Slowly but surely, the economic clouds hanging over SA appear to be lifting. The JSE all share index keeps hitting record highs, the rand is strengthening against the dollar and other hard currencies, and a meaningful cut in interest rates appears to be on the horizon. And the hard-pressed SA consumer appears to be regaining an appetite for spending if the Stats SA retail sales figures for June are anything to go by.
In constant 2019 terms, retail sales overall grew 4.1% year on year, after revised growth of 1.1% in May. This was the fourth consecutive month of positive sales growth, a far cry from 2023, when almost every month recorded negative growth.
The main positive factor is probably the greatly reduced incidence of load-shedding, with none since March 26. No matter how much retailers spent to insulate themselves from the worst aspects of load-shedding, it had a corrosive effect on consumer spending, casting a long, depressing shadow when it was at its peak.
The positive vibes emanating from the formation of the government of national unity may also be helping consumer sentiment.
Segmentally, only three categories of retail sales — food, beverages & tobacco in specialised stores, hardware, paint and glass, and all other retailers — recorded negative year-on-year sales growth. All the rest recorded positive growth, and some categories were strong. For example, general dealers recorded growth of 7.3%. This is especially important because this category constitutes almost half of all spending in the Stats SA survey. General dealers include outlets such as supermarket chains, which were especially badly hit during load-shedding because they had to spend large amounts of money on diesel generators just to keep their chilled sections cold.
The second best contributor was the clothing, footwear, textiles & leather (CFTL) sector, which is also the second-largest contributor to overall retail sales, contributing just under 18% of overall retail sales in June. Sales growth year on year in this category was a strong 6.1%, bouncing back nicely from minus 2.9% in May. This sector has had to contend with more than its fair share of problems in the past couple of years. Apart from load-shedding, most CFTL retailers struggled with stock availability due to port congestion and had to compete with cheap online clothing products from Far East retailers such as Shein and Temu.
Household furniture, appliances & equipment came in third with growth of 1.8%. This is a tiny sector, contributing less than 4% of overall sales, but its performance has been remarkably steady all year, with not a single month in negative territory, which is remarkable for a sector so sensitive to interest rates.
Pharmaceuticals & medical goods, cosmetics & toiletries came in fourth, on flat sales growth for the year to June. The trend for this sector appears to be rising mildly after grinding along in negative territory for much of last year. This positive trend is reflected in the share prices of both Dis-Chem and Clicks, which have shown relative strength recently.
Though there was a slight year-on-year decline in sales in the hardware, paint & glass category, the gradually improving trend remains intact.
Food, beverages & tobacco in specialised stores, a euphemism for convenience stores, saw year-on-year sales decline 1.5% in June after rising 5.1% in May. The hodgepodge category of all other retailers dropped 1.1% on top of a 0.3% decline in May.
The outlook for the remainder of the year is promising. Interest rates are likely to begin a declining trajectory in September and the SA Revenue Service has indicated that the Far Eastern online clothing retailers will have to start paying more realistic rates of VAT and import duty on their products. These factors, combined with a continuation of the good news on the load-shedding front, should result in consumers spending more freely as the year progresses.
• Gilmour is an investment analyst.
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