Divergence in South Africa's retail sector

Consumer spending trends in South Africa have been a topic of interest as hopes of lower interest rates and the ability of consumers to access some of their pension money early could provide a tailwind for consumer confidence ahead of Black Friday and the festive season. Nikki Quinn, Retail Lead for Sub-Saharan Africa at NIQ and GFK, and Roy Mutooni, Portfolio Manager at Sanlam Investments, recently discussed these trends on CNBC Africa. In the second quarter of 2024, fast-moving consumer goods saw a growth of nearly 5%, amounting to $181 billion in spending. On the other hand, tech and durables remained flat at $31 billion compared to the previous year. One of the factors impacting consumer spending patterns was the relief from load shedding, leading to increased expenditure on fresh and frozen foods. Large screen televisions, typically associated with big spending months like Black Friday, also showed stronger growth in Q2, a trend possibly influenced by major sporting events. Looking ahead, the expectation of more interest rate cuts and the two-part retirement system are anticipated to boost household expenditure in the second half of 2024. Roy Mutooni shared insights on market opportunities, highlighting a soft base and positive indicators such as lower interest rates and increased consumer optimism. He noted that apparel tends to be the first choice for consumers, followed by durables and electronics, especially during periods like the festive season and Black Friday. Nikki Quinn emphasized the importance of price and value for consumers, indicating that promotional activities and good value offerings continue to influence purchasing decisions. Despite the revenue growth primarily driven by price increases, there are expectations for volume increases in specific consumer categories. The upcoming medium-term budget policy statement is awaited with anticipation, with hopes for signals on infrastructure investment and solutions for challenges like ESCOM's debt. Overall, the experts expressed optimism about the consumer outlook and market potential in South Africa.