South Africans shift into survival mode as essential costs reshape spending habits

South African consumers are not reacting to the cost-of-living squeeze in the way you might expect.

Households are shifting into what can best be described as defensive consumption. They are reworking their financial lives around a simple reality: the fastest-rising costs are the ones they cannot avoid.

And that is changing everything.

Under pressure

The Competition Commission’s latest Cost of Living report makes the point that South Africa’s affordability crisis is increasingly driven by administered and essential costs, rather than discretionary spending.

Electricity prices have surged by roughly 85% since 2020, with water up by about 68%, both far outpacing headline inflation of around 30%. Public school fees and healthcare costs are also outpacing inflation, while rentals have been relatively contained.

Each edition of the Cost of Living report includes a “deep dive” into one key cost driver. In this edition, the focus is on electricity tariffs. Electricity is a direct household expense and a major cost for businesses. When tariffs rise, they put pressure on household budgets and can push up prices across the economy, including food and transport.

The report found that pricing approaches that add costs on top of costs, including at the municipal level, can contribute to prices staying high and tariffs rising over time. Recent reforms, including the Electricity Regulation Amendment Act, are important for the long term and for improving supply. However, under the current pricing system, they may not translate into quick relief for households.

“Addressing the cost of living requires greater scrutiny of administered price-setting mechanisms, enhanced transparency and accountability in tariff determinations and targeted protection for vulnerable households,” said the Competition Commission’s Doris Tshepe.

“Without deliberate attention to how essential service prices are formed and transmitted through the economy, cost pressures are likely to remain entrenched, limiting gains in household welfare and slowing broader economic recovery.”

This means the problem is the increase in the cost of non-negotiables rather than excess consumer expenditure.

When the bulk of your budget is tied up in food, transport, utilities and education, there is very little room left to adjust. For lower-income households, essentials already account for roughly two-thirds of spending. That leaves almost no escape hatch.

The behavioural shift

If you then factor in TransUnion’s Q4 2025 South Africa Industry Insights Report, the picture becomes more revealing.

Consumers still report a surprising level of optimism. According to TransUnion, around 72% say they feel positive about their finances over the next year, and 75% said they expect their income to increase.

But their actions paint a different story:

• • 51% have cut discretionary spending;
  • 34% have cancelled subscriptions or memberships;
  • 35% are paying down debt faster;
  • 27% are boosting emergency savings; and
  • 36% expect to miss at least one bill or loan repayment.

Consumers are not simply spending less. They are actively restructuring their financial behaviour, trying to balance immediate affordability with long-term survival.

It is a kind of financial multitasking: cut now, save where possible, avoid new debt, and still try to prepare for the future.

The TransUnion study also showed that 57% of South African respondents hold a BNPL (buy-now-pay-later) product, and 36% have used a BNPL product multiple times in the last 12 months to pay for goods and services.

“Consumers appear to be choosing these flexible payment options for smaller credit purchases, drawn to their fixed or interest-free instalment plans,” said Ayesha Hatea, director of research and consulting at TransUnion South Africa. “However, this trend has not yet significantly affected clothing accounts, which benefit from strong consumer loyalty and accessibility.”

Credit is both lifeline and barrier

Credit is increasingly central to how consumers manage their finances. A striking 91% of South Africans said access to credit is important to achieving their financial goals, but only 42% believe they have sufficient access.

According to TransUnion, 44% of consumers considered applying for credit but ultimately did not. Key reasons included high costs (33%), fear of rejection due to credit history (26%) or income (24%), or they found alternative funding (21%).

So, we have a system where consumers need credit more than ever, but are simultaneously wary of using it.

That creates a bottleneck in financial resilience.

Instead of smoothing shocks, credit becomes something to tiptoe around, which reinforces the defensive behaviour: cut spending, delay purchases, avoid commitments.

At the same time, the Credit Association of South Africa (Casa) has signalled deep concern about the growing rise in illegal lending, warning that increasing financial pressure on consumers and tightening access to formal credit are driving more South Africans into the unregulated credit market.

Casa CEO Leonie van Pletzen cautions that well-intentioned regulatory constraints, including outdated pricing structures and increasing compliance costs, may unintentionally contribute to financial exclusion.

“Exclusion does not equal protection,” she explains. “If regulated credit becomes unsustainable or inaccessible, illegal lending becomes inevitable.

“Consumers do not stop needing credit when they are declined; they simply look elsewhere. What we are seeing now is a growing migration from the regulated credit market into illegal and informal lending.”

The problem is that illegal lenders, often operating outside of any regulatory framework, typically do not conduct affordability assessments; charge excessive and unregulated interest rates, and employ harmful or coercive collection practices.

The rise of defensive consumption

Put these reports together, and a new consumer pattern emerges.

This is no longer just a cost-of-living crisis. It is a behavioural shift.

South Africans are entering an era of defensive consumption:

• • Spending is being prioritised around essentials;
  • Discretionary categories are the first to go;
  • Debt is being managed more cautiously;
  • Savings, where possible, are becoming more intentional; and
  • Big financial decisions are being delayed.

Even optimism is expressed differently. It is not a signal of comfort, but of adaptation.

Consumers are not saying, “Things are good.” They are saying, “We will make a plan.”

Why this matters

This shift has broader implications for the economy.

When consumers retreat into defensive mode:

• • Retail and discretionary sectors feel the squeeze first;
  • Demand becomes more uneven and unpredictable; and
  • Economic recovery becomes harder to sustain.

But the deeper issue lies with the structure of costs.

As the Competition Commission points out, essential goods and services in regulated or weakly competitive sectors tend to rise faster than inflation and then remain elevated.

That creates a kind of one-way ratchet effect on household budgets.

Even when inflation slows, relief does not follow — which is exactly what we are seeing now. DM