Business owners in South Africa hit with new low

The Bureau for Economic Research (BER) reports that sentiment for retailers in South Africa has reached a new low since the 2009 global financial crisis.

From its latest Retail Survey for the first quarter of 2023, the BER showed that confidence dropped from 42% to 34% in the first quarter of 2023, which brings retail confidence 6% points below the long-term average.

This suggests that the retail sector is under pressure and is currently facing weak consumer demand.

As measured by an index, business conditions are also low for retailers, following a similar downward trend from -23 to -41.

“While it is common for the first quarter of a year to have weak sales compared to the festive season, retailers expect lower sales this quarter than in the first quarter of last year,” said the BER.

“In fact, according to Stats SA, retail sales in January were -0.8% lower than at the start of 2022. The BER’s 2023 Q1 survey results indicate a continuation of the contraction in durable- and non-durable goods sales volumes that started in the fourth quarter of 2022.”

“However, semi-durable goods seem to hold firm on the back of a recovery in clothing and footwear sales.”

The group said this indicates that consumers are pinched by high inflation and an elevated interest rate affecting non-durable and durable goods, respectively.

Rubbing salt to the wound, consumer confidence is at levels last seen during the pandemic as well as the second quarter of 2022 when KwaZulu-Natal was hit with severe flooding, and the war in Ukraine just started to have global knock-on effects.

In Q1 2023, consumer confidence decreased to a negative 23 points, after a slight improvement from negative 20 points in Q3 2022 to negative 8 points in Q4.

The BER reported concerns surrounding the high cost of living as well as the electricity crisis as the main drivers for the poor sentiment.

One of the most notable handbrakes on businesses is currently load shedding.

Retailers are trying to mitigate the rolling blackouts by spending hard-earned revenue on backup power solutions.

Some major retailers such as Pick n Pay, Woolworths and Shoprite have racked up bills into the millions for diesel to fuel generators.

The BER did note, however, that on a more positive note, the selling and purchase price indices for retail goods may taper in the future, although they are being elevated currently.

Read: Light at the end of the tunnel for high food prices in South Africa