Economist says the 1% increase in VAT was likely to influence spending over the Easter holidays
Last year’s consumer spend left a lot to be desired in light of the fluctuating rand, the sad economy and the political landscape, so spending figures ahead of and during Easter were more than likely closely monitored.
Before the Easter weekend renowned economist and speaker Daniel Silke said contradictory forces were at play.
“The VAT increase on April 1 could cause a run on bigger ticket items as consumers attempt to beat paying the taxman extra. The period immediately before April 1 may see increased sales, only to dip after the 1st.
“Overall, this should make for an Easter spend that is better overall than last year. Adding to this is increased positive sentiment following the ‘Ramaphoria’ path. Business sentiment has improved and the better political outcomes should add some impetus to consumers’ shopping habits. Having said that, levels of disposable income remain depressed and there is no dent in the broader unemployment figures to help this,” he said, adding that the fuel levy would also have a hard-hitting impact on people.
“The fuel levy can impose a further burden on us consumers. With a bit of currency luck, the rand should remain stable to stronger, thus offsetting the fuel levy, at least for the moment.
“My overall view is increased spend to beat VAT more than anything else. The country will need a sustained period of better growth numbers, movement on economic policy, a dent in youth unemployment and clarity in terms of public sector wage negotiations before there is any major uptick.”
While he was cautious to say there would be increased spend, Silke said there would be enough to please most retailers, who may view this as the turning point of a “rather disappointing cycle”.
Tony da Fonseca, managing director for the OBC chicken and meat group, said their Mpumalanga and Limpopo stores receive the best support over the Easter period due to the many thousands of people living and working in Joburg and Pretoria visiting families during the Easter holidays.
“They purchase gifts and food items for feasts. Chicken is our undisputed bestseller, but fish takes the lead during Easter. This is based largely on religious considerations,” he said.
Da Fonseca said the Thursday before Easter was usually the peak of their customer support over this period. This year the company expected a 20% increase in inflation-adjusted sales figures compared to the same period last year.
“If one ignores the normal growth pattern our stores enjoy, a prime reason is that this year, Easter coincides with the end of the month. This means workers would have received their salaries and grant monies before the holidays.”
Remo’s, Old Town Italy and The Common Room owners, Rembrothers, also expected a busy Easter period, with Rembrothers’ Renzo Scribante saying their Durban stores usually received the best support during this time.
“Durban is very well supported as people from other provinces come down for the Easter weekend to be at the sea. From a customer buying pattern point of view, people are more price-conscious today and look for value for their rand. At Old Town Italy we have created our own in-house Easter eggs and brought in imported chocolate to give the customer price options. They want options along with quality.”
Good Friday is always buzzing at Old Town Italy, and he expected that day to be busy this year.
Gauteng-based retailers and shopping centres may have found themselves quieter as many Joburg residents headed to the coast over Easter. This usually means coastal retailers and shopping centres see spikes in sales.
Looking back to 2010, Silke said there was a recovery in household consumption expenditure, especially during the Easter period, driven by an aggressive interest rate cut by the Reserve Bank together with economic recovery. This saw real retail sales growth rise from a 3.1% decline in 2009 to a 5.6% rise in 2010, and on to a post-recession peak of 6.2% in 2011. Then, in 2015, the sector had a mild boost from a dip in consumer and retail price inflation in that year, sustaining its out performance of economic growth. That dip passed on, and the economy reinflated in 2016, while interest rates had increased through 2014 to early-2016.