will watch more live TV; and 35% expect to do more exercise.
• The state of the economy, public health, and uncertainty about the duration of the pandemic and lockdown, are top concerns for South Africans: 83% are extremely concerned about the South African economy; 80% worry about overall public health as well as the uncertainty over not knowing how long this will last; 78% worry about the safety of them and their family; 76% worry about taking care of their family; 75% are very concerned about the health of their relatives in vulnerable demographics as well as the negative impact on their job and income; 74% are extremely concerned about not being able to make ends meet; 63% worry about the impact on their business; 62% have not been able to get the supplies they need; and 60% are concerned about their personal health.
• South Africans increasingly believe that the personal and financial impact of COVID-19 will last well beyond two months, with 90% believing that it will take more than two months before routines can return to normal; with 89% believing that their finances will be impacted for much more than two months by the global pandemic.
• As far as consumer behaviour changes go at home, South Africans have started new digital and low-touch activities, including remote learning, online fitness, and grocery delivery – intensifying their behaviour for some of these activities. These include online streaming, playing online, remote learning, online gaming, and video conferencing for personal and professional use.
• Consumer shopping has undergone moderate changes, given that ecommerce is still not available to South Africans under lockdown at level four, however, more than half of consumers have shopped new stores and websites and most expect to continue after the crisis: 26% changed their primary grocery store and 44% intend to continue; 26% switched to discount stores for basics; 21% shopped at a new grocery store and 43% intended to continue to do so.
• Looking beyond COVID-19, consumers expect to reduce in-person activities such as shopping in store, travel, moves and attending live events in the real world.

McKinsey is tracking consumer insights across the globe in all key markets on every continent, updating data regularly.

*This report was edited for Retailing Africa by Louise Burgers, publisher and editor of Retailing Africa.

Louise Burgers (previously Marsland) is the Publisher and Editor and Co-Founder of RetailingAfrica.com. She has spent over 20 years writing about the FMCG retailing, marketing, media and advertising industry in South Africa and on the African continent. She has specialised in local and Africa consumer trends and is a passionate Afro-optimist who believes it is Africa’s time to rise again and that the Africa Continental Free Trade Agreement (AfCFTA) will be a global gamechanger in the next decade.

– Receive the Retailing Africa newsletter every Monday and Thursday • Subscribe here

– Take advantage of Retailing Africa’s ‘Pay-what-you-can’ business support package • Read more