Section 3
Contents
Introduction Average annual household expenditure Expenditure by households in each expenditure quintile Summary
The main findings regarding expenditure
This section focuses on the goods and services which households purchase, and examines expenditure patterns among poorer households, compared to more-affluent ones.
In general, when describing household purchases, we shall make use of annual household expenditure, rather than annual household income quintiles.
It would have been possible to have used either measure because, when comparing annual household income versus annual household expenditure, we found a high correlation (r=0,98; p<0,001) between the two measures. However, it made more sense to talk about each type of product or service purchased as a percentage of total expenditure for a household, rather than as a percentage of the total income of that household. For this reason, it was decided to use expenditure quintiles rather than income quintiles to describe purchasing patterns of households. This approach also conforms with international standards.
Average annual household expenditure
A large proportion of expenditure in the average South African household goes towards buying essential products and services, such as food and housing.
Figure 8: Average annual household expenditure
Expenditure by households in each expenditure quintile
The average expenditure pattern gives an overall indication of how average South African households spend their money. But this is an aggregate concept, and does not give a clear indication of differences in expenditure patterns among poorer households, compared to more affluent ones.
The purchasing power of each expenditure quintile
Total expenditure of households in South Africa on goods and services differs greatly, depending on the quintile in which a household falls.
Figure 9: Percentage of annual household expenditure spent by each expenditure quintile
Expenditure is therefore very unevenly distributed in the country, with the vast majority of households able to buy very little.
How households in each expenditure quintile spend their money
We now examine the proportion of expenditure in each quintile that goes towards purchasing selected goods and services, and how this proportion differs according to quintile.
The poorest households in the country are therefore spending more than half the money they have at their disposal on food, while the more affluent households can afford to purchase a much wider variety of goods and services, since a smaller proportion of available money goes towards buying food.
Figure 10: Annual household expenditure on selected items by expenditure quintiles
Proportion in each expenditure quintile spent on fuel and power, furniture and household
operation (including cleaning materials, furniture polish, etc.)
Poorer households spend a relatively large proportion of their available money on fuel and power for heating and lighting paraffin, candles or electricity, for example compared to more affluent households.
Figure 11: Annual household expenditure on fuel and power, furniture and goods for household operation by expenditure category
Percentage in each expenditure quintile spent on footwear and clothing, personal care and recreation
Figure 12 (in which percentages in the graph are shown to one decimal place because of the small proportions involved) shows that more affluent households tend to spend proportionately more on recreational activities such as reading, sport, holidays and restaurants and proportionately less on footwear and clothing than other households.
Figure 12: Annual household expenditure on clothing and footwear, personal care and recreation by expenditure category
Expenditure on income tax
As would be expected, households in the higher expenditure quintiles pay more income tax than those in the lower quintiles. But the extent of these differences in income tax payments across quintiles is striking.
Figure 13: Percentage of annual household expenditure on income tax in each expenditure category
Savings and investments
In general, a very small proportion of total expenditure in the average South African household goes on savings (1,3%), investments (0,8%), pension funds (1,6%) or insurance (3,3%) (decimal places are shown because of these small proportions). But, in spite of such small proportions, there are large variations when comparing expenditure quintiles.
Figure 14: Annual household savings and investments in each expenditure category
It thus appears that, once the vast majority of households has spent its available money on basic requirements such as food, housing, clothing and fuel, there is very little left for savings, including insurance, pension funds and investments. Only the more affluent seem able to save and, even in the top quintile, this represents a small proportion, on average, of total expenditure.
A closer examination of food expenditure
In an earlier section, we observed that more than half of all expenditure, on average, goes towards buying food in the poorest households. In this section, we examine the amount of money in rands, on average, that is spent by households in each quintile on food, and the type of food that is purchased by households in each quintile.
Food expenditure in rands by quintile
The average South African household spends R6 531 on food per annum. But this amount varies by expenditure quintile. Although, the poorest households spend more than half of their available money on food, on average, the actual amount they spend is rather small.
Figure 15: Average amount in rands spent on food among households in each expenditure category
Type of food products that the average household purchases
In this section, we look at household expenditure on food as being 100%. We then calculate the percentage of food expenditure, on average, on each food group.
Figure 16 indicates that, on average, the main items of food expenditure are meat, including chicken, (27%), grain products (23%), vegetables (10%) , and milk and dairy products (10%).
Figure 16: Proportion of total food expenditure spent, on average, on each type of food
Proportion of total food expenditure spent on selected food items in each quintile
We now examine the proportion of total food expenditure, on average, that is spent on selected food items, by households in different expenditure quintiles.
Figure 17: Proportion of expenditure spent on selected food items by expenditure category
Dietary patterns are therefore very different in rich and poor households. This, in turn, may be reflected in the health and nutritional status, patterns of disease and life-expectancy of household members. For example, malnutrition is more likely to occur among those households which cannot purchase sufficient food to meet the basic requirements, in calories, of each household member. In some countries, an absolute index of poverty has been determined, whereby the cost of a basket of food containing a minimum amount of calories required for a healthy life-style by each member of a given household is calculated. Poverty, purchasing power, diet, health and life circumstances are all closely interlinked.
The amount of money South African households spend differs widely by quintile. The poorest 20% of households spend only 3%, while the most affluent 20% of households spend as much as 61% of total national household expenditure. Poor households tend to spend proportionately much more of their available money on food than more affluent ones, even though the actual amount spent on food is comparatively little. In addition, in poor households, proportionately more of the total food expenditure goes towards purchasing
cereals and grain products, while in more affluent households proportionately more money is spent on meat and fish. In general, relatively little money finds its way into savings, even among more affluent households.
Thus, the substantial income inequalities described in the previous chapter translate into different expenditure patterns, with poorer households buying a smaller variety of essential goods and services, and more affluent households spending a smaller proportion on essential purchases, and buying a wider range of non-essential products and services.