Social unrest worries shake confidence in South Africa
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Retailer confidence in South Africa tanked in the first quarter of 2024 due to poor profits and perceived risks around the upcoming national election – a major one being the threat of social unrest during the period.
After jumping from 32 to 47 during the 2023 festive season, the Bureau for Economic Research (BER)’s retailer confidence index slumped back to 34 in the first quarter of 2024.
This means that only a third of the retailers surveyed by the BER are satisfied with prevailing business conditions – similar to the business confidence reading at the start of 2023 amid record load shedding.
The BER noted that the decline in retailer confidence could probably be ascribed to the fact that profitability remained poor in the sector, but the perceived risks around the upcoming national election may also be weighing on sentiment.
These risks – including the warning of social unrest in South Africa – were also highlighted in German financial service provider Allianz’s first Country Risk Atlas for 2024.
The Atlas is based on a proprietary risk ratings model revised every quarter with the latest economic developments and the group’s data on global insolvencies and the business environment.
Among several weaknesses that could impact South Africa’s risk rating, the report warned that there would likely be a rise in social unrest and violent events during the electoral period.
It said that the increase in violent uprisings and the growing disputes between political elites would further weigh on state legitimacy, the ANC’s capability to defuse dissent and the predictability and efficacy of government action.
This warning was taken more seriously when members of the uMkhonto weSizwe party said there would be a “civil war” if its candidates weren’t allowed to stand.
Visvin Reddy, a party official, warned in Durban that no one would be allowed to vote if the party didn’t appear on the ballot papers.
In 2021, former president Jacob Zuma was arrested for refusing to testify before a judicial panel that was investigating corruption during his rule, triggering a week of rioting and looting that claimed 354 lives and cost the country an estimated R50 billion.
Retailers were especially hard-hit by the riots, with many businesses forced to close operations for months – if not permanently – as looters tore through their stores.
With the former president being the face of the new party and once again featuring prominently in the discourse around it and the elections, concerns are being raised that a similar event could erupt should the party follow through with its threats.
Other retail performance indicators
Non-durable goods retailers registered the largest uptick in volume growth, which the BER said was no doubt supported by a further deceleration in food inflation and slower growth in restaurant and takeaway spending.
Textiles, clothing and footwear retailers reported that their sales volumes re-accelerated during the first quarter after suffering from some post-Rugby World Cup blues and underwhelming Black Friday sales in the fourth quarter.
“The fact that semi-durable goods retailers are still reporting robust volume growth – in the face of challenging economic conditions, and on top of two years of impressive growth – is a positive surprise,” it said.
Furniture and household appliance sales increased slightly on the durable goods front, albeit this sector remains under pressure from anaemic real disposable income and credit growth.
“Alarmingly, after a dismal festive season, the BER’s survey results suggest that hardware sales volumes plunged even further during the first quarter of 2024.
“Weak hardware sales correspond with the deterioration in residential construction activity in the building sector in recent months and ties back to high-interest rates, cost-of-living pressures and low consumer confidence levels,” added the BER.
The BER said consumers are clearly still shying away from big-ticket purchases, but retail sales of non-durables appear to have turned the corner.
At the same time, clothing and footwear volume growth remains surprisingly resilient.
Looking ahead, lower levels of load-shedding, moderating food inflation and interest rate cuts (expected to commence in July) should spark a more noticeable recovery in retail trade from the third quarter of 2024 onwards.
But first, the political and economic risks around the 29 May national election loom large.
Source:https://businesstech.co.za/news/business/761339/social-unrest-worries-shake-confidence-in-south-africa/
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