March 26, 2021, 16:00 PM--
KASI’s global CCI receded by 3 points in February following a decline in the index of current economic conditions and index of future expectations which fell by 3 and 2 points respectively.
General economic conditions in the city and country both decreased by 5 and 6 points respectively. This downward trend was also witnessed in the job prospects and household income indices. On the flip side, the household spending, personal financial situation, and discretionary spending indices rose by 1, 3, and 1 point(s) respectively after stumbling in January.
Consumer confidence in Cameroon moved up by 7 points in February making it the best performer for the month. Among the countries tracked, Kenya and Nigeria were the only other countries to record gains in their consumer confidence. The remaining countries experienced setbacks in their consumer sentiment with Tanzania registering the largest deterioration.
Africa’s consumer confidence dwindled in February by 3 points after a modest improvement in the previous month. The index dropped from 5 to 2 indicating that households are still plagued by economic concerns. Both the index of current economic conditions and index of future expectations shrunk by 3 and 2 points respectively thus causing the decline of the overall global index.
Despite several African states securing Covid-19 vaccines through the COVAX facility offered by multilateral agencies, the quantities procured thus far by governments are not adequate to sufficiently inoculate the majority of Africans unlike some countries in the West that have secured enough doses to vaccinate their citizens multiple times. Last week, Kenya’s Ministry of Health stated that “the country aims to inoculate about 15 million people nationwide, about 30% of the country’s population, by the end of June 2023” (Reuters, 2021). This goal is certainly underwhelming! Moreover, there are growing concerns of a 3rd wave because of the deadlier strains and the potential of super-spreader events over the Easter holiday. Due to this, the Kenyan government, for example, has extended the Covid-19 curfew for an additional 2 months including a ban on political gatherings and limits to church attendance.
Data from the Africa CDC shows that, as of 21st March 2021, there were a total of 4,114,437 cases with 109,893 deaths and 3,681,648 recoveries. These numbers are from a total of 39,829,115 tests administered in the continent.
Households indicate pessimism on general economic conditions and job prospects despite a slight improvement in expenditure.
The negative perception of the current economic conditions and future expectations is mirrored on the sub-indices tracking the financial and economic situation among households. Purchasing power and discretionary spending indices both had a modest improvement of a single point while the personal financial situation index climbed by 3 points. However, the magnitude of these gains was outweighed by the magnitude of the losses in the remaining sub-indices hence the downturn in consumer confidence. Households’ perception of the general economic conditions for both the city and country waned by 5 and 6 points respectively. Furthermore, the job prospects index slipped by 5 points while the household income index sunk by 3 points. With countries including Ghana and Ivory Coast instituting new lockdown measures in February and a slow roll-out of the vaccine in the continent, the optimism that one would have expected across households in 2021 is yet to be realized.
Tanzania’s consumer confidence plummets following mismanagement of Covid-19 while consumer confidence in Cameroon advances.
Among the countries tracked, Tanzania was the worst performer for the month. Consumer confidence in Tanzania endured a sharp downturn of 26 points falling from 31 to 5. The slump in Tanzania’s consumer confidence can be attributed to the backpedaling of both its indices of future expectations and current economic conditions which slid by 28 and 21 points respectively. Every single one of Tanzania’s sub-indices focusing on the economic and financial situation of its households regressed in February. Household income and general city economic conditions both equally suffered the largest depression of 43 points while the personal finance index had the smallest descent of 3 points. Tanzania’s handling of Covid-19 has been appalling compared to her counterparts. Reportedly, swaths of people have succumbed to the disease but the government has been secretive on the figures. Unfortunately, on March 17th, the country lost its President, John Pombe Magufuli, to a pre-existing heart condition which, according to some sources, was triggered by coronavirus but the Tanzanian government has denied such claims. This event may have detrimental effects on future consumer confidence.
Cameroon’s consumer confidence enjoyed positive momentum in February as the index expanded by 7 points rising from -1 to 6. The increase in its consumer sentiment can be fully attributed to the index of future expectations which surged by 10 points (from -1 to 9) while the index of current economic conditions stagnated at 0. This improvement comes after months of spending five of the last 6 months in negative territory owing to, among others, continued separatist violence between English-speaking states and the French-majority. Furthermore, after talks with multilateral lending institutions, Cameroon finally received a debt-service deferral extension for 2021 freeing up funds for the fight against Covid-19. Apart from the discretionary spending index which dampened by 9 points, every other sub-index for Cameroon heightened in February. The household income index underwent the largest hike of 18 points climbing to 10 from -8. General economic conditions in the city and country both advanced by 11 points while job prospects expanded by 9 points. Finally, the personal financial situation and purchasing power for households in Cameroon strengthened by 3 and 5 points respectively.
With limited access to vaccines and cases still on the rise, there is a need for retailers to ensure a safe and convenient shopping experience for consumers.
Concerns surrounding Covid-19, especially vaccine accessibility, have led to a weakening of consumer confidence among households. Clearly, the outlook on economic conditions and job prospects have been negatively affected as indicated by this month’s data. Even though consumers have reported spending this month, their expenditure has been negated by the pessimistic perception of the general economic conditions. From this, the expectation is that retailers and operators in the hospitality, leisure, and entertainment industry will face headwinds until households become vaccines are more accessible and governments subsequently ease restrictions. Also, with dwindling job prospects, we anticipate that household expenditure will favor essentials rather than luxuries.
As such, it is imperative for retailers to devise mechanisms that will enable them to weather these headwinds. Some coping mechanisms will be focusing on customer experience as consumers will be looking for safety and convenience while others will be on survival. Businesses can employ cashless payment systems or other e-commerce related services that will be safe and convenient. Retailers, particularly those in the discretionary space, could also use promotions/discounts so as to try and keep themselves afloat despite their businesses possibly already being in a murky situation.
“The disparity in vaccine accessibility and distribution between the developed and developing nations will certainly distort the path to economic recovery across nations. With developed countries expected to inoculate their citizens much earlier than developing countries, their return to growth shall be quicker than that of developing countries.”
By Davies Nyachieng'a, Economic Intelligence Group at KASI.
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