With load shedding expected to continue into at least the second half of 2023, consumers are likely to face more price hikes as retailers and consumer goods companies spend more on power back-up, increasing the cost of doing business with additional pressure on input costs, Sanjeev Bhatt, chairperson of the SA Paint Manufacturing Association (SAPMA), said in his annual report to the recent SAPMA AGM in Pretoria.
Bhatt said the South African economy had during the past year faced a series of disruptions, including a slowdown in international growth, geopolitical tensions, acute power challenges, inefficiencies in state-owned enterprises, and climate change natural disasters.
“Although the power woes – load shedding, in particular – have spared no South African industry, mining and chemical manufacturing especially have been among the worst affected,” Bhatt stated.
“The year 2022 alone saw 200 days of load shedding – with the final quarter being the worst on record with only two non-load shedding days in 92 days. The first quarter of this year has proved to be worse: there was only one day without load shedding and longer blackouts. This has translated into lower mining (–1.9%) and manufacturing production (–3.7%) for January 2023 compared to January 2022.
“Domestic freight and logistics bottlenecks, coupled with flatter commodity prices, have further undermined growth prospects in the chemical sector, and increased global food and fuel prices have sent inflation rates over the SA Reserve Bank’s inflation target band of 3% to 6%. Headline inflation reached a 13-year high of 7.8% in July 2022,” he added.
Also speaking at the SAPMA annual meeting, Gary van der Merwe, chairperson of the SAPMA Retail Committee, said South Africa’s retail trade performance was down by 0.5% in February 2023 compared with the same month last year, following a 0.8% decrease in January 2023. It was the third consecutive month of declines in retail activity, mainly impacted by higher interest rates, rising fuel prices and electricity load shedding and elevated living costs for consumers, he said.
Van der Merwe said the largest negative contributors were:
- General dealers: -1.5% compared with 0.6% in 2022;
- Retailers in hardware, paint and glass: -7.7% vs -5.1%; and
- Pharmaceuticals and medical goods, cosmetics and toiletries: -3% vs -2.8%.
“On the plus side, demand picked up for new paint orders in March and April 2023. Revenue was either flat or slightly ahead of the curve compared with 2022 despite volumes for the first quarter decreasing by between 4% and 10%. Many groups have benefited from new stores and expansion plans but are unhappy with the performance of established outlets in densely populated areas. Margins remain under pressure, while increased operating expenses are hurting operating profits,” Van der Merwe stated.