The latest fuel price increase, the highest on record so far, will seriously affect already stretched household finances, according to Gwarega Mangozhe, CEO of the Consumer Goods Council of SA (CGCSA).
Both grades of petrol, 93 and 95 (ULP & LRP), increased by 99 cents and 100 cents a litre (c/l) respectively at the beginning of October. This brings the overall retail price of 95 ULP for motorists in Gauteng to R17.08 c/l and R16.49 c/l at the Coast.
“Although our members in the retail and consumer goods sector have, and continue to absorb input costs, it is becoming increasingly difficult to sustain these increases,” he responded to Fin24 on Monday.
“Indeed, times are tough and consumer spending remains under pressure and this has been exacerbated by elevated household debts and the rising cost of living.”
The CGCSA has noticed that shopping baskets have become smaller and many consumers have become bargain hunters as they opt for solely for the basics rather than luxury purchases.
“Our members are soldiering on and many have and continue to rationalise operations to improve operational efficiencies and achieve cost savings which they pass on to consumers in the form of reduced prices,” said Mangozhe.
“Going into the festive season, naturally the retail sector is always geared for a busy trading period, including the expected surge in sales on ‘Black Friday’. This is notwithstanding the tough economic environment and the stressed consumer budgets.”
He added that it is, however, not possible at this stage to make specific predictions of expected trading patterns over the festive period. CGCSA remains hopeful that its members will still benefit from the expected consumer spending during this period.
Karl Westvig, CEO of SME-funder Retail Capital, commented that small and medium enterprises (SMEs) in SA are currently one of the largest employers, yet between 70% to 80% don’t survive their first year.
In addition, only 9% of these businesses make it to the 10-year mark.
“Business owners are already grappling with VAT increases and factoring in several petrol hikes into the cost of goods, so assistance from government will be well needed to help see them through the year,” said Westvig.
“In the latter part of this year, we have seen improvements in the tourism and agricultural sectors and many more township entrepreneurs coming on stream.”
He said the most notable downturn in SA has been seen in the clothing, apparel and textiles industry, with a 28% decline so far this year.
“Small business owners will need to make smart decisions to see through the rest of this year. We are seeing an uptake of small businesses applying for funding to see them through, but we caution owners to spend carefully on essential stock and focus on strategic marketing,” he said.
Erin Louw, chief brand officer of Retail Capital, said businesses need to aim for more than 6% or 7% turnover growth per year just to cover the cost increases they’re experiencing.
Despite current economic conditions, Retail Capital is still seeing a number of new start-ups as well as many established businesses expanding and growing.
This article was first published by Fin24 on 8 October 2018.