Extended Black Friday Sales Bring Added Financial Risks

Black Friday offers South Africans who are already under financial pressure an opportunity to buy essential goods at lower prices. However, it may also increase the risk of overspending and taking on additional debt, warns Thys van Zyl, CEO of Everest Advisory Services.

Black Friday falls on 27 November this year, but over time it has evolved into a shopping season lasting weeks, and sometimes even months. Once again, it comes at a time when South African households are already facing considerable financial pressure.

According to Van Zyl, the extended sales season presents an interesting contradiction. “For many South Africans, Black Friday is no longer simply an opportunity to buy luxury items at discounted prices. It has become a way to make essential purchases, from household appliances to clothing and other family necessities, more affordable.

“There is nothing wrong with taking advantage of good deals. Financial risks may arise when promotional offers influence purchasing decisions more than actual needs and affordability.”

Van Zyl says the growing interest in Black Friday, with online searches already rising sharply, shows that consumers are starting earlier to look for deals and compare prices in an effort to stretch their money further in a challenging economic climate.

“If a family already knows they need to replace a refrigerator or buy school supplies for the coming year, a genuine discount can make a significant difference. However, there is a fundamental difference between a planned purchase and one made simply because something suddenly appears to be cheaper.”

He says the longer sales period can also make it more difficult for consumers to keep track of how much they are spending overall.

“When Black Friday lasts just one day, it is relatively easy to set a budget for that day. But when promotions are spread over four or six weeks, consumers may repeatedly convince themselves that they are only spending a small amount. By the end of November, those smaller purchases can add up to a substantial sum.”

The extended shopping season also comes against a backdrop of higher borrowing costs. “The South African Reserve Bank has already raised interest rates in May and September, with its next interest rate decision due to be announced on 19 November, just days before Black Friday. The possibility of further interest rate increases remains a consideration, although the outcome of the next decision is uncertain.”

The fuel levy will also be temporarily reduced from 4 November until 5 January. Van Zyl says this intervention is welcome news for households already under pressure, particularly because fuel costs affect not only motorists but also transport and distribution costs.

“The reduction is temporary, however, and does not necessarily mean that consumers will suddenly have significantly more disposable income. It would be a mistake to view this short-term relief as an opportunity to take on new financial commitments, especially with the festive season’s expenses just around the corner.”

According to Van Zyl, consumers who do benefit from lower fuel expenses should consider using those savings to strengthen their budgets or make provision for upcoming financial commitments. “A few rand saved at the fuel pump can quickly be swallowed up by an impulse purchase. Consumers may wish to consider using any savings to make provision for upcoming expenses.”

Van Zyl says households that are already spending more on debt repayments should be particularly careful not to take on additional financial obligations simply to take advantage of promotional offers. “A discount of 20% or 30% may sound appealing, but it means little if the purchase is repaid over several months with interest, administration fees and other credit costs.

“Consumers should not only ask how much they are saving today, but how much the product will ultimately cost them.”