Shops to suffer as sales fall

Zweli Mokgata

Zweli Mokgata

Small retail businesses are expected to close shop during the course of the year along with job losses in the banking sector as a result of depressed trade conditions.

The South African Chamber of Commerce and Industry (SACCI) yesterday revealed that trade activity was headed for its lowest levels.

Richard Downing, an economist at SACCI, said: "The prospect for an improvement in trade conditions appears uncertain and tighter financial conditions and cost pressures could worsen trade prospects without a turning point in sight over the short-term."

The trade activity index has been on a steady decline each month this last year to the current level of 43 for May. This is nearing the all-time low of 42 in May 2003.

The Trade Expectations index dipped to 46 in May, the lowest level since the inception of the survey in 2001.

Although the survey did not specify the sectors that were worst affected, Gina Schoeman, economist at Macquirie First South Securities, said jobs would be lost in the banking and retail sectors.

"The outlook is quite bleak for the next six months. We expect to see job losses, especially casual staff in retail outlets," she said.

According to Schoeman, small businesses that were started when the economy was experiencing a boom last year might face closure unless cash flow is managed well or additional capital to fall back on is available.

"On the flip side, we still expect to see job growth in sectors that benefit poorer communities. Agriculture, government services, electricity, gas and water and construction all stand to grow in the year," she said.

The combined effects of rising oil prices, interest rates and a weakening rand have resulted in a depressed outlook in the business sector.

Econometrix economist Russell Lamberti said: "Rising interest rates is the biggest factor. The retail and consumer sectors are continuing to weaken.

"We expect to see two further rate increases in the year, which will put increasing pressure on those sectors."