During the third quarter of calendar 2012 we could only see the effect of the South African labour unrest in our sales in the affected towns. We did however notice a marked slow-down in sales from November, which was only interrupted for the last two weeks of Christmas trade. We assume the economic effect of that unrest started flowing into the broader economy in the fourth quarter.

South African inflation has remained relatively benign, despite large increases in fuel and energy costs, which will likely eventually result in higher levels of inflation. In our product categories, inflation remains low at 3.7%, suggesting that national inflation occurred at higher levels outside that for consumer goods. Our Food and Liquor inflation increased to 6.8% but has since paused and may now possibly decline. The weaker Rand is likely to bring further inflation in General Merchandise and Home Improvement.

As consumer expenditure slowed, we saw increased discounting amongst most retailers and the inevitable fight to hold or gain market share, which is positive for consumers.

Examining both our own recent internal sales trends and other listed retailers’ sales updates, it seems that upper-end consumers are in better shape than middle- and lower-end consumers. The middle-income customers are impacted by inflation and possibly over-extended credit, while lower-income customers are affected by inflation and possibly the labour unrest.