South Africa is facing one of the most difficult and turbulent periods since the beginning of its democracy, with load-shedding and inflation creating a “potent cocktail” that has put consumers under extreme pressure.
This is feedback from Pick n Pay chairman Gareth Ackerman, who spoke at the presentation of the retailer’s results this morning.
Ackerman said the past six months from March to August “were among the most difficult South African consumers have had to endure in the recent past”.
Load-shedding reached its worst level since 2008. This has had a disproportionately negative impact on the retail industry.
Food inflation topped 14% in March, its highest level in 14 years, and the price of fuel has risen by about 20% so far this year.
Interest rates also reached their highest point since 2009, thanks to 10 successive increases since the end of 2021.
“All of this has proved to be a potent cocktail that has once again put consumers under extreme financial pressure,” Ackerman said.
Most worryingly for Ackerman, none of the structural problems with the South African economy have been addressed adequately.
“When I spoke to you a year ago, I referred to several worsening problems in the macroeconomic and socio-economic spheres. Today, I am disappointed that we have seen little or no progress in addressing them,” he said.
In short, South Africa is negotiating one of its most turbulent periods since 1994, and there is significant uncertainty about the country’s future trajectory.
This was reflected in the retailer’s results for the first half of its 2024 financial year.
Group turnover increased 5.4%, with a substantial contribution from Boxer SA (16.1%). Other income grew 7.3%.
However, the retailer’s trading profit margin declined to 0.1% from 2.4%. Trading profit declined to R31.8 million from R1.25 billion the previous year – a 97.5% decrease.
This is mainly because trading expenses increased 13.7%, driven by energy and employee restructuring costs.
The retailer spent R396 million on diesel to run generators and keep stores open and R259 million on employee restructuring costs during the period.
This impacted the retailer’s expense growth and constrained Pick n Pay’s ability to respond to increased promotional activity in the market, the company said.
“The Group delivered a disappointing result in a period heavily impacted by load-shedding and increased competitive intensity,” Pick n Pay said.