6 of 2024

  Newsletter No 6/23 February 2024

                          

             

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Rand firms as markets welcome Godongwana’s budget

By Lindiwe Tsobo

Picture: 123RF/chipus

The local unit hit its best intraday level in almost three weeks

The rand maintained its gains on Wednesday after finance minister Enoch Godongwana delivered what analysts viewed as a “balanced” budget.  

With debt the biggest threat to SA’s fiscal stability, Godongwana said the National Treasury would tap the Gold & Foreign Exchange Contingency Reserve Account (GFECRA) by drawing down R150bn to reduce borrowing costs. After many years of rand depreciation, the GFECRA now contains R506bn.

To further address fiscal pressure and support debt stabilisation, the government has proposed tax measures that will raise R15bn in 2024/25, including above-inflation increases in excise duties for alcohol products and tobacco, as well as an increase in the carbon tax and carbon fuel levy.

To provide some relief to consumers, the minister said there would be no increases in the general fuel levy for 2024/25, resulting in tax relief of about R4bn.

“The rand has been surprisingly resilient on the day, showing strength as an initial reaction to the government’s budget speech. The appreciation of the rand post the address, suggests some approval of proposals towards fiscal responsibility and environmental stewardship in 2024/25,” said IG senior market analyst Shaun Murison.

“There is also the suggestion of relief for consumers that they aren’t being burdened too much further through what is a very difficult economic juncture.”

Nitrogen Fund Managers director Rowan Williams said the use of R150bn of the gains on the GFECRA to bolster the fiscal balance sheet was seen as bond market positive and also helped to improve sentiment in the rand.

At 5.39pm, the rand had strengthened 0.24% to R18.8659/$, having touched an intraday best of R18.7475/$ — its best level in almost three weeks. It had firmed 0.17% to R20.4011/€ and 0.25% to R23.8046/£. The euro was little changed at $1.0814.

“Most of the other elements of the budget were in line with market expectations, with a continued commitment to fiscal consolidation with debt to GDP now expected to peak at around 75% from a previous forecast of 77%,” said Williams.

“The forecast of a primary budget surplus (spending before interest costs) was also taken positively, with interest rate-sensitive sectors like the banks and clothing retailers also reacting positively to the speech.”

The JSE all share index gained 0.11% to 73,029.61 points, while the top 40 was little changed. SA listed property rose 1.72%, retailers 1.2%, banks 0.81% and financials 0.69%. The precious metals and mining index fell 3.37%, resources 1.63% and industrial metals 0.5%. 

The Dow Jones industrial average had lost 0.22% at 6pm, while markets in Europe were mixed.  

Nike cuts costs by laying off 2% of its total workforce

Photo by Jerome on Unsplash

Nike, the global footwear and sports apparel manufacturer, has confirmed that the company is planning on laying off about 2% of its total workforce. That amounts to more than 1,600 people, based on the 83,700 employees Nike reported in its latest annual report.

Following announcing its cost-savings plan in December, Nike is laying off about 2% of its total workforce, the company confirmed. That amounts to more than 1,600 people, based on the 83,700 employees Nike reported in its latest annual report.

“Nike’s always at our best when we’re on the offense. The actions that we’re taking put us in the position to right-size our organization to get after our biggest growth opportunities as interest in sport, health and wellness have never been stronger,” Nike said in a statement. “While these changes will impact approximately 2% of our total workforce, we are grateful for the contributions made by all Nike teammates.”

In December, Nike slashed its revenue forecast and announced cost cuts amid growing concerns that consumers around the world are slowing their spending. The company said it was looking for up to $2bn in savings over the next three years.

When presenting the company’s latest financial results in December, Nike finance chief Matt Friend said its gloomier outlook reflected “indications of more cautious consumer behavior around the world” and also mentioned “increased macro headwinds in China and in Europe.”

Customers are changing their behavior, passing up discretionary purchases of goods — like expensive sneakers and athletic wear — for basics and experiences such as concerts and travel.  Bizcommunity

Pack up your old handbag and sell, sell, sell

By Thabiso Mochiko

Hermès Birkin and Kelly bags at a pre-auction photo call at Bonhams, Knightsbridge, London. Second hand bags from high-end brands such as Versace and Chanel are becoming popular among consumers. Picture: Supplied

Second-hand luxury Entrepreneurs reselling pre-owned luxury items are recording increased demand for their products, especially from thrifty and tech-savvy younger consumers.

goods drive a recommerce boom globally

Euromonitor, the world’s leading market analysis and consumer insights group, has flagged the online market for used goods as one of the global digital consumer trends for 2024. As a result, a local company is planning to expand its footprint.

In its top five global digital consumer trends for 2024, Euromonitor said “recommerce”, the online retail of pre-owned goods, is surging and evolving globally, driven by environmentally conscious young consumers. 

Brands and retailers are recognising the potential of the market and are actively adopting strategies to enter it, mirroring the convenience of e-commerce and making recommerce more widely accessible across product categories, the research firm said.

While the sale of used items is not new, demand for luxury items is growing, prompting The Changing Room — a Cape Town-based reseller of clothes and bags from high-end brands such as Versace and Chanel — to open a shop in Gauteng.

Founder Toni Tamaris said the company has been operating for nine years and focuses on luxury brands “because these products have inherent longevity based upon the superior quality of manufacturing and the materials used”.

This made them suitable for resale, in contrast to fast fashion items made to last a season.

Tamaris said that in the early stages of her business it was “hard to convince customers to purchase second-hand clothing, and even harder to convince them to buy these items online”. 

Before Covid-19, online shopping was not as popular in South Africa as it is today. “The appetite for the second-hand market has increased dramatically since we were first online in 2016, so it’s much more fun to operate in the sector and less time is needed in educating people towards a more sustainable way of living,” she said. 

Second-hand goods sales have thrived in emerging markets such as Ghana, Kenya, and Nigeria for decades, but in recent years the segment has seen significant growth globally, particularly in developed markets. This has been supported by the ease of access through online offerings, the higher cost of living and rising environmental concerns, said Christele Chokossa, consultant at Euromonitor International.

In South Africa the online second-hand market consists of popular lifestyle products such as clothes, bags, and shoes, and luxury products in those segments are gaining momentum

Christele Chokossa, consultant at Euromonitor International

In South Africa the online second-hand market consists of popular lifestyle products such as clothes, bags, and shoes, and luxury products in those segments are gaining momentum because “they tend to come with added value in brand equity and perceived quality”, Chokossa said.

Tamaris said The Changing Room makes about 70% of its sales online, while “our website drives traffic to our physical store. We also have customers who prefer to shop in-store as opposed to online, as well as tourist drop-ins and stylists from the film industry”.  

Customers’ ages range from the early 20s to the 80s. The Changing Room delivers to all African countries and beyond.

There is also an increased demand for second-hand furniture and electronics. iStore and companies such as TechMarkit sell refurbished smartphones, tablets, and laptops. 

At pre-owned furniture and décor retailer, New To You, founder Tracey Tonathy stocks many items from clients that are emigrating or semigrating. She says “decent, comfy sofas” are always in demand, while coffee tables and bedside tables are also popular. 

Tonathy started her business in 2010 when she could not afford the retail prices for new furniture and décor items. “I wondered what people did with the high-end items they no longer could use and saw a gap to exclusively sell high-quality, gently used items.  I started out at my home and called all my friends and my network at the time and asked them to give me their items they no longer needed, or could no longer use.” 

Tonathy now runs a consignment store, which means that once items are sold she takes 30% commission and the rest goes to clients.   

Chokossa said local online recommerce is dominated by transactions between individuals and small businesses, hence its prevalence across social media platforms such as Instagram. However, as demand rises and the perception of second-hand goods evolves, more brands and retailers are likely to recognise the significant potential of such offerings.

The trend is already noticeable in developed markets, as reflected by the influx of retailers such as Zara and the rapid expansion of start-ups like Vinted in Europe. The shift is also likely come to categories such as children’s wear and toys as they are recurring purchases and likely to attract parents seeking value propositions and to consolidate brand loyalties, Chokossa said. 

100 Billion Items of Clothing Are Produced Each Year

That translates to nearly 14 items for every human being on the planet. Based on these jaw-dropping high figures, it should come to no surprise that global clothing production represents the third largest manufacturing industry in the world, preceded only by the automotive and technology industries.

 

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