South Africa retail industry feels pain from coronavirus pandemic

South Africa retail industry feels pain from coronavirus pandemic
Vegetables are seen at a retail outlet in Cape Town. South Africa has embraced online shopping in a more natural fashion amid the COVID-19 crisis. (Reuters/File)
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Updated 24 August 2020

South Africa retail industry feels pain from coronavirus pandemic

South Africa retail industry feels pain from coronavirus pandemic
  • Households are tightening their purse strings amid rising unemployment in the country

JOHANNESBURG: South Africa’s retail industry is feeling the pain from the coronavirus pandemic on two fronts — store closures during lockdown and the sharply reduced purchasing power of households.

South Africa, the continent’s most industrialized economy, went into strict lockdown at the end of March, with people only allowed to shop for essential items such as food, medicine and winter clothing.

It is also the African country that has been hardest hit by COVID-19, with more than 600,000 cases and at least 2,500 deaths.

Restrictions have been gradually rolled back since June. Generally, business is now almost back to normal.

Nevertheless, retailers are reeling from the economic effects of months of suffocating restrictions.

South Africa’s Massmart — majority-owned by US giant Walmart — said that it expected half-year losses to widen by as much as 42 percent as a result of the nationwide lockdown.

Massmart was already in dire straits before the pandemic and closed a 23-store electronic retail chain and 11 wholesale outlets shortly before the lockdown came into effect.

“Retailers that were already taking the strain” in an economy that was contracting even before the outbreak have found themselves vulnerable to the virus fallout, said Casperus Treurnicht, portfolio manager at Gryphon Asset Management.

South African shoppers have had to get used to wearing a mask, having their temperature taken at the door and using hand sanitisers.

And even as the economy reopens, shops will continue to enforce such measures in order to protect both staff and customers.

Investment analyst Lulama Qongqo suggested that customers were likely to favor stores with visible hygiene measures.

“Retailers who cannot signal that it’s safe to shop in their locations are probably going to lose, and perhaps those are the ones more likely to be plagued by the question: ‘Can we survive?’” Qongqo told AFP.

But the measures come at a cost. Since the start of lockdown, South Africa’s second-largest supermarket chain Pick n Pay has had to budget for protective equipment, a voluntary severance program taken by 1,400 of its 9,000 employees and bonuses for front-line workers.

The company, which has a market capitalization of over $1.2 billion, warned that its profits in the first half could be halved as a result of the fallout from coronavirus.

Faced with rising unemployment and uncertainty about the future, South African households are tightening their purse strings. And that, in turn, makes it difficult for retailers to draw in customers.

The central bank has slashed lending rates by 300 basis points since January to boost spending, but economists fear it will not be enough.

“The consumer will be trading down and the operator with the best price and ease of buying will come out on top,” said Treurnicht of Gryphon Asset Management.

On the other hand, digital services and e-commerce are booming.

South Africa’s largest online shopping platform Takealot, which had estimated sales of around one billion rand ($57.9 million) per month between January and March, recently reported a surge in demand.

“South Africans have embraced online shopping in a more natural fashion and this trend is looking likely to continue,” said Matthew Leighton, spokesman for OneDayOnly, another digital sales platform.

Traditional brick-and-mortar retailers are also developing their omni-channel trade.

Durban-based apparel and homeware giant, Mr.Price Group, saw online sales grow by 75 percent during the pandemic.

Africa’s largest retail group Shoprite extended its online grocery delivery service.

However, analyst Qongqo said retailers should not lose sight of their target income group to avoid “throwing away money” on digital.

Owing to limited Internet access and high data prices, online sales still only account for a fraction of South African spending.


Flagship Huawei store in Saudi Arabia will be its biggest outside China

Flagship Huawei store in Saudi Arabia will be its biggest outside China
Terry He, the CEO of Huawei Tech Investment in Saudi Arabia, said the Kingdom is a very important market for the company. (AFP)
Updated 1 min 25 sec ago

Flagship Huawei store in Saudi Arabia will be its biggest outside China

Flagship Huawei store in Saudi Arabia will be its biggest outside China

RIYADH/JEDDAH: Chinese tech firm Huawei has signed an agreement with Kaden Investment for the launch in Saudi Arabia of its largest store outside China.
During the signing ceremony, at the Ministry of Investment headquarters in Riyadh, Investment Minister Khalid Al-Falih highlighted the importance of investment in information and communications technology, along with energy and entertainment, which are important pillars of the Kingdom’s Vision 2030 development plan.
He said that the agreement with Huawei is a symbol of the prosperity that comes from long-term partnerships, in this case a 20-year relationship with the Chinese business. It is a “long-standing digital partner and ahead of the curve” in spotting the potential offered by the Kingdom, he added.
“Huawei has played an instrumental role in Saudi Arabia’s development, collaborating with government and private enterprises to enhance our nation’s technological infrastructure,” said Al-Falih. “It continues to share our commitment to talent development, innovation and ambition, the values which underpin Vision 2030.”
Terry He, the CEO of Huawei Tech Investment in Saudi Arabia, said the Kingdom is a very important market for the company.
“It gives me great pleasure to announce the next step in Huawei’s commitment to the Kingdom of Saudi Arabia, to open the largest Huawei flagship store in the overseas market,” he added. “This will provide customers with an unprecedented, immersive full-scenario experience.”
Fahad Alarjani, a member of the Saudi Chinese Business Council, welcomed the agreement as a “huge success” for the Ministry of Investment, in collaboration with other Saudi ministries, in attracting high-tech investments to Saudi Arabia, “especially given that Huawei is considered a technology giant in China and the world.”
Alarjani, a doctorate-level scholar in sustainable entrepreneurship, SMEs development, and marketing strategies, said it is important that agencies in the Kingdom work together to create a fertile, world-leading environment for investors so that they can attract the latest, and sustainable, technological innovations.
“This will help to open new markets and speed up entrepreneurial development,” he added. “It is important to be aware of the fact that Chinese companies are working hard on being pioneers of 5G.”

The agreement with Huawei is a symbol of the prosperity that comes from long-term partnerships, in this case a 20-year relationship with the Chinese business.

Khalid Al-Falih, Investment minister

Saleh M. Al-Saleem, a professor of computer and information sciences at King Saud University, said: “The agreement will definitely entail training programs to transfer technology, and an investment by a company of this size in the Saudi market is an acknowledgment on its part of the huge size of the technological sector in the Kingdom.”


He added that the agreement opens the door for increased competition between the biggest international companies in the sector, and will contribute to lower costs and enhanced services in the Kingdom.
Saudi consumers also expressed excitement about the news. Pharmaceutical science graduate Ruwaid Mahalawi, 29, who lives in Jeddah and describes himself as a Huawei fan, said: “It’s nice to see big names coming into Saudi Arabia and this is only the start — it will inspire more companies to invest in the Kingdom and recognize the market is extremely welcoming.”
Saudis are a very tech savvy society, he said. “Children and adults alike use electronic devices — especially now, with the pandemic — whether it’s for work or schooling. I think it’s shedding light on how big the market is here.”
Mahalawi’s wife, 26-year-old Wajd Abdullah, is also a fan of the Chinese firm and said she ditched her iPhone for a Huawei Mate. She appreciates the added level of service that is provided when a tech brand sells its products through its own stores, rather than through third-party retailers.
“It’s always best when a brand’s own store opens,” she said. “You don’t have to worry about insurance for the gadgets or quality. The store staff will be more knowledgeable and helpful, too, and that helps to ensure customers will return.”
An opening date for the new store, which will be in Riyadh, has yet to be announced.