South Africa's Consumer Confidence Plummets

South African consumers are facing a crisis of confidence, with the country's economic prospects growing more uncertain by the day.

The latest figures reveal that consumer sentiment has dropped to its lowest point since 2023, putting a strain on the fragile recovery efforts and raising concerns over the government's ability to maintain financial stability.

The sharp decline in consumer confidence can be traced back to the proposed VAT increase in the February Budget , a move that has shaken the spending power of South Africans. The initial plan to raise VAT by two percentage points has since been revised, but the damage to consumer sentiment has already been done.

Momentum Investments' chief economist, Sanisha Packirisamy, pointed out that even though the VAT hike has been scaled back to one percentage point over two years, the damage to consumer confidence remains significant. VAT is one of the most visible taxes for the average South African, and any hike sends immediate shockwaves through households already struggling with inflation and high interest rates.

While the revised VAT proposal might ease the immediate pain, the long-term implications are still worrisome. The Daily Investor reports that consumer spending, which has been a key driver of South Africa's meagre economic growth, is expected to slow down as confidence continues to falter.