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Economy

Retailers shift away from Africa expansion

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Africa is falling off the immediate radar of local retailers after the region posted its slowest growth rate in two decades in 2016, and with the outlook for 2017 looking as unpromising, most companies are changing their focus from expansion to improving customer experience.

According to the World Bank, growth in the Sub-Saharan Africa region slowed to 1.5% in 2016. The bank said the risk outlook weighed heavily to the downside due to heightened policy uncertainty in the US and Europe and continued weakness in commodity prices.

Speaking at the EY retail sector overview on Tuesday, Derek Engelbrecht – EY lead consumer products and retail partner – said African expansion was just not something most retailers were speaking of.

“Compare this to five years ago, the picture was very different. There was talk of aggressive store rollouts,” Engelbrecht said. “The publicly available data from the big 12 retailers’ in SA show that they are putting their money into store refurbishments and into their IT capabilities.”

The 12 big retailers include Massmart, Mr Price, TFG, Pick n Pay, Shoprite, Woolworths, Clicks, Spar, Dischem, Edcon, Truworths, and Holdsport.

These companies account for nearly R600bn in annual sales.

Data collated from these companies showed that in the latest six months, they grew merchandise sales an average 10.2%, while headline earnings increased 0.4%. Capital expenditure grew an average 6.4%.

The latest six months is dependent on retailers’ reporting cycle. For some it would have ended in September 2016, while for others it would have been December. The right strategy was becoming a key factor in determining the performance in a period, Engelbrecht said.

“Some companies expanded into Europe and the UK to diversify their earnings. When the rand strengthened in their latest six-month period, we saw that those companies lost out. But the general trend has been a renewed focus on the customer and investment in technology.”

The strong customer focus was grounded in technology, Engelbrecht said. IT played a critical role in investing in a single view of the customer; building online capability; enhancing efficiencies ” especially across supply chains and distributions; and reward programmes to enhance client insights.

Looking at profitability and other metrics, EY said clothing retailers had reported on average a 1.4% decline in like-for-like sales. Grocers increased their volumes 4.9% and those in clothing saw a decrease of 5%. Product inflation in clothing was at 11.1% and 5.5% for grocers.

Rising interest rates and currency depreciation would put a further strain on consumers’ disposable income, EY said. Retailers with more diversified geographic earnings would be better positioned to withstand the pressures.

“Grocers will face a multitude of challenges but are better positioned to report sustainable profit growth,” the firm said.

Challenges facing clothing retailers included foreign competitor presence and scale; renewed price pressures as the rand depreciates; and changing consumer expenditure.

Source: Business Day
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Economy

FairPlay takes VAT-free chicken fight to Parliament

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No consensus was reached on making chicken VAT-free and has effectively left the decision to Parliament. Photo: Simphiwe Mbokazi/African News Agency (ANA)

 

 

CAPE TOWN – Chicken came out as the clear favourite to be VAT-exempted for the support of South Africa’s poor, when stakeholders presented their responses to the Woolard Panel of Expert’s report in Parliament today.

The overwhelming majority of organisations represented, which included FairPlay, Cosatu, the SA Poultry Association (Sapa), PWC, the Institute of Economic Justice and the SA Chamber of Banking called on MPs to vote for chicken to be added to the VAT-free basket.

FairPlay, which supports jobs and opposes dumping and predatory trade practices, has championed the cause of VAT-free chicken, and expressed its gratitude that the other stakeholders agreed today.

“We were heartened by the support, because we believe is it essential VAT should be removed on the chicken portions most consumed by low-income households,” said FairPlay spokesperson Lionel Adendorf.

Adendorf told the Standing Committee on Finance that the move was essential for poor people and affordable for the country.

He said that the nutritional benefits of chicken made it an essential component of a healthy diet, to address issues such as the prevalence of stunting in South African children due to malnutrition.

Stakeholder responses

The committee is considering stakeholder responses to the report of the Woolard panel, which recommended a number of additional items for inclusion on the list of goods that are exempt from VAT.

The panel could not reach a consensus on making chicken VAT-free, despite noting strong arguments in its favour, and has effectively left the decision to parliament.

FairPlay believes that zero-rating chicken would be a simple and effective mechanism to provide targeted relief for lower-income households. For these households, “chicken is not a luxury but a necessity,” the FairPlay submission stated.

“The benefits of VAT-free chicken, particularly for lower-income households, are overwhelming.

“It is South Africa’s most popular meat, it is nutritious and is the major protein source for poor people. VAT-free chicken will therefore bring immediate economic and nutritional benefits to the poor.”

As for the concerns about the cost of VAT-free chicken, FairPlay argued that a comprehensive revision of the current VAT-free basket will indicate where savings can be made to be able to afford chicken.

“There are outdated items in the basket, such as R1 billion worth of pilchards that are being imported, with no benefit to the fiscus,” said Adendorf.  “The discussion in parliament should be about the best way to implement it and relieve the burden on those who suffer most from rising food prices.”

Combating malnutrition should be a national priority, and chicken is the highest-protein meat source per rand spent. Adding nutrient-rich food such as chicken to the VAT-free basked would bring relief to the poor and address the shocking statistics that show that 1.5 million children in South Africa suffer from often irreversible stunting.

FairPlay also urged consideration of the wider economic benefits of expanded chicken production which would follow reduced chicken prices. This could include 11 000 new jobs, R1 billion in tax revenue and an additional R3.7bn to gross domestic product.

“We can afford VAT-free chicken by fighting corruption and illicit trade that evades revenue collection,” FairPlay stated.

– BUSINESS REPORT

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Economy

CBN, government, financial institutions promise to tackle MSMEs’ challenges

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[FILE PHOTO] Central Bank Governor Godwin Emefiele speaks during the monthly Monetary Policy Committee meeting in Abuja, Nigeria January 26, 2016. REUTERS/Afolabi Sotunde/File Photo

 

 

The Federal Government, Central Bank of Nigeria (CBN) and other financial institutions in the country yesterday in Abuja said challenges confronting Micro, Small and Medium Enterprises (MSMEs) would be tackled to improve nation’s economy and reduce growing poverty.

Speaking at the 11th yearly banking and finance conference with the theme: “MSMEs: The Game Changer for Economic Growth and Development,” Secretary to the Government of the Federation (SGF), Boss Mustapha; Governor of the CBN, Godwin Emefiele; heads of commercial banks across the country as well as the President/Chairman of Council, the Chartered Institute of Bankers of Nigeria (CIBN), Uche Messiah Olowu, said projected economic goals for Africa, particularly Nigeria, would remained unrealistic if challenges affecting the contribution of MSMEs to Gross Domestic Product (GDP) with the sector are not prioritised.

Mustapha, represented by his Permanent Secretary, Olusegun Adekunle, urged investors to take advantage of government policies and maximise the opportunities in the Economic Recovery and Growth Plan (ERGP).

Emefiele said government’s bid to improve the economy could become a mirage without significant improvement in the contribution of the MSMEs sector.

According to him, the sector has continued to face numerous challenges, including infrastructure deficit, harsh operating environment as well as access to finance.

Olowu said the bankers would collaborate with concerned agencies of government and other bodies to strengthen the capacity of the operators of MSMEs to improve their competencies and the professionals in the banks to deliver satisfactory services to them.

(GuardianNG)

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Economy

U.S. describes Nigeria’s tax system as “weak”

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The United States (U.S.) Ambassador to Nigeria, Mr Stuart Symington has attributed poor social infrastructure development in Nigeria to the weak system of tax collection in the Country.

Symington made this known on Tuesday, while speaking at the 10th anniversary colloquium of the Nigerian Development Finance Forum, organised by Financial Nigeria Magazine in Abuja.

He blamed the Federal Government’s inability to discontinue subsidy and allow market forces determine electricity tariffs for Nigeria poor social service delivery system.

The U.S. ambassador said that the inability of government to eliminate subsidy on petroleum products and failure to hands off the fixing of electricity tariffs was hampering the provision of critical social infrastructure in the country.

He also attributed the low investment in the social services sector by government at all levels on low revenue from taxes and inefficient tax system.

According to him, the decision of the country to continue to transfer public funds to keep petrol pump price at lower levels, as well as electricity rates below cost-recovery levels, means that less funds were available to fund education, healthcare and other social sector services.

“One proximate cause of poor health, education and nutrition standards is low public expenditures. This in turn is related to very low public revenues due in fact to low tax rates and weak systems for tax collections.

“Low social spending is also as a result of transfers from government to petroleum and power sectors because fuel and electricity tariffs are below cost recovery levels.

“Fiscal, trade and other micro-economic policies tend to act as breaks on private sector initiatives on economic growth. Weak governance due to inadequate capacities or lacks of checks and balances also slows social and economic development.” He said

Symington was represented by Country Mission Director of the US Agency for International Development, USAID, Mr Stephen Haykin.

In his remarks, the former Minister of State for Health, Dr Muhammed Pate, berated Nigeria’s political class for failing to make decisions that would attract the much-needed investments in critical sectors of the economy.

According to him, the country’s leaders have consistently made choices that were not in the interest of the country but themselves.

He added that these choices had denied the country investments in the education and growth of its children.

Pate noted that Nigeria had wasted financial resources on frivolous expenditures adding that much had not been done to change the situation.

He said: “After extracting almost a trillion dollars’ worth of oil since our national independence, we have a situation where poverty is going on.

“We have effectively squandered an opportunity to utilise the natural resources that we obtain purely by chance, not by hard work.

“Instead of investing to uplift our people’s lives, our political elites by commission or omission chose the path of short-term comfort and purchase of loyalty through economically unwise or corruption riddled national expenditure at the expense of economically sound investments in both human and physical aspects to transform our nations.”

He further stated that a country seeking to realise its demographic dividends, must first undergo demographic transition, meaning a shift from high fertility and high child mortality to relatively lower fertility and child mortality.

“Nigeria’s demographic transition is slow, variable and achieving the dividend from the population is not guaranteed. Childhood development is going in the wrong direction particularly in northern Nigeria.

“Some areas in the security challenged north east, stunting is more than 60 per cent among children under-five while over more than 40 per cent of Nigeria’s children under-five are stunted,” Pate added. (NAN)

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