The huge amount of debt particularly micro financing type debt is concerning the retail sector, Gareth Ackerman, co-Chairman of the Consumer Goods Council South Africa told CNBC Africa.
“The market is tight and as a result consumers are struggling as there has been a lot of money taken out of the system,” he added.
Ackerman also warned that consumers were still spending though the retail sector was not seeing the stellar growth and headline sales growth experienced a couple of years ago.
He warned of inflationary pressures impacting South Africa’s retail sector.
“The consumer is under pressure especially due to rising interest rates but the real challenge is the decline in the rand and this might edge up a little bit also due to imported inflationary pressures next year,” said Ackerman.
“With the inflation impending over the next year, this might take additional amount of money coming out of consumers’ pockets.”
One of the leading banks Capitec has rejected about 52 per cent of loans applied for by consumers, a move calling for responsible spending.
Ackerman added that garnishee orders currently being challenged in courts will also redefine how South Africans purchase in the future.
“What is worrying us is the number of people using credit cards to buy food and that will also impact negatively on the economy in the long term,” he said.
He also raised what is happening in the mining sector as a concern: “What is happening in the mining industry and projected layoffs will harm consumer spending in the next six months.”
To resolve these issues Ackerman urged a review of government’s policy to help stimulate growth as the current trends were not ‘acceptable for an emerging economy’.