Economic turmoil felt by retailers and importers
By Denys Hobson, Investec for Business, Head of Logistics. With latest GDP stats indicating a contraction and the possibility of another inflation hike, the need for resilience across all pockets of operations is necessary.
By Denys Hobson, Investec for Business, Head of Logistics. After two consecutive months of encouraging growth, the BankservAfrica Economic Transactions Index (BETI) fell in February 2023, signalling deteriorating economic activity. The index fell by 1.3% to 131 index points in the month.
On a year-on-year basis, the BETI was down 1.9% – a result of load shedding, high interest rates and inflation which continues to not only directly impact the performance of businesses, but also on consumer spending ability. And there is no doubt the retail sector is feeling the pinch.
It has been widely reported how load shedding has plagued retailers – negatively affecting their trading hours resulting in reduced sales with losses that go into the millions. This, coupled with tightening consumer belts, has meant significant impact on their margins. Moreover, this knock-on effect has also resulted in many retailers having to deal with being overstocked – meaning capital is tied up in inventory that’s not moving quick enough. The high rate of exchange has dealt another blow.
The weaker Rand means that new orders are landing at a higher cost, which results in additional margin and working capital pressures. Businesses need to be disciplined in their procurement and avoid getting into positions of having to discount sales to move inventory
Should things continue in this trajectory, the market will continue to see import volumes slowing down. Most shipping lines continue to report a reduction in their year-on-year volumes carried which comes as no surprise considering the global economic pressures. At the same time, shipping lines are having to refocus on how and where they deploy their capacity, especially the new ship builds that need to be placed into operation.
Planning for shipments will always be a reoccurring need as the supply chain is ever evolving and in order to stay ahead of the curve, retailers will need to run a tight ship to ensure that big events whether local or global don’t affect business continuity. We have been operating in less than favourable times as of late and with latest GDP stats indicating a contraction, coupled with the possibility of another inflation hike, the need for resilience, across all pockets of operations, has never been greater. Use your working capital where it is needed most and plan, pre-empt and mitigate as far as possible while we try find our way back to better days.
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