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Follow our blogs to gain insights into contemporary market research and business intelligence trends relevant to consumers and business. The blogs serves as a platform for knowledge generation and sharing for those interested in household and personal wealth, demography and population, economic and business, consumer behavior, neuroscience and youth research. The blog supports life-long learning and collective generation of solutions related to contemporary community-related challenges impacting on South African individuals, society and regulatory environments.

CONSUMER FINANCIAL VULNERABILITY INDEX: Q4 2020

Improvement in consumer financial vulnerability levels, but consumers remain financially very exposed

Some of the financial strain that several consumers had to endure during the initial lockdown periods early in 2020 dissipated during the fourth quarter of 2020 (Q4 2020). This is evident from the Momentum-Unisa Consumer Financial Vulnerability Index (CFVI), which recovered to 47.5 points in Q4 2020 from 43.5 points in Q3 2020. This means that the index improved to a similar level before lockdown. The improvement follows two very difficult quarters during which the index deteriorated to the highest level of financial vulnerability since inception in 2009.

During Q4 2020 the four sub-indices of the CFVI all showed an improvement, but remained rooted in the very exposed category on the index scale:

  • Income vulnerability decreased as the sub-index improved from 44.1 points in Q3 2020 to 47.7 points in Q4 2020. This suggests that more consumers were able to earn or increase their income. The strong improvement since Q2 2020 suggests a recovery in employment.
  • Expenditure vulnerability decreased as the sub-index increased from 45.9 points in Q3 2020 to 49.2 points in Q4 2020. This sub-component is close to the mildly exposed category and was, among others, supported by the recovery in employment.
  • Savings vulnerability also decreased as the sub-index score moved from 43.1 points in Q3 2020 to 47.3 points in Q4 2020. This can be attributed to both the improvement in income and less spending (due to some regulations restricting the full opening of the economy).
  • Low interest rates contributed to consumers being less vulnerable in terms of debt servicing as the index score increased to 45.8 points in Q4 2020 from 40.8 points in Q3 2020.

A review of the average annual scores of the CFVI and its sub-components shows that consumers suffered greatly during 2020. The average annual score indicates that consumer financial vulnerability was at its lowest level since inception of the index, dropping to a low of 43.4 points. The main contributor to the low score was a significant increase in debt servicing vulnerability. This sub-index declined from 48.7 points in 2019 to 40.9 points in 2020, on the brink of the very vulnerable category of the index scale. This means that the inability to service debt made the largest contribution to consumers’ financial vulnerability.

The key informants were asked to provide reasons for the financial difficulty that consumers experienced during Q4 2020. COVID-19 and the impact of lockdown on personal finances and job retention remain core reasons as retrenchments, salary cuts and price increases affected consumers’ ability to work and earn an income.

Key informants also provided insights into worrisome consumer behaviour during Q4 2020, namely that some consumers did not live within their means and did not demonstrate self-control when spending. Another troublesome observation was that consumers are in several ways limited in expanding their incomes. This could be due to the economy’s inability to create sufficient jobs coupled with limited opportunities to start their own businesses due to a struggling economy.

Key informants reported little hope for a quick recovery in consumer finances due to, among other things, COVID-19 and lockdown. This is evident from the following views:

  • 6% of key informants are of the opinion that it will take 18 months or longer for consumer finances to recover from the impact of COVID-19 and lockdown;
  • 8% of key informants noted a decline in consumers’ perceived levels of control over their financial situations (i.e. personal empowerment) during the past few months; and
  • 3% of key informants noted that consumers attach a high value to their finances, but they also attach a high value to staying safe against COVID-19, while 27.5% of key informants believed consumers are more focused on their finances than on staying safe against the virus. The remaining 36.3% believed that consumers were more worried about staying safe against COVID-19 than their finances.

Overall, the Q4 2020 CFVI results show that despite an improvement in the index, consumer finances will remain vulnerable for some time to come as a sustainable economic recovery is expected to take years rather than quarters. Therefore, key informants are of the opinion that consumers need to empower themselves with appropriate skills, financial and otherwise, and adjust their behaviour if they hope to restore their financial situation and stimulate economic recovery.

As part of Momentum’s Science of Success campaign, the Index is one of the reports produced in the partnership between Momentum and Unisa that aims to provide South Africans with information and strategies on how they can accelerate their journey to financial success. The CFVI is compiled from the views of key informants (researchers, bankers, insurers, retailers, government, economists, analysts, etc.) who deal with consumers daily.

Click here > for a copy of the final report.

 

 

 

 

 

 

 

MOMENTUM-UNISA HOUSEHOLD FINANCIAL WELLNESS INSIGHTS 2020: See the upside of a world turned upside down

Unisa’s partnership with Momentum to obtain a better understanding and insights of South African household finances has been running for nine years. This year’s Momentum/Unisa Household Financial Wellness Insights report served as the backbone of the 2020 Momentum Science of Success Festival, held in Johannesburg as well as broadcasted via a Facebook Live event on Wednesday 25 November. It seeks to provide South Africans with an in-depth look at the state of their finances in their homes. The report provides information specially designed to inform and empower South African households to achieve financial success and recover from the possible impacts of life before, during Covid-19 and beyond.

Even before the onset of the Covid-19 pandemic in the country, and the implementation of a lockdown period in March, the South African economy was not a positive environment within which companies and households could thrive. Economic growth averaged 0.8% over the past five years instead of the needed 5%, while unemployment continued to increase, instead of declining. With decelerated economic growth and an increase in job losses, more and more South Africans have now become excluded from participating in economic activity.

Although all households have been affected to some extent by the Covid-19 pandemic and resultant lockdown, the research highlights that South Africa’s middle-class households were hit the hardest as both their income and net wealth were severely impacted by factors beyond their control.

The good news is, despite the lockdown and other challenges experienced due to Covid-19, some already recovered – for several reasons – but mostly because they followed a specific recipe necessary to taste financial success. The report shows that those who experienced financial pressure due to a salary reduction dealt with the challenge by reorganising their spending patterns. This involved changing their store of preference, updating their budgets and cutting back on luxuries (financial management), and managing their debts. The adjustments that were placed at the bottom of the list included reviewing medical aid, business closure or changing living arrangements.

To be better prepared for the journey towards financial success, it is important for households to gain a good understanding of the factors that are within their control and those over which they don’t have any control. It is vital for households to know that there are ways to self-guard them against some of these factors. In order to limit the impact of factors beyond our control households should minimise financial dependence on others (including government), spending on luxuries, increase savings (for emergencies and long-term, such as retirement, insure against the uncertain and access credible financial advice.

Regardless of income level or qualifications obtained, the one key ingredient to financial success is for households to take control of their own financial journey by starting with the end in mind – have a financial plan which includes short- and long-term goals and implement the plan, regardless of events that are outside of their control. Planning and then implementing such a plan is key. A clear implementation plan must provide all the activities that must be undertaken and the specific times it must be undertaken to achieve the long-term goals. A solid implementation plan will also help to increase the financial literacy levels of households and guide their emotions during volatile times.

The report reveals the following seven habits of households that can weather a financial storm:

  1.  They map out their journey with measurable goals and a plan to achieve them.
  2.  They maintain their momentum by knowing where every cent goes.
  3.  They cover and protect themselves from rainy days.
  4.  They make the bold but intelligent choice to invest.
  5.  They don’t let speed bumps deter them from achieving their aspirations.
  6.  They broaden their perspective by being financially savvy and streetwise.
  7.  They realise there is more than one path to achieving success.

The research is the result of the collaborative effort by the Bureau of Market Research, College of Accounting Sciences and Momentum.

Click here> to download the detailed report.

CONSUMER FINANCIAL VULNERABILITY INDEX: Q3 2020 Consumer finances under less pressure, but the road to recovery will be tough

The government’s decision to allow more economic activity during the third quarter of 2020 (Q3 2020) relieved some of the financial strain that several consumers had to endure during Q2 2020. This is evident from the Momentum-Unisa Consumer Financial Vulnerability Index (CFVI), which improved to 43.5 points in Q3 2020 from its lowest ever level of 35.4 points in Q2 2020. However, consumers’ financial desperation levels were still very high, given that the CFVI was at its second lowest level since its inception in Q2 2009.

During Q3 2020 the government relaxed the lockdown from level 3 to level 2 midway through the quarter and then to level 1 by the end of the quarter. This contributed to an improvement in the four sub-indices of the CFVI:

  • The income vulnerability sub-index improved most – from 34.6 points in Q2 2020 to 44.1 points in Q3 2020 as more consumers were able to earn an income, or increase their income;
  • Expenditure vulnerability decreased as the sub-index increased from 39.0 points in Q2 2020 to 45.9 points in Q3 2020;
  • Likewise, the savings vulnerability sub-index increased from 36.0 points in Q2 2020 to 43.1 points in Q3 2020;
  • Debt servicing vulnerability also declined as the index score increased to 40.8 points in Q3 2020 from 32.1 points in Q2 2020.

As part of Momentum’s Science of Success campaign, the Index is one of the reports produced in the partnership between Momentum and Unisa that aims to provide South Africans with information and strategies on how they can accelerate their journey to financial success.

The CFVI and its sub-indices are compiled from the views of key informants (researchers, banks, insurers, retailers, government, etc.) that deal with consumers daily. They identified several macro and consumer specific reasons that affected consumer finances during Q3 2020.

The macro reasons include Covid-19 and the lockdown; the resulting job and income losses in Q2 2020; opening of the economy in Q3 2020 and regaining some of the lost jobs; the inability of the economy to regain most of the lost jobs in Q2 2020; and general economic circumstances. However, they noted several consumer behavioural reasons (see figure below) that both contributed to the improvement in consumer financial vulnerability levels, but also explained why financial vulnerability levels remained high during Q3 2020.

For instance, behavioural reasons they noted for the improvement in the Q3 2020 CFVI are that (compared to Q2 2020) more consumers: demonstrated self-control when it comes to spending; lived within their means; expanded their income; did financial planning; used credit responsibly; were empowered to deal with their finances; considered the risks when taking on credit; increased their financial literacy; learned to adapt to changing financial conditions; shopped around before purchasing goods and services; and had more access to financial products.

However, the same reasons shed light on why consumers’ financial vulnerability remained high. For instance, although the 19.8% of key informants that agreed that consumers demonstrated more self-control when it comes to spending is almost twice the 10.1% recorded in Q2 2020, this percentage is very low. For consumer financial vulnerability to decline to sustainable levels, this percentage, and those of the other listed reasons, should be higher than 60%.

Although the key informants noted that a further improvement in the CFVI in Q4 2020 is likely, the outlook for a quick recovery in the state of consumer finances is not good:

  • 64.2% of key informants are of the opinion that it will take 18 months or longer for the state of consumer finances to return to their pre-Covid-19 level;
  • Due to this desperate situation, 32.4% of key informants noted that consumers seem to be more worried about their finances than staying safe against the Coronavirus, whereas only 26.7% believed that consumers were more worried about staying safe against the Coronavirus;
  • 66.0% of key informants also noted a decline in consumers’ perceived levels of control over their financial situations (i.e. personal empowerment).

Overall, the Q3 2020 CFVI results means that although the degree of consumer financial vulnerability subsided in Q3 2020, a quick recovery in consumer finances to pre-Covid-19 levels should not be expected.

To download the complete report click here>

Happiness Index 2012-2019

The findings portrayed in this report concludes the eighth annual Happiness Index Report since the 2012 baseline Happiness Index study by the Bureau of Market Research (Pty) Ltd (BMR) (Joubert & Poalses, 2012).  On demand of industry, the BMR commenced with an annual Happiness Index study in 2012 with the intention of generating research intelligence in support of business decision-making.  From 2012 to 2018 this study was commissioned by the BMR Behavioural and Communication Research Division Projects Committee, constituting corporate syndicate members.  Research involving happiness measures, satisfaction with life measures, meaning of life measures and well-being measures remain topical on a local and global level.  The BMR accordingly decided to continue tracking these measures.

HAPPINESS ANTECEDENTS REVIEW:  2012-2019

A synopsis of the happiness antecedents measured from 2012 to 2019 is presented in the table below. As of 2013 additional construct measurements were introduced to expand the insightful offerings of the Happiness Index.  The range of colours represent the year-to-year trends, with dark green being most favourable followed by the lighter greens, then yellow, orange and lastly red being most negative.  It should be noted that the figures displayed represent overall trends, and any interpretation thereof is general in nature, as significant age cohort and, in some instances, gender differences are evident.  Disaggregated analyses and interpretations are presented and discussed throughout the comprehensive research report.

Upon close examination, it is evident that the number of red and orange identifiers have increased since 2012, depicting increased strain.  It should be noted that for some antecedents a higher score implies less strain and more happiness, whereas other antecedents require a lower score to indicate the same.  The overall state of happiness has consequently changed over the last eight years with the number of respondents expressing positive sentiments declining on almost all of the happiness antecedents.  Ambivalent states have improved considerably during 2019.  However, given the declined positive general mood and increased negative general mood, the ambivalent general mood rating in fact implies that respondents  are reaching a stage where they know exactly how they feel with greater confidence, namely a negatively inclined emotive state compared to previous years, without a sense of ambivalence about it.  The most positive happiness antecedents in 2019 is that of Locus of Control (LoC) and present standing in society, and it is noteworthy that internal LoC tends to increase as other happiness antecedents decrease.  A detailed explication of each respective happiness antecedent is presented in the comprehensive research report.

STATE OF CONSUMER FINANCES DROP TO THEIR MOST VULNERABLE LEVEL EVER

THE INITIAL CONSEQUENCES OF COVID-19 AND SUBSEQUENT LOCKDOWN

The Momentum/Unisa Consumer Financial Vulnerability Index (CFVI) has declined to its lowest level ever, of 35.4 points, during the second quarter of 2020 (Q2 2020). The decline of 11.8 points from 47.2 in Q1 2020 is also the largest ever quarterly decrease measured since the inception of the index in Q2 2009. This reading, which indicates that consumer finances are in a “Very Vulnerable state”, is a direct consequence of Covid-19 and the subsequent lockdown instituted by the South African government.

This severe state of financial vulnerability appeared to have behavioural effects – the results revealed that consumers appear to be more focused on their finances and less on staying safe against the Covid-19 virus. Literature has similarly revealed that financial vulnerability can be associated with social consequences, such as an increase in criminal activity and substance abuse. All four sub-components of the CFVI declined to the Very Vulnerable state, which means that consumers, in general, are so vulnerable that they are unable to cope.

The recovery in consumer finances, following the effects of the pandemic and lockdown, will most likely be slow, an opinion confirmed by 53.6% of key informants that recovery is more likely to take longer than two years.

The main interventions or changes that key informants suggest for consumers to recover financially from this pandemic include:

  • An improvement in the local economy to stimulate job creation.
  • Entrepreneurship and complimentary income streams.
  • Financial discipline and financial literacy.
  • Restructure expenditures to focus on needs.
  • Government support (for businesses and individuals).
  • Repay outstanding debts.
  • Increase savings, despite difficulties in doing so.

To download the complete report click here >

A tribute to the first RASU client

The Research Advisory and Support Unit (RASU) team started to actively consult with postgraduate students during May 2020 and we are proud to tribute this post to our first client, Ms Esther Niemand. After completing her Bachelor’s degree in Physiotherapy at the University of Pretoria during 2015 and completing community service at 1 Military Hospital, she has continued to work in private practice in different sectors. During the past three years she has been working in an acute neurology rehabilitation centre. She completed her Master’s of Science in Physiotherapy degree at the Sefako Makgatho Health Sciences University during 2020. Her research focuses on oncology , which is the first known research in this field for physiotherapy in South Africa.

Ms Niemand was referred to one of our consultants by a colleague and required assistance with inferential analysis of data that she gathered during the course of completing her Master’s degree. Her article titled “Physiotherapy management of chemotherapy-induced peripheral neuropathy in Pretoria, South Africa” has been provisionally accepted to be published in the South African Journal of Physiotherapy and required the additional inferential analysis based on reviewer comments. Our consultant provided assistance with both visual and inferential analysis of the data. Ms Niemand provided the RASU team with a glowing review, which we truly appreciate. She stated that she was very happy with the service provided and indicated that the RASU team is highly recommendable. The RASU team would like to thank Ms Niemand for making use of our services and we wish her great success in her research journey.

CHANGES IN CONSUMER PREFERENCES FROM A BIG DATA PERSPECTIVE, 2019 TO 2020

Consumer preferences changed rapidly during the past decade. Because the Bureau of Market Research (BMR) aspires to continuously keep track of changing consumer preferences, a Market Intelligence Research Unit (MIRU) was established during early 2020. The report under discussion in this blogpost, entitled Changes in consumer preferences from a big data perspective, 2019 to 2020, is the first BMR report from MIRU. In this report, authored by Prof Carel van Aardt, MIRU aims to provide insights into changing consumer preferences and behaviour by using qualitative, quantitative, administrative and National Accounts data captured on a big data platform. The core focus of the study was to provide an indication of changes in consumer preferences during the period May 2019 to May 2020 with specific reference to the impact of the depressed economic environment, COVID-19 and the resulting lockdown on such preferences. This was done by, inter alia:

  • identifying the product and service categories in which there were increasing consumer interest over the period 2019 to 2020;
  •  identifying the product and service categories in which there were decreasing consumer interest;
  • determining the impact of declining economic growth rates on the interest of consumers in specific product and service categories; and
  • analysing the impact of COVID-19 and the resulting lockdown on consumer interest in specific product and service categories.

From the research conducted for this report, it appears that consumer interest in vehicles generally declined slowly between May 2019 and March 2020, followed by a rapid decline from March 2020 to late April 2020. This was due to a combination of factors including the lockdown, job losses and economic stagnation. This period of decline was followed by a slight increase in interest from late April 2020 to the beginning of May 2020.

An interesting pattern is evident with respect to consumer interest in computing equipment during the period May 2019 to January 2020. Consumer interest in computing equipment remained at a consistent level, after which interest in laptops increased substantially. The increased interest in laptops was driven by a combination of factors, the most important of which was an increased need to work from home as the effects of COVID-19 became more widely known during January to March 2020. This was followed by the national COVID-19 lockdown from March 2020 onwards, giving impetus to the interest in laptops for home working purposes. It is evident that many employees, who were previously office-bound, will increasingly work away from their erstwhile offices, even after the lockdown has been eased. This finding is confirmed by the fact that office chairs and home equipment have seen the greatest increases in consumer interest with respect to household furniture, equipment and appliances.

The interest of consumers in food and non-alcoholic beverages remained at the same level irrespective of declining economic growth and the national lockdown. However, in the case of alcoholic beverages the scarcity value of alcohol and tobacco, brought about by the lockdown regulations, resulted in a very strong consumer interest in these products. It is, however, expected that this heightened consumer interest in alcohol and tobacco will normalise at its pre-lockdown levels as their scarcity value declines once the sale of alcohol and tobacco is again allowed.

Consumer preferences for catering and accommodation already started a strong decline during February 2020, well before the lockdown, which was exacerbated by the general lockdown. The catering and accommodation time series shown in this report indicates that these two economic sub-sectors will not generate large-scale interest over the short to medium term and will in all probability take long to recover to pre-February 2020 levels in terms of both consumer interest and financial performance.

It is clear from this report that the period 2019 to 2020 was one of declining economic growth, with the national lockdown putting additional pressure on the macroeconomy and consumers. Furthermore, it is evident from this report that the declining economic growth rates, as well as the national lockdown, had statistically significant impacts on consumer interest in products and services in South Africa.

The findings of this report agree to a large extent with those of a number of other studies in South Africa and internationally, focusing on the impact of COVID-19 on consumers, consumer behaviour and consumer interests. In these studies it is shown that it is not just consumer interests that are changing because of COVID-19, but also their behaviour. Surveys have shown that staying alive and keeping others alive have become top priorities for consumers.

The findings of this report also show that consumers’ interests and behaviour have adapted, and are still adapting to the lockdown lifestyle. Consumers are increasingly improving their home environments for lockdown living and are also adapting parts of their homes for remote working purposes. Consumers are increasingly looking for other shopping solutions due to the fear of contagion as well as temporary store closures. It is clear from a variety of studies internationally that consumers will not revert en masse to their old shopping patterns post-lockdown. Most probably, COVID-19 consumer behaviour will become the new normal. One of the main reasons for this is that consumers actively adopted a wide range of existing and new technologies for lockdown living which they will not abandon in favour of their old interests and behaviour patterns since a new consumption normal has been created during lockdown. As lockdown and the impact of COVID-19 continue, it can be expected that such consumer interests and behaviour patterns will be strengthened and will become the new normal.

PERSONAL INCOME ESTIMATES FOR SOUTH AFRICA: Trends for the past five years and possible outcomes for 2020

TRENDS IN PERSONAL INCOME ESTIMATES (2015 – 2019)

The BMR Income and Expenditure Model was used to obtain the estimates provided in this report. Population and parameter weights were used to ensure the overall accuracy (validity) of the income estimates of the model. The updated results indicate that, following relatively high annual growth rates of approximately 7.5% during 2016 and 2017, growth rates in personal incomes have slowed to about 5% during 2018 and 2019.

Income inequalities remain a thorn in the flesh of South Africans

The analysis reiterated the existence of income inequality in South Africa as 73.8% of the adult population earned only 8.8% of cash flow-related incomes in 2019.

Despite the almost equal gender population distribution between females and males, females remain at the lower end of cash flow income earnings. Approximately two-thirds of cash flow income was earned by males during 2019.

POSSIBLE PERSONAL INCOME OUTCOMES DURING 2020

COVID-19 and the resulting lockdown are expected to have far-reaching economic growth, employment and personal income implications for South Africa. Given the troubling and uncertain times surrounding the COVID-19 pandemic, it was decided not to provide projected 2020 estimates, but rather conduct scenario analyses to provide possible personal income outcomes for this year.

The pandemic will not just result in a large number of people losing their jobs and hence their incomes being affected, but people not losing their jobs will also earn lower incomes during 2020 because of temporary business closures, temporary pay-cuts, lower salary increases, etc. In the absence of COVID-19, cash flow income is estimated to increase by 5.9% during 2020. A decline in cash flow income is expected due to job losses and the subsequent impacts on compensation growth as per the two scenarios outlined below. It is estimated that 800 000 job losses (scenario 2) will result in cash flow income estimates that are R265 billion lower compared to the baseline estimates for 2020, translating to a -1.7% change in cash flow income compared to 2019 estimates. Similarly, 1.6 million job losses (scenario 3) are estimated to result in cash flow income estimates that are R461 billion lower than the baseline estimate for 2020, translating to a -7.4% change in cash flow income compared to 2019 estimates.

Middle income groups are the most vulnerable

The employed middle class working in skilled jobs in the formal sector of the economy is expected to be hardest hit by COVID-19 and lockdown-related job losses. Compared to the expected growth in the absence of COVID-19, those earning between R 447 001 and R899 000 per annum are anticipated to suffer the greatest income losses.

The recovery process will most likely not be quick and sufficient support needs to be provided to individuals who are expected to be most impacted by the challenges arising from the current economic environment.

Formal retail trade sector: Stressed and stretched?

Introduction

This year the Bureau of Market Research Pty (Ltd) (BMR) commemorates its sixtieth anniversary of establishment and contribution to the field of socio-economic research. It will unfortunately also be remembered as the year of the unprecedented onslaught of the Covid-19 pandemic, bringing the global health and economic system to a near stand-still and reversing development gains made by a number of countries over the last few decades. There is a great deal of speculation over the potential impact of the outbreak of Covid-19 in South Africa on the country’s fiscal position. Considering the number of people supported by the fiscus, the fiscal metrics are likely to worsen as government channels money towards fighting the virus. The national lockdown announced by the President in March 2020 has made a significant proportion of consumers financially more vulnerable.  This has had a big impact on the spending power of consumers, especially with respect to the consumption expenditure of the lower income groups. Covid-19 is now expected to have a much greater impact on global economic growth than previously thought.

Key Macroeconomic Forecasts 2020

Aside from the current impact of the Covid-19 pandemic, the international economic scene has been dominated by the trade war between the United States and China as well as the Saudi Arabia-Russia crude oil battle, which has resulted in the reduction in the price of crude oil, decline in commodity prices, and a softer demand from South Africa’s trading partners. Domestically, there has been a deterioration in a wide range of key variables in the South African economy over the last decade, including a substantial rise in government debt, a dramatic increase in financial support provided by government to the major state owned enterprises (SOEs), a sharp slowdown in economic growth to an average of less than 1.0% over the past four years, Moody’s downgrade of South Africa’s credit rating, currency depreciation and a further rise in the country’s already high level of unemployment. Taking these aspects into account the BMR probabilistic macroeconomic model predicts the South African economy will contract by -9.5% and for 2020 to be a far less favourable year than 2019 in terms of the key macroeconomic indicators presented in table 1 below.

Trends in Real Retail Trade Sales Growth 2012-2019

Figure 1 presents the annual growth in real retail trade sales in South Africa, confirming that the sales have been registering a declining trend during the last eight years from a high of 4.3% in 2012 to a low of 1.2% in 2019.

Real Retail Trade Sales Forecast 2020

Taking into account the prospects of both the 2020 global, regional and local economies in the wake of the Covid-19 pandemic, the BMR estimates formal retail sales to contract by -4.0% in real terms during 2020. The highest reported declines are by retail outlets in hardware, paint and glass (-6.4%), followed by general dealers (-5.1%), and food, beverages and tobacco in specialised stores (-4.9%) as reflected in figure 2.

Real Household Consumption Expenditure Forecast 2020

Growth in consumption expenditure is normally attributed to two major components, namely, price inflation and an increase in demand.  The BMR forecasts household retail expenditure by product group in constant terms to decline across the board.  Overall, non-durable goods are anticipated to contract the most by -8.0%, while semi-durable and durable goods are likely to contract by -6.8% each and services are expected to decline by -7.4% as depicted in figure 3.

Figure 4 shows that, in terms of retail outlets, the highest expected contraction in demand by product during 2020 is  with respect to household fuel, power and water (-9.7%), followed by recreational and entertainment goods (-9.4%) and food, beverages and tobacco (-8.5%).

Conclusion

The 2020 BMR retail sales forecast shows that retail sales are anticipated to contract by -4.0% in real terms.  This forecast reflects a contraction in sales in terms of volume for 2020. Stats SA 2020 Covid-19 business impact surveys show that 89.6% of responding businesses had turnovers that were lower than their normal range. Retail stores and outlets are adapting their business models by targeting potential customers with online activities. This is done out of necessity in an effort to increase sales after registering significant declines in their offline stores, and to take advantage of new opportunities.