Can Black Friday repel festive Grinch?

Have the Guptas stolen Christmas? Consumer confidence is so low that some may be wondering whether the infamous family has captured the festive season, just as Dr Seuss’s Grinch character did.

We asked Mail & Guardian readers whether they’d be spending or holding back this festive season. At least a fifth responded they would splurge a bit to spoil themselves and their loved ones, but 80% said they would be taking it easy this December.

“With what money? I’m broke,” said one. “No bonus, no spending,” another responded. “No, no, no …” a third said.

Economists concur. Investec’s Kamilla Kaplan said that “depressed consumer confidence has contributed to low consumer willingness and ability to spend”, adding that consumers are heavily indebted and are spending on basics rather than luxuries.

“Retailers have also been more strict and have started to apply more rigorous credit processes,” he said.

The latest TransUnion report shows that consumers are defaulting less on debt obligations but are “still depending on credit and store cards, usually a sign that households are under pressure”, said chief executive Lee Naik.

South Africa’s economy has been battered by scandals centring on President Jacob Zuma’s associates, the Guptas. Corruption at state-owned enterprises has weakened the rand and raised borrowing costs. In turn, the weak economy has gouged a R50‑billion hole in the national budget.

Statistics South Africa figures for September show that real retail sales grew by 5.4% compared with the previous year, when the increase was 3.8%. The growth, though, is primarily driven by sales labelled as “other”, largely second-hand goods.

“Overall retail sales growth remains relatively muted, with the decent numbers that some retailers have recently been reported by Foschini, Mr Price and Shoprite Holdings due to company-specific factors rather than macro factors,” said Damon Buss, an equity analyst at Electus Fund Managers. He says this trend is likely to continue over the festive period.

Consumer Goods Council of South Africa chief executive Gwarega Mangozhe said: “We have seen shopping baskets become smaller and many consumers have become bargain hunters, opting for basics rather than solely luxury purchases.”

There may be a potential bright spot for retailers. They are hoping that the huge discounts they offer on Black Friday, November 24, will kick-start the festive spending spree and see tills ringing. South Africans have enthusiastically embraced the concept that originated in the United States on the day after Thanksgiving.

This was borne out by Julie-Anne Walsh, online retailer Takealot’s chief marketing officer, who said: “Despite the struggling economy and a tough 2017 … Takealot has not seen a slowdown during the year and is expecting sales volumes will increase on [Black] Friday and towards the festive season. It further expects that to make sales between R80‑million and R130‑million compared to last year’s R56‑million.”

Added Absa investment strategist Craig Pheiffer: “The rising popularity of Black Friday domestically is making a noticeable difference in the shape of spending over the year- end, and it’s highly likely that many of those festive gifts are going to be purchased this week rather than just before the festive period begins.”

Black Friday will be almost over before we know the decision by the ratings agencies, expected after the close of business on Friday, but retailers will be hoping to beat last year’s base effect, said Buss.

Thulebona Mhlanga is an Adamela Trust trainee at the Mail & Guardian

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Thulebona Mhlanga
Guest Author

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