Dire times mean we must tighten our belts — the ones we bought on credit
Thirty-one years later, money is still too tight to mention
ON Wednesday this week, Stats SA released retail sales data for June — yearon-year growth of 1.7%, compared to 4.5% the previous month. The seasonally adjusted month-onmonth number showed a contraction of 2% compared to May.
Economists had apparently expected a slower June, but not that slow. A median consensus forecast by seven economists by BDlive put it at 3.6%.
A detailed reading of the retail data makes for some interesting analysis.
The highest annual growth rates at constant 2012 prices were recorded for retailers in pharmaceuticals and medical goods, cosmetics and toiletries (9.2%); and food, beverages and tobacco in specialised stores (7.5%).
Perhaps the pharmaceutical purchases have something to do with the cold winter; and maybe the cosmetics, food, beverages and tobacco increases reflect attempts to deal with the depression caused by a stagnant economy.
However, the most important insight was that spending on durable goods — household furniture, appliances and equipment — declined by 6.2% year on year in the April-June period this year.
This clearly points to a consumer who cannot afford the “luxuries” because the “basics” are just so expensive.
This is a direct result of the effects of rising unemployment and for those lucky enough to have jobs, a consequence of very slow real wage growth.
This is best evidenced by this week’s news that the three-week petrol strike by the Chemical Energy Paper Printing Wood and Allied Workers Union had ended with an agreed 7% wage increase for 2016.
Consider that the June inflation number was 6.3% and you will appreciate the significance of the settlement between employers and the union. Perhaps even union leaders, who often carry tons of leverage and EMPTY POCKETS: Retail sales lagged in June, and many of those consumers who did buy clothes did so on tick make unrealistic demands, are starting to live in the real world.
Add the fact that food inflation is in double digits, and it is clear that consumers are, should and probably will continue to be, very cautious in their spending.
So when one reads the Truworths results and discovers that the clothing retailer increased sales by 11.3% year on year to R12.8-billion, of which 70% were credit sales, it becomes cause for concern.
I have a vivid memory of a standing appointment with my mother every month-end Friday. After school I would make my way to the Durban city centre. The preferred meeting spot was The Hub on West Street.
The reason for the meeting was to accompany her in paying her clothing accounts. The reason for the meeting spot was that she had an account at The Hub and Miladys, right next door, and Foschini a short walk away.
This was long before internet banking so we had to walk around town, joining long queues of other teachers and government employees servicing their clothing account debt. This happened every month without fail, and I looked forward to it because it also included a lunch treat, often at KFC, or at an Indianowned bunny chow tearoom.
I was reminded of this when I realised that seven out of 10 of our people borrow money to clothe themselves. This is the reality for many South Africans — toiling for low wages with high inflation in a zerogrowth economy and borrowing at high interest rates to finance what ought to be life’s basic needs.
The Simply Red single that launched the band’s career in May 1985 was a worldwide hit, Money’s Too Tight to Mention.
Mick Hucknall’s youthful voice belting out the opening verse comes to mind: “I been laid off from work/ My rent is due/ My kids all need brand-new shoes/ So I went to the bank to see what they could do/ They said son, looks like bad luck got a hold on you/ Money’s too tight to mention.” We have so much work to do. Khumalo is chief investment officer of MSG Afrika Group and presents “Power Business” on Power 98.7 at 5pm, Monday to Thursday