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From buying local to buying online, changing our behaviour has the ability to change

One of the long-standing criticisms of the South African government specifically is that it has failed to identify strategic sectors and industries to support and capacitate. We often tried to be all things to all people and failed to identify sectors that we can excel in or those that are important in the local economy in terms of job creation or export revenue potential.

Over the last few years, there has been a focus on establishing sectoral Master Plans with a combination of tax and financial incentives to attract foreign investors with some notable successes like the automotive sector. We have recognized the need to move from an Import economy back to self-producing and export driven economy in order to create jobs and thrive.

As an example, the increased focus on the textile sector and related Master Plan, has the potential to bring manufacturing back to South Africa, and furthermore also adds support to small scale farmers and fabric producers, artists and creatives.  However, we keep coming back to the question: “How do we incentivise South African’s to support their local talent and buy local produce?”

A number of the retailers run initiatives – often in conjunction with the likes of Discovery – where you get rebates on buying healthy food and gear. Could the same principle be applied to buying locally manufactured products and how would the consumer respond to this?

From Absa’s consumer merchant spending analytics, it is clear that the clothing industry took extra strain during Covid, putting even more pressure on the already struggling textile industry. The below graph illustrate spending growth across various categories:

Cash comes with Risk and Risk comes with additional costs. Ideally we would like to significantly reduce cash in our payment systems, but in an economy like South Africa, cash is still a major part of the day-to-day payment system.  COVID-19 has raised further concerns around the risks associated of handling cash and even the passing of card terminals between consumers and merchants.

James Scott, Head Digital and Platform services at Absa Corporate and Investment Banking agrees that cash is king and very relevant in Africa when he states: “It is no longer about a gap in the technology to displace cash, it is all about shifting consumer and merchant behaviour towards enabling digital payments. Regulatory shifts in South Africa will see the introduction of a low cost payment rail, this has the potential to really open up innovation, financially include more of the population and reduce the friction and risk inherit in cash. An exciting space to watch.”

So the question then is how do we influence a change in consumer behavior to demand payment from sources by means other than cash?  Again, we have to consider incentivising consumers with discounts for paying digitally or other.  There is no doubt a saving to be done away with between security and cash deposit fees, which potentially could be passed on to the consumers.

In theory at least, the idea is great and has the potential of running stores more efficiently by reducing security risks and probably lower other cash related costs such as insurance.

Before I end, I would be remiss not to discuss the stick versus carrot approach and what it brings out in consumers. For those who are old enough to remember, you used to have to pay a license to have a bicycle and own a dog as revenue categories for government. These were eventually canned and interestingly, both the leisure and pet care sectors have exploded as major retail categories.

Over the last decade the SABC has bemoaned the lack of compliance around TV licenses as consumers have shifted away from cable to online streaming options. The response from government and the regulators is to attempt to use the stick of applying “TV” licenses for the viewing of the likes of Netflix.  In my humble opinion, sticks rarely work in driving a new trends being adopted or behavior we would like to see – quite the opposite.

I don’t have all the answers but I think that the events of 2020 have shown that if we can find ways to positively influence and drive change in consumer behaviors, we potentially have the ability to re-imagine our local economy.

Contact:  Isana.Cordier@absa.africa