Environment

With most South African GDP forecasts for 2013 being revised downwards, it is clear that economic growth is declining and is below the level required to mitigate the high unemployment rate. The middle to lower consumer economy is being further burdened by sharply rising costs of energy and services, over indebtedness, and tightening credit extension by unsecured lenders. These factors provide an unfortunate backdrop to aggressive demands by organised labour, which in the absence of a more reasoned approach will perpetuate the economic challenges. Disposable income levels are fragile.

There is also little on the macro-economic horizon that suggests any improvement, other than the annualisation of the marked slowdown in September last year. Upcoming election periods traditionally detract focus from the core economic issues. The weaker Rand should translate into higher product inflation, although demand weakness should mitigate this to some extent.

Retailers will respond differently to the slowdown, but total retail capacity needs to be reduced, competition for market share will increase, and new avenues for growth need to be found. E-commerce is making prices more transparent. Regulation and steep increases in administered prices are making delivering consumer value more expensive.