Consumer sentiment plunged to a record low as COVID-19 hits Africa
KASI consumer-sentiment index plunged by 24 points to -21, in March as COVID-19 hits Africa
The slump was led by both current-condition index, which plummeted by 21 points the most since the inception of the index in 2016 and the consumer expectations index, which plummeted by 25 points, a record as well.
In line with the global indices, consumer confidence in Africa is now falling fast, the larger size of the informal economy, weak health infrastructure in Africa means the COVID-19 impact can be catastrophic.
The consumer sentiment index launched in 2016 has witnessed its largest monthly decline in March when it plunged 24 points. The COVID-19 pandemic that basically froze the global economy has finally hit Africa. During the month of March, Africa recorded its first cases and the virus quickly spread to 54 countries. As of April 17, the continent has over 18,000 cases and 967 deaths according to the latest tally by Africa CDC.
Sentiment dropped in every country; South Africa leading the slump with 76 index-points monthly drop
The drop in consumer sentiment was seen across the board, South Africa leading the way with 76 points drop from February, the country was already fighting off a muted economy and a pending recession. Its sovereign debt was recently downgraded to Ba1 by the rating agency Moodys. Investors will now demand higher interest payments when the country raised money via bond issuances, adding to the country debt burden.
On the other side of the spectrum, consumer sentiment rose 10 points in Cameroon during the month of March, a small reversal from a big drop in February. Our COVID-19 data shows that people in Cameroon were not deeply concerned with the outbreak in March but that sentiment is likely to change as the country now ranks amongst the worst performers in terms of the number of cases and deaths. As of April 26th, the country has 855 cases; concerns over the absence of the president during the crisis are raising alarms about the management of the pandemic.
Where is the hope? Consumer expectations turn negative for the first time
Consumer confidence in Africa has always been driven by positive consumer expectations. Africans are known to be optimistic. In fact, the consumer expectation sub-index has never been negative in always 4 years since we started tracking consumer sentiment. In March, the sub-index dropped 25 index points, the largest monthly swing, and an all-time drop.
Again, South Africa saw the largest drop in consumer expectation (-78 points) while Cameroon saw a 10 points increase. 6 out of the seven countries saw a significant drop in March.
COVID-19 a global reset?
The systemic shift and disruption due to COVID-19 are so significant that we are seeing consumer sentiment converging in the US and Africa. Is it the beginning of a global reset? The global economy has never witnessed such disruption since the Great depression. While the lack of jobs has always been a staple of Africa economies, the US has always been a wonderful job engine. That's until COVID-19.
The US lost 22 million jobs since the president declared the state of emergency and lockdowns were enforced in the country as a result of COVID-19. The magnitude and the speed of the crisis basically shut down the strongest growth engine of the world. The uncertainty about the pandemic, the length of the downturn means that the US could be in recession for a long time.
Africa was the last continent to be hit by COVID-19, it is also the continent with the lowest amount of the cases so far, but the cases are growing fast. From virtually no case in early March, the continent has over 18,000 cases in 40 days. The impact of COVID-19 in Africa can be catastrophic. The continent is not a strong job engine like the US, intra-Africa trade is still low, its dependency on foreign aid and investment is still very high, its fiscal and monetary tools are limited. To make matters worst, oil prices are at a historical low.
As expected, consumer sentiment in Africa fell faster, dropping 24 points to land at 79 (scaled adjusted) while consumer sentiment in the US dropped 11 points from February to March to land at 89. Initial April readings from the University of Michigan put the index at 71! which is even lower than in Africa.
Interestingly, COVID-19 has created a convergence between the US and Africa at least for now.
"Consumer sentiment drives economies because there is a direct correlation between consumer confidence and spending. The magnitude of the drop is definitely historic and it doesn't bode well for the economic prospects of the continent. The response to the crisis has to bold in every sense of the term, it is time for governments, the private sector, and people to step up if we want to come out this crisis sooner rather than later " said Yannick Lefang, head of data and analytics at KASI.
About the methodology
KASI Consumer Confidence Score (KASI CCI) is a composite index compiled from a seven-question survey that runs monthly via our consumer polls in the countries covered. The data output is based on a fresh, randomly selected representative sample of city dwellers aged 18-64. Released the first week of every month, KASI CCI provides a focused view on consumer perceptions in seven African urban centers (Ghana, Nigeria, Kenya, South Africa, Cameroon, Ivory Coast, Tanzania) where most spending in the continent is concentrated.
For each question, the final metric will be a ‘balance measure’ of the percentage of positive responses minus the percentage of negative responses. The overall metric will be an average across all the questions. March 2020 data were collected from 03/21 to 04/04, 2020.
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