2021 Budget in a nutshell

Source: SA Commercial Prop News

Finance Minister Tito Mboweni on Wednesday delivered the toughest budget since the dawn of democracy. His speech comes in the wake of shocking unemployment figures that were shared by Stats SA on Tuesday.

The unemployment rate in the fourth quarter of 2020 increased by 1.7 percentage points to 32.5% compared to the third quarter. This is the highest since the start of the Quarterly Labour Force Survey (QLFS) in 2008.

Taxpayers can breathe a sigh of some relief as Finance Minister Tito Mboweni tabled a 2021 Budget Speech free from substantial tax hikes and that will bankroll South Africa’s Covid-19 vaccination programme.

The Budget Review said total consolidated spending is expected to amount to R6.16 trillion over the next three years or R2 trillion each year over the medium term, with the majority of the spending going towards social services.

Covid-19 vaccine funding

Government has set aside R19.3 billion to fund Covid-19 vaccines, in the interests of saving lives and supporting the economic recovery. R10 billion will be used for the purchase and delivery of vaccines over the next two years.

No new taxes have been introduced to fund vaccines – funding will be provided through budget allocations, emergency withdrawals and – if needed – the contingency reserve.

Vaccines will be rolled out free of charge for the majority of South Africans, while private providers will be able to claim back from medical aid schemes.

Direct taxes

Government will not introduce hikes for personal income tax and corporate income taxpayers, in an effort to aid economic recovery and ease financial pressures on households and businesses.

The state had a revenue windfall in the latter part of 2020, brought about by increased corporate income tax receipts from mining companies coming off the back of improved commodity prices. Improvements in consumption and wages also bolstered revenue.

The tax revenue shortfall is now expected to stand at R213 billion, lower than the R312 billion projected during the Medium-term Budget Policy Statement tabled in October last year.

Government has also withdrawn a proposal to raise R40-billion in additional revenue over four years.

Hikes on indirect taxes

Government will levy an 8% increase on excise duties for alcohol and tobacco products in order to discourage their consumption and promote good public health.

Unemployment

Mboweni said despite government efforts to boost job creation and soften the blow for those who lost their jobs in the past year, the unemployment crisis in South Africa shows little sign of letting up.

Budget said R12.6 billion was allocated to various sectors to create about 694 000 short-term jobs in the 2020/21 financial year and that this programme is expected to continue in the 2021/22 financial year.

The Budget Review said the outlook remained uncertain and the economic effects of the pandemic would continue to be far-reaching. It paid R11 billion to the public employment initiative in 2021/22. By January 2021, the initiative had created 430 000 temporary jobs and aims to create another 180 000 by March.

Wages

Mboweni said savings in public service wages could be achieved through doing away with annual cost-of-living adjustment in the public service until 2023-24, reduced head counts, early retirement, natural attrition and the freezing or abolishing of non-critical posts.

At least two unions legally challenged the failure to honour the previous wage agreement and it is currently before the Constitutional Court, after the Labour Appeals Court dismissed an application for government to be compelled to honour that agreement.

“A three-year inflation-linked agreement would raise the total shortfall to R112.9 billion by 2023/24. And an agreement similar to the one achieved in 2018 – one percentage point higher than inflation – would create a compensation shortfall of R132.7 billion (or 2.2% of GDP) by 2023/24,” the review said.

According to the Budget Review spending programmes circular, the fastest-growing functions over the medium-term are economic development, community development and general public services, with spending on health amounting to R248.8 billion in the 2021-22 financial year.

The debt ditch beckons

The Budget Review said debt-service costs were higher than the 2020 Budget estimates by R3.6 billion in the 2020/21 financial year, R11.3 billion in the 2021/22 financial year and R17.9 billion in the 2022/23 financial year.

It expects debt-service costs to continue their increase at an annual average rate of 13.3%, reaching R338.6 billion in the 2023/24 financial year.

“Due to the higher budget deficit, coupled with fluctuations in interest, inflation and exchange rates, debt-service costs will continue to rise over the medium term,” the Budget Review said.

The Budget Review said gross national debt was projected to grow continuously over the long term, despite 2020 budget proposals to reduce expenditure growth. The review said strategies to contain debt would be monitored regularly by the minister.

Some SOEs face debt defaults

National Treasury highlighted that state-owned enterprises (SOEs) suffered a deterioration in their financial performance, partly owing to the impact of the Covid-19 pandemic and the associated lockdowns.

Many SOEs risk defaults, Treasury warned. Just last year, the Land Bank defaulted on its debt. Last year, the bank was allocated R3 billion in the 2020 special adjustments budget. The October Medium-term Budget Policy Statement also highlighted it would require R7 billion to support the restructuring of the entity.

Infrastructure

Mboweni says that the state has budgeted R791.2 billion for its infrastructure investment drive, without making a time table clear. “All these efforts to expand infrastructure will be wasted if the end user does not pay a cost-reflective tariff for usage,” he says.

Economy

Mboweni says SA’s economy is expected to rebound by 3.3% this year, following a 7.2% contraction in 2020. The finance minister says there is reason to hope from SA’s “much-improved economic outlook”. The global economy will be buoyed by the expected rollout of Covid-19 vaccines, he notes.

Massive car licence rush expected to hit SA

Source: capetown.gov

The City of Cape Town managed to license and register the more than 1,3-million registered vehicles in Cape Town in only six months, between June 2020 and December 2020.

This is a doubling of the number of vehicle transactions normally done per month, and that would typically be done over a year. This exceptional transaction rate was a response to the backlogs created by COVID-19, which is a country-wide phenomenon. Primarily 228 staff members have managed this feat amid the most trying of circumstances. The City has not received additional equipment from the National Government to enable it to work faster through the National Traffic Information Services (Natis). The City, as an agent of the National Government, receives allocated Natis terminals and the vehicle-related transactions can only be done on these terminals and programmes. COVID-19 will continue to impact licensing operations across the country.

The City is looking at all options within its power to assist motorists during this extraordinary time. Discussions on ways to increase Natis terminals and infrastructure continue with the Western Cape Government and the National authorities.

‘Some options that we have already started implementing is the opening of another customer service office in a shopping mall in Lansdowne, in addition to the Promenade Mall and Table Bay Mall offices. The City is also looking to expand capacity in its Kraaifontein office. This would positively impact operations and lead to more transactions at that office.

‘The City has requested the lead licensing authority, the Road Traffic Management Corporation (RTMC), to provide additional Natis terminal and printer capacity so that City staff can deal with the increased volumes of online renewal transactions. This will speed up the time taken to process online transactions and will encourage members of the public to follow the online route, which is safer and more convenient.

‘Importantly, COVID-19 will continue to have a material impact on our operations. We will continue to have unplanned and sudden office openings and closures to ensure the safety of our staff and customers. The COVID-19 regulations will continue to affect staff complements at times and we will continue to experience the intermittent national system problems that we have seen over the past year. These problems affect the City’s service delivery, but are unfortunately not within our control.

‘The dedicated City staff will continue to go above and beyond the call of duty to assist customers. We ask motorists to please be proactive: check the expiry date on their licence discs, and start the renewal process at least a month or two in advance of their due date or within the grace period. This will make a huge difference to all and enable motorists to successfully apply for their licences online via e-Services.

‘We thank our customers for their support and understanding in what continues to be a trying time for all,’ said the City’s Executive Deputy Mayor, Alderman Ian Neilson.

July/August 2021 peak
The City expects a July/August 2021 peak in renewals, as many licences will expire on 31 August 2021, with a due date of 22 September 2021. This is due to the COVID-19 lockdown extension given to motorists whose motor vehicle licences expired in March, April and May 2020.

Tips

  • Customers are reminded that fines are nationally determined and the City may not unilaterally write off fines.
  • Please plan for a turnaround time of approximately four weeks currently from application to receipt of the licence when applying online via e-Services. This is due to high volumes, but the City hopes that the plans that are under way will help to reduce the turnaround time in the future.
  • Please plan ahead.
  • The length of queues at motor licensing offices have been reducing in general. However, it may still seem long due to the social distancing and other COVID-19 measures that are in place.
  • If customers must visit a customer office in person, please remember that there is COVID-19 screening at the entrances and a limited number of customers are allowed in at a time due to COVID-19 regulations. Social distancing is required and must be adhered to and masks are compulsory.
  • Motorists only need their ID for motor vehicle licensing and registration renewals.
  • Motorists are reminded that they are not allowed to drive an unlicenced vehicle or a vehicle where a valid licence disc is not displayed.
  • Motorists are further reminded to update their cell phone numbers and email addresses when applying and paying for their licences online and at licensing offices as they will be receiving renewal reminders via their cell phones or email addresses.

SA’s jobless grows to 7.2m

By Siphelele Dludla for IOL

South Africa’s unemployment rate increased by 1.7 percentage points to an unprecedented 32.5 percent in the fourth quarter of 2020 compared from 30.8 percent in the previous quarter.

This is the highest jobless rate since the start of the Quarterly Labour Force Survey (QLFS) in 2008, with more people entering the labour market and actively looking for jobs.

The unemployment rate according to the expanded definition of unemployment, however, decreased by 0.5 of a percentage point to 42.6 percent in the fourth quarter compared to the third quarter.

Statistics South Africa (StatsSA) said that the number of unemployed persons increased by 701 000 to 7.2 million compared to the third quarter of 2020.

StatsSA said the number of discouraged work-seekers increased by 235 000, or 8.7 percent.

The number of people who were not economically active for reasons other than discouragement decreased by 1.1m between the two quarters, resulting in a net decrease of 890 000 in the not economically active population.

The QLFS also showed that the number of employed persons increased by 333 000 to 15 million in the fourth quarter of 2020

StatsSA said this resulted in an increase of 1 million in the number of people in the labour force.

The statistics agency said employment increased in all sectors in the fourth quarter, with formal and informal sector employment, private households and agriculture all recording positive outcomes.

The formal sector in South Africa accounts for 69.9 percent of total employment.

StatsSA said that trade, construction and agriculture had higher employment shares relative to their gross domestic product (GDP) contribution.

Employment increased in all industries, except finance and mining, with community and social services, construction recording the most gains.

 

Sandton City sees a spike in luxury purchases

By Londiwe Buthelezi for Fin24

The owner of Sandton City says footfall at the country’s premier shopping centre recovered to 87% of pre-lockdown levels on weekends in October.

Its other big malls, such as Eastgate in the East Rand and Liberty Midlands Mall in Pietermaritzburg are recording more customer visits on weekends than they did before the lockdown.

And what have people been frequenting the malls for? Looking at retailers’ turnover in Liberty Two Degrees’ malls, they have been shopping for luxury and tech goods, as well as more obvious grocery and supermarket items.

In fact, luxury brands contributed 8.1% towards total turnover at L2D malls even though they only account for less than 1% of mall space. The rapid recovery in demand for luxury brands is defying expectations in a country where over 43% of people are now unemployed if you include discouraged jobseekers after 2.2 million more people lost their jobs in the third quarter.

But a 10 point improvement in consumer confidence in the three months to end-September – after it reached a 33-year low in June as shown by the FNB/BER Consumer Confidence Index – was perhaps a telling sign that those who still have the ability to spend will gradually go back to their shopping habits.

L2D said the recovery for luxury brands was driven by domestic demand.

But while people are out shopping for luxury items again, they aren’t yet flocking to hotels. L2D said the Sandton Sun hotel is currently the only hotel in its portfolio that is operational. But its occupancy rate still stood at 30.9% in September, 10 percentage points above the 20.9% recorded in August.

The Sandton Intercontinental Towers, Garden Court and the Convention Centre have been closed since March 2020. But it’s not only hotels that are giving L2D a headache. The company said vacancies across its property portfolio increased again from 6.1% in August 2020 to 7.6% in October. Office vacancies increased to 15.1% by the end of October 2020, with Melrose Arch being the most affected.

“The effects of Covid-19 continue to drive the downsizing of office space,” wrote L2D in a trading update released on Friday.

The retail vacancy rate also continued to increase with Eastgate Mall being the largest contributor. But the company said its team had secured leases for further 900 square metres of space, which will reduce the Eastgate’s vacancy from 7.0% to 6.3% in the fourth quarter.

Image credit: Michael Turner

SA’s matric results shock

By Jamie McKane for MyBroadband

The recent matric results announced by Minister of Basic Education Angie Motshekga reflected a pass rate of 76.2%, down by more than five percentage points compared with last year’s results.

Additionally, the “real matric pass rate”, which measures the number of students who were enrolled in grade 10 two years earlier and passed their matric exam in 2020, is now 44.1%.

The Department of Education noted in its report that it was concerned with the significant decline in the pass rate for Mathematics and Physical Science.

A pass refers to the achievement of 30% or more in a subject.

Mathematics performance among South African learners remains shockingly poor, as more learners choose to take Mathematics Literacy over core Mathematics.

The matric results data reflects the Mathematics pass rate fell by 0.8 percentage points to 53.8%, while the Physical Science pass rate fell by 9.7 percentage points to 65.8%.

Few matrics achieve university mathematics thresholds
The Department of Planning, Monitoring, and Evaluation has set national targets for academic performance in mathematics and science.

It uses a threshold of 60% to determine the matric candidates’ potential to qualify for university faculties such as engineering, commerce, and medicine.

The latest matric results reflect a significant increase in the number of learners who achieved more than 60% for mathematics, although this figure remains shockingly poor compared with the total number of matrics.

Out of the 578,468 students who wrote matric exams, only 43,447 (8%) achieved more than 60% in Mathematics.

Compared with the total number of matrics who were enrolled in the same cohort in Grade 1 the figure is even more shocking.

The data shows that of the 1,072,993 students who were enrolled in grade 1 in 2009, only 4% went on to achieve more than 60% in matric Mathematics.

The move to Mathematics Literacy
A major factor that affects this performance is the steep decline in matrics choosing to do Mathematics.

Instead, most students now choose to study Mathematics Literacy, which precludes them from studying technical subjects at university.

Source: Eyewitness News

Master KG’s Jerusalema was the sound of 2020. It was the song that launched countless homemade challenge videos and even found its way into a presidential address last September.

“There can be no better way to celebrate our South Africanness than joining the global phenomenon that is spreading across the world, and that is the _Jerusalema_ dance challenge. So I urge all of you to take up this challenge.” – President Cyril Ramaphosa, 16 September 2020

Many South Africans and others across the world took up the challenge. Workplaces got involved and people marshalled their kids to join in, posting their videos on social media.

Type “Jerusalema challenge” into YouTube and the results go on for pages. The official music video has clocked over 344 million views on YouTube. Master KG bagged the Best African Act award at the MTV European Music Awards, beating Nigerian superstars Burna Boy and Rema among others.

News in the past few days that Warner International sent royalty invoices to various video posters in Germany sparked an outcry on social media – and just a little bit of panic.

The music giant charged various German government entities for using the song in their versions of the challenge. So what does that mean for us? Can anyone who filled some bored downtime during lockdown perfecting the moves and sharing their effort expect a bill for their troubles?

Eyewitness News spoke to Dumisani Motsamai, an entertainment lawyer and the man who takes care of legal and business affairs for Open Mic Productions – that’s Master KG and Nomcebo Zikode’s record label.

He said some people took the challenge on for their own gains.

“We have followed the news that Warner, our partners internationally, has actually been taken to task by many people on social media saying ‘you guys are being greedy, ‘we are doing this thing because of social [distancing], we are all down because of COVID’, and I think it’s quite on point. But there’ve been different versions of this challenge. There are situations where a child and their family are in their living room and they are doing the challenge, or they are outside and doing the challenge. That’s perfectly fine. But we have seen these challenges taking it a little bit too far, where really, what has been happening here is that people have been pushing their brands,” he said.

Companies and brands using the song to enhance their own social capital is the problem Open Mic will also be targeting, he said.

“I saw brands where you would see a drone showing a view of a company yard, then you will see their workshop, they dish out products, they make sure they give you a picture of every product they sell. The song is playing in the background, and because it is playing in the background, now I have an interest in seeing what this particular company is doing,” he said. “If it’s for private use and has nothing to do with commercialising the song, in other words, using the song in order to exploit the brand, in order to make a specific brand visible, there is totally nothing wrong with that.”

Picking out the companies and brands taking advantage of the feel-good song in between people who are using it for a bit of fun isn’t cut and dried, he said.

“There has been a thin line. Some of them will show maybe their logo at the beginning and it’s all about the dance. But some of them when you look at them, it’s all about the brand, the company that is doing the challenge and little about the challenge. Those are the ones that Warner and Open Mic has found. If the challenge is taken and someone is dancing with their family, individually, and has nothing to do with brand endorsement, has nothing to do with using the song to push a particular brand and put the brand in the face of people with the song in the background, then that’s fine.”

So what constitutes a brand or an advert? Presumably, those heart-warming videos of frontline healthcare workers at taking up the challenge won’t be targeted.

“Those are the critical examples that we will certainly not go after. You can see they were using it within the context of uplifting spirits during difficult times and within the confines of the call that was made by the president,” he said.

So if you did it for fun or to lift the nation’s spirits, you’re good. But if you used the music to shill for business, not so much. Motsamai said Open Mic was looking at local examples of brands exploiting the song and will request payment from them too, just as Warner International has done. While he didn’t have an exact number of companies they were going after, he did say there were “quite a few”.

“We will start politely [asking for fees] locally because we have seen there has been a lot of skipping of the line. We do owe it, not just to Open Mic, but to the people who were part of it. [Open Mic] owns the master, but we also have a duty to pay royalties to the people whose sound is embedded, whose performance is in the master, and in this case it is Master KG and Nomcebo,” Motsamai explained.

He also explained how royalties were due when a song was used for commercial outcomes.

“There’s royalties that, as Open Mic, we pay arising from synchronisation licences. So it is upon us to ensure that we pursue this instance and make sure that some or other kind of licensing is paid so that we can pay them as well. Yes, it’s income that comes to us as master owners, but it’s also income we have an obligation with our artists to pay over.”

It’s worth remembering that all the artists who make this music have to eat too. It’s been a very rough ride for their community as global lockdowns wiped opportunities off the board for them.

So if you took up the challenge, herded your kids into formation and posted the results online, you’re not going to get a hefty bill – or any bill – for that matter.

Image credit: Open Source Productions

Eskom granted 15% tariff hike

Source: MyBroadband

Eskom will increase electricity tariffs by 15.63% on 1 April 2021, following an agreement reached with the National Energy Regulator of South Africa (Nersa) for the 2021/2022 financial year.

The settlement was confirmed in a court order handed down by Justice Joseph Raulinga on 15 February.

Raulinga had in January 2021 heard Eskom’s application to have an earlier High Court order allowing the increases executed, pending Nersa’s appeal of the matter in the Supreme Court of Appeal.

The High Court in 2020 found that the power utility should recover R69-billion in a phased manner over a three-year period.

Nersa had reportedly negotiated with Eskom and reached a settlement of R10-billion to mitigate the risk of the court ordering a R23-billion addition, the amount the High Court had originally found Eskom was entitled to for the next financial year.

This would have resulted in an increase of 21%.

The new court order stated that “an amount of 5.44c/kWh will be added to the average standard tariff for Eskom customers in the 2021/22 tariff year making the aggregate standard tariff for Eskom customers in the 2021/22 tariff year 134.30c/kWh”.

Phased tariff increases
News of the increase comes a day after Eskom CEO André de Ruyter said the utility was working with Nersa to ensure its planned tariff increases don’t come as shock to customers.

These comments came during a recent episode of FMF’s The Free Marketeers web series, during which De Ruyter elaborated more on Eskom’s plans to reduce load-shedding, increase its operational reliability, and improve finances.

He maintained cost-reflective tariffs were required to address Eskom’s revenue shortfall, as the quantum of electricity Eskom sold had for a fairly long time remained flat, which Eskom attributed to a lack of growth in the economy.

According to benchmarking that the utility had done internationally “on a number of fronts”, it was absolutely convinced that Eskom’s electricity price was below the norm.

De Ruyter said Eskom was making good progress in negotiations with Nersa for price increases.

“We will be able, I believe, to address the electricity tariff increase issue in a way that does not cause a price shock to the economy,” De Ruyter said.

“We are at idem [in agreement] with Nersa that what we want to avoid is a sudden large increase in the cost of electricity that causes distress to households and businesses.

“What we are going to try and do within the confines of the regulatory system is to have a phased approach to this,” he added.

De Ruyter emphasised that the amounts on the bill that a business or homeowner would get differed from Eskom’s actual electricity selling price. These bills would include the additional charges that municipalities or other distribution authorities charged.

He submitted that those charges would in instances vary from justifiable, to very high, and above the norm.

 

SA’s Wonderbra, Playtex maker goes bust

Source: Business Insider SA

The South African manufacturer and licence holder of the Wonderbra and Playtex brands has filed for provisional liquidation.
More than 700 jobs are under threat.

Netwerk24 reports that Hanes has applied for voluntary liquidation.

The Durban-based company has the licence to manufacture Playtex and Wonderbra in South Africa and other African countries.

A Hanes spokesperson told Netwerk24 that there is currently no plan to appoint an alternative distributor for the products in South Africa.

This means that South Africans may not have access to Wonderbra and Playtex products in future. The Wonderbra online store has already stopped taking orders in South Africa.

Hanes blamed the weak local economy, worsened by the pandemic, as well as the business rescue process of a “big client” for its demise. Netwerk24 believes that this can only refer to Edgars, and the Hanes spokesperson confirmed that Edcon owes it money for stock that has been supplied.

Edcon’s brands – including Edgars and Jet – were sold off last year, as part of its winding up after doing business in SA for more than 90 years. The company was forced to near-collapse under a debt burden of billions.

The Hanes factory in Durban employs more than 700 people. IOL reports that the workers received their last salary in mid-January, and that they have not been able to work since then.

 

By Siphelele Dludla for IOL

Eskom has proposed taking over debt laden municipalities as it tries a different approach in recouping around R36-billion in debt arrears that continue to weigh down on its balance sheet.

Chief executive Andre de Ruyter yesterday said the utility was piloting an “active partnering” model where it would over the running of struggling municipalities, like it did with Malutia-Phofung Local Municipality in the Free State.

De Ruyter said non-paying municipalities were a “major problem” to Eskom’s financial sustainability, adding that 70 percent of the arrears debt was owed only by 10 councils.

He said that Eskom had applied a variety of measures to recoup the debt, including the so-called nominated maximum demand and attaching bank accounts and movable assets, but all these efforts had come to nought.

“We are implementing something that we call active partnering. We have tried many levers to persuade municipalities to pay,” De Ruyter said.

“But the model that we think is going to work best is something that we are currently trialing with Malutia-Phofung.”

In July last year, Eskom attached the bank account of Maluti-a-Phofung following a court order granted in 2018 as of its revenue recovery strategy.

Eskom said this was a result of the repeated failures by the municipality to adhere to its payment obligations for the bulk supply of electricity.

De Ruyter said Eskom would step in and acts as the agent for the municipality by maintaining the infrastructure such as substations while assisting with billing and false prepaid metres.

Eskom would also collect revenue on behalf of the municipality and then pays it to its bank account.

“With that part of the revenue into Eskom’s bank account we can assure that the current account is serviced on a regular basis,” De Ruyter said.

“And if you prevent further build up of incremental municipal debt, that’s a very good start towards addressing the debt problem.

“So we certainly think that this active partnering concept is far more a constructive and an appropriate way of engaging with our customers and ensuring that we get paid, and that service delivery can be addressed.”

De Ruyter said there was still a substantial ramp of legacy debt that needed to be addressed.

He said building a financially self-sustainable Eskom was part of his top three priorities.

Though Eskom’s staff costs had come down after 2 000 workers left the power utility last year, De Ruyter said the debt burden was still at unsustainable levels.

“We are currently labouring under an unsustainable net debt burden that varies between R460bn to R485bn, depending on the exchange rate,” he said.

De Ruyter also said that Eskom was not opposed to self-generation for domestic purposes without a license.

President Cyril Ramaphosa last week said the government will begin amending the law to allow for self-generation of between 1MW and 50MW to ease the burden on Eskom.

“There is a narrative that Eskom is opposed to rooftop solar generation, that’s not true,” De Ruyter said.

 

The evolution of retail in a post-pandemic world

The rhetoric of ‘retail is dead’ is incorrect. In fact, retail is advancing at a rapid rate to meet the consumer demands for in-store innovation and service solutions for their shopping requirements in this post-Covid era.

This was the view of industry thought leaders who participated in the Fortress Retail Evolution webinar that took place recently. This online event was hosted by Mike Stopforth and included a panel discussion between Vuso Majija, Alex Morar, Tshiamo Mathibela and Richard Mukheibir, as well as commentary from other retail experts.

A key insight shared by Graeme Codrington is that the pandemic has accelerated a lot of the trends that were already underway. “E-commerce is one of the biggest trends at this time, but it’s not merely about putting your products online and then hoping somebody buys them. It is not competition to traditional retail; it extends and expands traditional retail. You need to develop relationships with your consumers and then personalise your connection with them through the right in-store experiences that gives them reasons to keep coming back– it’s not just sales.”

When discussing the innovations that are in play at this time, Vuso Majija explained how the tenant mixes are evolving and changing in response to changes in customer behaviour. “Pre-Covid-19, we saw space consolidation by tenants, including the closure of non-performing stores. For example, banks closed branches and Edgars closed certain stores. On the other hand, certain retail categories including grocers, pharmacies, and athleisure tenants were opening new stores. This is directly because shoppers were focusing on essential items, health and beauty products and changes in clothing preferences.”

“Our biggest challenge as landlords at this time isn’t omni-channel retail, it’s economic growth. There is appetite from small and large retailers to open stores, but the current economic situation is the main hindrance,” commented Majija.

SMEs are key drivers of economic growth in the country, which is the area where landlords are hoping to attract new tenants to shopping centres. “Both large and small partners are looking for space – it’s not all doom and gloom. Our priority this year is to try and accommodate as many of those opportunities as possible,” added Majija.

Richard Mukheibir supported these views, saying, “As a franchise business, we couldn’t sell franchises during hard lockdown in our usual face-to-face manner. Our sales model changed to weekly webinars and within a month, I had spoken to more than 100 people about franchising. Subsequently, we have sold 11 franchises as at the end of January. There are now more stores, but the size of the stores has reduced, with lower overheads and in turn, more profit. This proved how discomfort has resulted in interesting, innovative solutions that led to growth.”

Bathu Shoes have directly contributed to economic growth by opening twelve stores during 2020, despite the pandemic and its difficulties. Tshiamo Mathibela shared her views on how this emerging business overcame their challenges: “We don’t have a blueprint for the way we do things. Instead, we focus on innovation and customer experience. For the new stores, we paid a lot of attention to in-store design elements which have technological features that engage our customers as they approach the store – for example, the levitating sneaker machine makes the shoes look like they are floating. We consider the music we play, the images we use and fragrances we have in stores in detail. Most importantly, our engagement with customers through trained sales executives in a safe manner that makes customers feel secure in store. Furthermore, we built South Africa’s first sneaker customisation lab as an extension of customer engagement.”

The conversation around offline or online, this binary notion of one or the other, seems to be fading into obscurity. Retailers are looking to landlords to aid and advice in giving their customers a more seamless omni-channel experience. Alex Morar, CEO of NEPI Rockcastle, commented on how this has played out in the Central and Eastern European region: “We will never go back to the way things were, but that is always the case. Circumstances and operations continuously evolve and there is not a “one size fits all, all the time” strategy that we can apply. Landlords and retailers are part of one ecosystem. We need to work together to provide the best retail experience for our customers and partners. Landlords need to make sure shopping centres are attractive, well located and that the entire tenant mix is advertised. By integrating the various retailers’ concepts into digital advertising, we can ensure we are where the customers are searching. We need to have a joint strategy to approach this omni-channel experience.”

Retailers have realised that customer experience is only as strong as its weakest link. When the retail ecosystem works together to provide operational excellence, it benefits the customers. Most importantly, paying attention to what customers need and the level of human interaction that people are looking for was they come out of lockdown.

Majija made the point that customer experience does not start with the sales executive in store. “It starts with the car guard in the parking area and includes everyone in the shopping centre environment. The entire ecosystem must provide a great experience. Upskilling all staff to interact with customers will increase the interactions and will add to the overall shopping experience.”

It is a known fact that consumer behaviour is dictating most of the changes that have been implemented in recent months. The number one priority for customers is convenience. Majija related how Fortress partnered with a company that focused on Click and Collect. This company opened booths at many of the Fortress centres and there are plans to open more booths this year. In addition, Takealot opened a depot at Pineslopes. “We have seen a massive increase in delivery services like Uber Eats at a number of our centres, especially those with lots of restaurants and fast-food outlets”.

Mukheibir discussed the trend of people thinking about the trend of reuse, recycle and repurpose and wanting to live a more nomadic and agile existence. “This trend is playing really well into our hands. People are selling unwanted items in a professional retail environment and others are buying those items at half the price with a six-month guarantee. The idea of “value shopping” is increasingly mainstream, fast-forwarded as a consequence of Covid, a re-evaluation of priorities and financial spend, and the sad reality of change in employment status.”

Morar is looking forward to the continued progress of retail innovation in multi-channel retail strategy. “We are optimising our operations using revolutionary technology. The end goal is to offer a better service to our final customers. It does not sound like a big deal, but the detail behind it is substantial. The faster and the better that we do this, both us and the retailers, the more we will be able to provide the adequate experience and bring products to the end customers via multiple channels, not just physical or just online.”

Mathibela added that her team is excited about proving that traditional retail is still alive and kicking. “Because South Africa still struggles with high data costs and people not wanting to share their personal details online, they are frequenting shopping centres. We are going to continue to expand our footprint and conduct research into other engaging features to put into these stores. Our biggest goal for 2021 is become even more accessible by tapping into the smaller communities that other retailers don’t think about.”

Majija reiterated that the shopping centre industry in South Africa accounts for about 72% of all retail. “That’s approximately R780 billion per year. It is an important industry and employer. We must keep growing and expanding the retail industry. It is a massive contributor to service delivery and to the provision of services and products in South Africa. All we need now, is the economic recovery and growth to improve so that we can see the retailers opening more stores and consumers get what they want and need too.”

 

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My Office News Ⓒ 2017 - Designed by A Collective


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