Overstretched South Africans are further cutting back on spending, hit by higher fuel prices and tighter credit in Africa’s top economy, the chief executive of discounter Massmart Holdings Ltd has said.
Nearly half of South Africans failed to pay back their debts for three straight months this year, prompting banks to rein in lending, while a weaker rand currency has fuelled inflation and higher petrol prices.
“The pressure on the consumer is increasing and it seems to be related to rising energy inflation and unsecured lending being pulled back,” Chief Executive Grant Pattison said on the sidelines of a consumer goods conference in Johannesburg today.
Unsecured loans are high-interest loans not backed by collateral.
Massmart, a unit of US retailer Wal-Mart Stores Inc, in August warned of slowing consumer spending when it reported a less than 10% rise in first-half sales.
Pattison said Massmart, which sells everything from televisions to groceries, said holiday season shopping was unlikely to give second-half sales a major boost. “I am hopeful but part of me is telling me that things have changed. There’s just not enough good news,” he said.
Industry-wide sales grew 2.8% year-on-year in July, latest official data shows, well below the 4.5% growth economist polled by Reuters had expected.
South African economic growth is unlikely to reach the government target of 2.7% this year, Finance Minister Pravin Gordhan said last week.
Pattison said Massmart, known for its Game and Makro chains, would still go ahead with a plan to open stores in Kenya, even after a deadly attack on a Nairobi shopping mall last month that left nearly 70 people dead.
“We are not rethinking our investment decision in Kenya. We are still looking for a partner and we are still opening our first Game store, possibly by the end of next year,” he said.
Pattison added Massmart would get recommendations from security experts on how to best avoid a similar attack before moving into Kenya.
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