SA’s third quarter retail confidence hits 7-year high

Retail confidence in South Africa has seen a noteworthy uptick in the third quarter, defying expectations amid challenges such as the violent protests in July and stricter lockdown measures due to the third wave of COVID-19 infections. Tshepo Moloi, an economist at the Bureau for Economic Research (BER), shed light on the factors driving this surge in confidence during an interview with CNBC Africa. The retail sector, particularly non-durable goods and home improvement categories, emerged as the key drivers of this growth. Moloi highlighted the resilience of non-durable goods retailers, such as food and beverage sellers, and hardware stores in weathering disruptions and maintaining consumer spending levels. The boost in retail confidence can be attributed to various factors, including the reinstatement of the social relief grant and shifting consumer habits amidst the pandemic. Moloi emphasized the significance of low-income earners in driving sales volumes for retailers selling non-durable goods, as they primarily spend on essential items like food. Additionally, government restrictions on services sector activities prompted consumers to redirect their spending towards groceries, benefitting non-durable goods retailers. Furthermore, the sustained demand for home improvement products, fueled by remote work trends and post-looting renovations, bolstered the performance of hardware retailers. Moloi noted that high-income earners, supported by low interest rates and increased savings from the previous year, also contributed to the positive outlook for hardware retailers. Despite initial concerns about the impact of the looting incidents on consumer confidence, the subsequent surge in demand for building materials has paradoxically improved sentiment in the sector. However, not all segments of the retail industry have experienced the same level of growth. Moloi pointed out that semi-durable goods retailers, encompassing clothing and footwear sellers, face a challenging outlook despite past optimism during winter sales periods. On the other hand, non-durable goods and durable goods retailers are poised for continued support from government initiatives like the social relief grants and expected public sector wage increases. Looking ahead, ongoing developments such as better-than-anticipated dividend payouts and potential government investments are expected to further bolster the retail sector. Despite the mixed performance across different categories, the overall increase in retail confidence reflects a resilience and adaptability within South Africa's consumer economy in the face of adversities. The sector's ability to navigate challenges and capitalize on emerging opportunities bodes well for its future growth and stability.