South Africa's retail sector is lagging behind the continent

As slow economic growth has its impact on South Africa’s retail sector, the country is performing significantly poorer than its peers across the continent according to a new A.T.Kearney study. Sujeet Morar of A.T.Kearney believes the way forward for South African retailers is to expand abroad. 

Where the retail sector was among the last few economic segments in South Africa that was recording steady growth, the sector has taken a considerable hit in recent months as the economic outlook in South Africa worsens. GDP forecasts for the country have dipped, taking the propensity to spend amongst consumers with it.

A.T.Kearney’s latest Global Retail Development Index reveals that the rest of Africa appears to be performing particularly well in contrast. As many as seven of the top 30 countries that achieved significant retail growth across last year were African, whereas South Africa failed to feature on the list altogether.

Factors that go into rankings on the index include a country’s GDP per capita, population and the risk factor that emerges from poor economic growth. South Africa’s dismal performance has raised many questions, while Sujeet Morar of A.T. Kearney has tried to offer some insight.

According to Morar, who is a Principal at A.T.Kearney in South Africa, the country’s consumer market has reached a point of saturation in its current form. Prosperity is not increasing, and the existing consumer market has exhausted its pending capabilities or stagnated in preference. 

“The level of saturation in the market, combined with rate of growth within the South African economy presents less opportunity for existing retailers to expand, and limits the opportunity for new entrants,” he said. As a result, the best way forward is to expand into other economies.

Syd Vianello, a prominent independent retail analyst in South Africa has backed Morar’s analysis of market saturation and low spending power. “If the amount of money available to spend is under pressure, then obviously if you've been expanding and rolling out more stores in more malls, then your sales per square metre are obviously going to come down. At the same time, your costs are rising because rent and wages go up,” he said.