Things are (very) bad out there
THERE IS NO CONFIDENCE AMONG CONSUMERS OR BUSINESSES There’s a glut of retail space.
It’s been clear for some time that all is not well with SA consumers or the economy. Government spending has all but frozen and consumer spending won’t paper over the cracks. Practically every recent data point’s been negative, but these are generally backward looking. Those that aren’t – like confidence indicators – are more dire.
Let’s be blunt: right now there is no confidence among consumers or, more worryingly, businesses. Own goals, like the temporarily halted Mining Charter, have ensured foreigners eager to invest in our mining sector look elsewhere.
Someone in the know at one of SA’s largest investment banks told me a handful of deals already lined up in the sector evaporated in under a week after the charter’s unveiling.
Disposable incomes have contracted, in some cases, disappeared.
The emptier flights caught me by surprise earlier this year. After a few months, the trend on different airlines on different routes at different times was obvious. Corporate travel is faltering. Holidays are being downscaled or cancelled.
There’s a glut of retail space. Walk through some of the newer Johannesburg shopping malls and you’ll see what I mean. Practically every second (independent) line shop has failed, leaving only the major chains who have been on a blurred, perpetual sale since before Christmas.
Even national operators are trimming store numbers. I’d argue Edcon’s cuts and Stuttafords’ failure were structural in nature, not cyclical. We’re about to see cyclical closures and space reductions. Jobs will be cut.
Some restaurants and fast food outlets in malls are teetering, with noticeably more closures of late. Some of these were profitable and on the market, but there aren’t too many buyers around. Most, however, weren’t. Those trading are noticeably quieter … in Gauteng, the Cape and around Durban too. Jobs have been lost. Franchise owners are under as much – possibly more – pressure. Traditional gold mine franchises litter business broker websites. Five/10/15 years ago, you wouldn’t have been able to buy some of these outlets at any price! Other, independent, operations that have been on the market for some time are now listed at half the price they were six months ago. Perhaps the scariest recent news was the JSE Ltd announcement that up to 60 people would be retrenched over the rest of the year. These are highly skilled information workers. This surely means similar job cuts in other professional services sectors are a given and, while these skills are – relatively – scarce, there can’t be too many corporates hiring at any great pace currently. Worse still, this part of our economy has helped us eke out the little growth we’ve managed in recent years.
Add to this a residential property market that’s gone backwards – after inflation – since the peak in 2007.
On their own, none of these things are healthy. Add them together and the result’s terrifying.
Hilton Tarrant works at immedia.
Disposable incomes have in some cases disappeared.