Despite the pretty lights and bells, there’ll be little Christmas cheer and ho ho ho-ing in the retail sector this year, writes Ferial Haffajee
At Edgars, Christmas comes in July. The manager of the city store in Johannesburg begins planning for the summer high season in mid-winter.
“The atmosphere, the look, the gift- wrapping corners. All the planning began seven months ago,” says Perks Nxumalo as he surveys his fairyland of lights, red-ribboned Christmas trees and beautiful things to buy, buy, buy.
His struggling group needs a consumer boom to get it out of the red and managers like him around the country are pulling out all the stops this festive season.
Nxumalo’s shop will stay open until eight every night (very unusual in central Johannesburg) and he is working South Africa’s newly price-conscious consumers by introducing discounts and bargain rails.
Will Christmas meet his expectations? “It’s a million-dollar question. I’ve got mixed feelings,” says the less than perky manager.
Half of Edgars’s projected revenues for the year are earned between November and December.
For other retailers, the twin highs of Christmas and the summer holidays are traditionally the zenith of trade in South Africa as busy tills ring up more than 20% of the year’s takings on average.
But this year, the twin lows of recession and the highest-ever interest rates threaten a Black Christmas.
In a recent survey, the South African Chamber of Business predicted an 8,6% annual growth in Christmas sales to R33,9-billion, but almost one in three businesses surveyed said they were expecting lower figures than last year. They blamed their Christmas woes on high interest rates, economic problems, crime and competition.
At Poper wholesalers in downtown Johannesburg, the atmosphere is all kwaito music, cut-price fashion and counterfeit goods. It looks busy enough at lunchtime, but the manager Tibi Gavrila complains that “Business is down, down, down.”
Gavrila says unemployment is driving business down. “Ten people a day come in here looking for jobs. But business is not going up. It’s because of the Chinese. They’re coming here and opening up businesses and they go for small profits like 5% and 10%.”
Says James Rheeder of Econometrix: “Retailers are cutting profit margins,” adding that people will hang on to their bonuses – “if they’re lucky enough to get bonuses” – and instead of splurging on gifts or buying stocks, they will shovel the extra income into their mortgage bonds.
The markets in turn are heading for a “boring Christmas … things are so, so quiet”, says Rheeder, adding that the rand is strong only because there’s no interest in the foreign exchange market.
Most investors are waiting for the New Year, but even then the grim reaper may not be gone.
UBS-Switzerland Bank has predicted that a dollar will cost seven rands next year, investors get nervous at election time and there are looming emerging market problems in Taiwan and Russia.
As South Africa has learnt this year, global investors make little distinction when they get nervous of emerging economies, of which this country is one.
Fiona Treggena, an economist at the National Labour Economic and Development Institute (Naledi) says that the skewed impact of the recession is more evident at Christmas.
“The wealthy can still enjoy overseas holidays … they can protect their incomes by investing offshore.” But for the person in the street, the recession means less disposable income and holds the spectre of joblessness. In this atmosphere, workers spend less and the economy can enter a vicious circle. The Christmas retail season depends on the spending power of the mass of consumers.
At Edgars, Nxumalo has stocked up on an entire floor of children’s clothes because that is where the biggest demand will be. Butchers and clothing retailers expect the best sales this Christmas, but those who sell audio- video equipment, furniture, jewellery and beauty products predict flat sales this year.
This week’s announcement of a steep 2,3% drop in gross domestic product has fuelled recession talk. The drop is partly the result of high interest rates and some economists are optimistic about a one percentage point drop in interest rates before the end of the year.
It could have a domino economic effect on spending, and retailers like Shabier Mohamed at Abie’s wholesalers are “hoping for a last-minute boom”. His business has picked up since Monday and he adds, “For every business, a good Christmas is a matter of survival.”