Tag: SA

Prospects for the retail sector remain weak and are unlikely to improve in 2017, as confirmed by Massmart’s interim sales update released on Monday.

In the 26 weeks to June 25, Massmart recorded R42.5bn in sales, representing an increase of 0.5% compared with the year-earlier period. Comparable store sales fell 1.6%. Product inflation was estimated at 3.2%.

Massmart’s share price initially dipped more than 2% after the announcement, but bounced back into marginally positive territory. “I don’t know if there was anyone who was massively disappointed by the update,” said Old Mutual Investment Group consumer and industrial sector analyst Brian Pyle.

“Nobody really expected anything else other than what Massmart reported today. People are expecting tough times and the update shows it. That said, these numbers are weak.”

Comparable store sales fell at most of the company’s trading divisions. Like-for-like sales fell 3.5% at Massdiscounters, by 0.2% at Massbuild and 3.3% at Masscash. Masswarehouse grew comparable sales by 1.5% with inflation of 3.9%.

Mergence Investment Managers portfolio manager Peter Takaendesa said the food side of the business performed better than nonfood categories. Sales growth in food was 3%. In general merchandise it fell 2.9%.
“As we saw in the recently reported Woolworths numbers, the trend of better food sales relative to nonfood consumer goods is evident in Massmart’s numbers. Consumers are largely in survival mode and discretionary items have to take a back seat for now,” he said.

The biggest concern for all retailers was the downward trend in growth rates to levels much lower than cost inflation. This came at a cost to profit margins, said Takaendesa.

For Massmart, he expected a technical improvement in the sales rate for the rest of the year, but a stronger recovery was only likely later in 2018 “and could be better if we get an interest rate cut sooner to help consumer confidence recover”.

“It’s going to be difficult for Massmart’s turnaround efforts to show the intended results given much weaker consumer spend and the mid-long term risks posed by independent e-commerce rivals such as Takealot, which need to be monitored closely,” he said.

Ashburton Investments said that it preferred Woolworths in this sector.
Woolworths said it expected its adjusted headline earnings per share for the year to June 25 to fall between 5% and 10%.

“Massmart’s update shows the really poor consumer environment in SA,” said Ashburton portfolio manager Wayne McCurrie. “This is not unique to Massmart. All consumer firms are suffering the same — a subdued consumer in recession.”

McCurrie said the performance of Massmart’s food division was reasonable and the performance of the nonfood goods was “terrible”, but that the market knew this after SA fell into recession.

Pyle said the next six months were not going to be any better for any retailer, but that the sector could see recovery in 2018.

By Colleen Goko for Business Day

The country’s gross domestic product contracted 0.3% in the fourth quarter of 2016, according to Statistics South Africa (Stats SA).

Stats SA released the data in Pretoria on Tuesday. Overall GDP grew by 0.3% in 2016. This is lower than growth of 1.3% reported in 2015.

The main contributors to negative GDP growth were the mining and quarrying industry and the manufacturing industry.

Commodities showed a declining trend, according to Michael Manamela, chief director of national accounts. Mining and quarrying decreased by 11.5% due to a drop in the production of coal, gold and other metals including platinum.

Manufacturing decreased by 3.1%. This was brought on by a decline in manufacturing of food and beverages, petroleum, chemical products, rubber and plastic products as well as motor vehicles, parts and accessories of transport equipment.

Agriculture declined by 0.1% but although negative, it showed signs of improvement, said Manamela. “What is important is that the trajectory is upward and we should see an improvement in 2017.”

The primary and secondary sectors declined by 9% and 1.8%, respectively.

The tertiary sector grew by 1.3%. The largest contributors to GDP include trade, catering and accommodation industry and finance, real estate and business services.

Expenditure on GDP

Expenditure on GDP decreased by 0.1%, and overall expenditure lifted 0.5% in 2016. This is lower than the expenditure of 1.2% reported in 2015.

Household final consumption expenditure increased by 2.2% in the fourth quarter. It contributed 1.3 percentage points to total growth. The largest contributors to growth include food and non-alcoholic beverages which went up 2.4%, and clothing and footware which rose 10.4%.

Growth in semi-durable goods grew 6.8%, followed by services at 3.2% and non-durable goods at 0.3%. Durable good spend only increased by 0.2%.

Government final consumption expenditure increased 0.3%.

Growth in investment expenditure increased by 1.7%. The largest contributor to growth was construction works, which increased 3.6% and contributed 1.2 percentage points to growth.

Net exports contributed positively to growth in expenditure, said the report. Exports increased by 12.5%, due to higher exports of precious metals and mineral products. Imports increased by 6.1%.

Fin24 previously reported that economists were expecting low growth in the fourth quarter. South Africa’s GDP growth rate on a yearly basis until the end of September 2016 was at 0.7%, which was impacted by a 0.1% contraction in the first quarter of 2016 and low growth in the following quarters.

South Africa’s GDP growth rate on a yearly basis until the end of September 2016 was at 0.7%, which was impacted by a 0.1% contraction in the first quarter of 2016 and low growth in the following quarters.

Further, the Business Confidence Index declined to 38 in the fourth quarter of 2016 from 42 in the previous period, explained Giacomo Bonavera, head of foreign exchange trading at Capilis Asset Managers, who wrote in Finweek on Monday.

“An increase in activity in the finance, transport and communication, real estate and construction sectors was offset by a decline in the agriculture, mining and manufacturing industries,” he said.

National Treasury said in its budget in 2017 that it expected the country to grow by 1.3% in 2017, and by 2% in 2018. It also sees inflation falling to 6.4% in 2017 and 5.7% in 2018.

By Lameez Omarjee for Fin24

Amazon puts roots in SA

While global online retail company Amazon.com widens its net with online food shopping and walk-in bookstores, its Web services division is making inroads in South Africa.

Amazon Web Services says it is recruiting 250 people for its offices in Cape Town and Johannesburg.

The company offers cloud computing for other companies. Cloud computing refers to the on-demand delivery of IT resources and applications via the internet with pay-as-you-go pricing.

The head of technology and solutions architecture at Amazon, Attila Narin, says the company had recognised the potential for growth in South Africa where Cape Town and Jo’burg acted in perfect unison.

“Cape Town is ideal for the technical side of things, and Jo’burg is perfect for the customer-facing side of things. In fact, some of the core technology for Amazon’s cloud computing used across the globe was built right here in Cape Town,” says Narin, who is based in Luxembourg but worked in Cape Town from 2006 to 2008, and was back in the city this week.

“This city has an amazing pool of talent, as universities like UCT and Stellenbosch produce some of the finest engineering students on the continent. That is the main criterion for choosing our development centres, so Cape Town ticked the boxes.”

Narin says that Johannesburg, which opened its Amazon Web Services office last year, is “the economic heart of the country and the continent too, so it made sense to have our customer-facing presence there”.
Narin says the company’s successes in South Africa included Entersekt, Travelstart, and Medscheme.

Stellenbosch-based Entersekt developed South Africa’s first security solutions for mobile banking, resulting in a decline in credit card fraud.

Travelstart, an online booking service for flights and hotels, “shows how you go beyond the normal borders with cloud computing. It is now present in all of southern Africa and the Middle East”.

Medscheme uses cloud computing to keep patient records, making them “more accessible to medical service providers”.

Narin says South Africa was a “highly innovative and creative space for start-ups”.

By Tanya Farber for www.timeslive.co.za

SA companies not ready for POPI

Trustwave has released its findings from a survey of 113 South African IT professionals, asking if they are ready for POPI – South Africa’s Protection of Personal Information Act which seeks to regulate the processing of personal information and standardise compliance with privacy and data protection legislation.

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