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Retail bounces back after crashing to a low during hard lockdown

Retail trade in South Africa bounced back in the fourth quarter after crashing to a 29-year low during the hard lockdown. Photo: African News Agency (ANA)

Retail trade in South Africa bounced back in the fourth quarter after crashing to a 29-year low during the hard lockdown. Photo: African News Agency (ANA)

Published Dec 4, 2020

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JOHANNESBURG - RETAIL trade in South Africa bounced back in the fourth quarter after crashing to a 29-year low during the hard lockdown in the second quarter as confidence rose in wholesale and motor trade.

The Bureau for Economic Research (BER) yesterday said that retailer confidence soared remarkably from what seemed to be an upbeat 36 points in the third quarter to 50 points in the fourth quarter.

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Retail trade crashed to a low of 11 points in the second quarter as consumers struggled with strict levels of lockdown imposed to curb the spread of Covid-19.

The BER said wholesale confidence climbed to a six-year high from 33 to 59 points, supported by a sharp increase in spending on consumer goods.

Motor dealer confidence surged to a two-year high of 41 points as sales continued to recover in the fourth quarter.

“This upbeat performance was not only significantly better than pre-crisis levels, but also contributed immensely to the overall optimistic RMB/BER Business Confidence Index ,” BER said.

“Major improvements can be seen across all trade categories, with retailer, wholesaler and new vehicle dealer confidence all increasing remarkably on the back of improved operating conditions, a noteworthy uptick in sales volumes and an overall improvement in profitability.”

The BER said while the fourth quarter sentiment were encouraging, it was unclear whether the trade sector can sustain this upbeat performance.

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It warned that there remained significant risks ahead, especially with the expiration of the top-up social grants and Social Relief of Distress grant early next year, which would remove billions of rand from consumers’ incomes, and hence the trade sector.

The second wave of Covid-19 infections appearing in the Western and Eastern Cape also threatened the outlook.

The poorer-than-expected Black Friday and festive sales should not be ruled out amid virus fears and a weak Covid-19 induced labour market.

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“Despite massive gains in sentiment, questions remain about whether the sector can sustain this momentum amid the significant headwinds that lie ahead,” it said.

“Renewed lockdown restrictions to curb the spread of the virus would be devastating to the trade sector during the festive season.”

Investec chief economist Annabel Bishop said the economy showed a strong rebound during the third quarter as lockdown restrictions were eased, albeit with uneven performance between some sectors.

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Bishop said the country’s third quarter gross domestic product was expected to see a substantial expansion of up to 50 percent quarter-on-quarter after an annualised contraction of 51 percent in the second quarter.

“The risks for the global, or domestic economic recovery, have not been eradicated …” Bishop said.

“In South Africa, Covid-19 cases have been rising, risking recovery in tourism and hospitality activity in the key festive period, although the government is now leaning towards the sensible approach of differentiating lockdown restrictions depending on case loads in different areas.”

BUSINESS REPORT

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