Opinion: Can the government use spending patterns to address inequality in South Africa?

Opinion: Can the government use spending patterns to address inequality in South Africa?

Editor’s note – Briefly editor Andre takes a closer look at the spending patterns of South Africans and what if anything government can learn from these patterns in order to help improve the lives of the poorest people in the country.

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Consumer spending patterns might not be the most glamorous topic in the world, but analysis of how much various income groups spend on certain items can help retailers, financial institutions and the government work out what they need to focus on.

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South Africa is one of the most unequal countries in the world and the gap between the rich and poor has actually been growing in recent year. According to the World Inequality Lab report published in December of last year, 10% of South Africans account for 66% of the country’s wealth.

In South Africa, as in other countries such as India with huge income inequality, there is a vast difference in the spending habits of people. These patterns are almost entirely based on income.

What South Africans spend their money on

While it’s true that what South Africans spend their money on differs based on income, Statistics South Africa (Stats SA) says there are certain universal truths which apply across all income groups.

Briefly.co.za discovered that Stats SA says the average South African household is consists of three to four people with an average income of R132,268 per annum. These households spend an average of R103,293 per year.

Using those statistics we can estimate exactly what the average household spends its money on.

Housing – The average household spends 32.55% of their income on housing, water, electricity, gas and other living essentials (not including food). Surprisingly the percentage of spend rises among the more affluent households. This is attributed to either a more relaxed approach to spending or due to a more luxurious lifestyle necessitating a bigger investment.

Transport – Getting from point A to point B takes up an average of 16.29 % of household income in South Africa. Poor families tend to spend most of their transport money on public transport such as trains and minibus taxis while the middle to upper classes generally has their own private vehicles.

Entertainment – South African families love their entertainment and spend the third largest chunk of their income on things like satellite TV, internet, restaurants, casino’s, weekend retreats and almost any other form of entertainment a person can think of.

Worryingly South Africans right across the board spend more on entertainment than they do on education, surprisingly poorer families spend more on entertainment than richer families.

What rich South Africans spend their money on

Wealthy South Africans are as a rule not afraid to flaunt their wealth and spend their money without shame. This means rich families have very different spending habits than average or poor families. Rich families are not afraid to splurge on hotel stays, buying only branded items and luxury goods

Hotels – Not only do rich families enjoy staying in lavish hotels, they actually buy apartments within hotels which allows them to live in these hotels on a permanent basis.

Brands – South Africans are notorious brand snobs, this holds true for everything from cars, clothes, luxury goods to toilet paper! Brands like Hugo Boss, Lacoste and L’Occitane, Burberry, Louis Vuitton and Gucci are firm favourites of the rich and famous in South Africa.

What poor South Africans spend their money on

Low-income to poor families spend more than a third of their income on basic foods. This drops to under 10% for rich families. This means the poorer a family is the more exposed they are to rises in food costs which are caused by inflation, increased transport cost (the price of diesel becomes very pertinent in this category) and various other factors.

Conclusion

These patterns make it painfully clear that poor households are more exposed to risk of financial ruin than any other group. Even a slight rise in food costs, such as the recent 1% VAT increase, can have a serious effect on consumer spending.

Rampant fuel prices and increased costs of living also threaten these families.

The government needs to implement strong policies specifically aimed at curbing inequality and it needs to back these policies over a number of years.

The World Inequality lab report found that China and India experienced similar levels of wealth across a similarly sized population. In China, inequality is much lower than India thanks to many years of careful policy implementation.

"The fact that inequality trends vary so greatly among countries, even when countries share similar levels of development, highlights the important role of national policies in shaping inequality," said Lucas Chancel, general co-ordinator of the report.
"For instance, consider China and India since 1980: China recorded much higher growth rates with significantly lower inequality levels than India. The positive conclusion of the World Inequality Report is that policy matters, a lot," Chancel added.

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The views and opinions expressed here are those of the author and do not necessarily reflect the official policy or position of Briefly.co.za

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Source: Briefly.co.za

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