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Retail trading environment
While consumer spending in the Group's major markets of South Africa (SA) and the United Kingdom (UK) remained under pressure over the past year, developments in recent months have been positive for the prospects of consumers in both markets and supportive of a turnaround in retail spending in the medium term.

General elections in SA in May and the UK in July both had defining outcomes which resulted in changing political landscapes. In SA, the establishment of the Government of National Unity (GNU) was positively received in the market.
High interest rates persisted in both markets. However, in August 2024 the Bank of England (BoE) lowered interest rates for the first time in over four years while the SA Reserve Bank (SARB) announced a 25 basis points reduction in interest rates in September.
SOUTH AFRICA: TRUWORTHS
The domestic trading environment was marked by sustained cost-of-living pressure and high borrowing costs which further eroded consumers' disposable income. The second half of the period was dominated by social and political uncertainty in the build up to the five-yearly national election. Supply chain challenges, with a shortage of containers and extended delays at the ports in South Africa, impacted merchandise deliveries into stores from November 2023 and extended through to the first quarter of 2024.

South Africa's energy crisis abated in the first half of the 2024 calendar year as electricity load shedding was reduced significantly before being suspended from late March onwards. The absence of load shedding is positive for consumer sentiment and shopping patterns, retail trading and the economic growth of the country.
The inflation rate eased to 5.1% for June 2024 (June 2023: 5.4%). Food inflation slowed to its lowest level of 4.6% since the peak of the COVID-19 lockdown in 2020, while transport inflation decelerated due to slower increases in fuel prices. However, regulated electricity price increases are one of the main drivers of cost-of-living pressure for South Africans, with no respite in electricity costs expected in the short to medium term.

Despite inflation moderating and being maintained within the SARB's 3% to 6% target range for the past 12 months, the repo interest rate remained unchanged at a 15-year high of 8.25% throughout the financial period. Encouragingly, the monetary policy committee reduced the interest rate at its September meeting.
The pressure of interest rates being held higher for longer than expected, together with sustained cost-of-living increases, impacted consumers' ability to service debt. The TransUnion SA Consumer Credit Index, which measures the credit health of South African consumers, was 47 for the first quarter and 46 for the second quarter of calendar year 2024. While this indicates that the credit environment has deteriorated (below 50 is defined as deterioration), the pace of decline has slowed down from June 2023 when the index reached an all-time low of 39 points.
The labour market remains under extreme pressure in the country's low-growth environment. Unemployment measured 33.5% for the second quarter of 2024 (Q2 2023: 32.6%), with 8.4 million South Africans unemployed. Youth unemployment, which measures jobless South Africans aged 24 and younger, is at 60.8%. The prospects for sustainable job creation in the short to medium term are limited given the subdued economic growth in the country.
The improving outlook as seen by South Africans is reflected in the FNB/BER Consumer Confidence Index (CCI) improving to -12 points in the second quarter of 2024 from -25 points a year earlier. While confidence levels remain negative, this is the strongest CCI level reported in 18 months, with the improving sentiment driven mainly by middle- and low-income households. The CCI for the second quarter of 2024 was measured after the general election, but ahead of the formation of the new coalition government which has provided greater certainty in the country.
Consumer disposable income is expected to remain constrained in the short term, although interest rates are predicted to reduce further in the second half of the 2024 calendar year and into 2025 as inflation moderates. Increasingly buoyant sentiment, improved electricity supply and the introduction of the two-pot retirement system in September 2024, which allows for limited early retirement savings withdrawals, are all catalysts to stimulate retail spending.
The stable social and political environment that followed the national election and formation of the GNU has reduced the country's political risk, supported the strengthening of the Rand and created a solid foundation for reform which is forecast to translate into higher economic growth.
UNITED KINGDOM: OFFICE
Retail sales in the UK remained constrained due to pressure on household income, with sales falling in seven months of the past year and ending 0.2% lower year-on-year.
Tight monetary policy, together with slowing food and energy price increases, contributed to the inflation rate declining from 7.9% in June 2023 to achieve the BoE's 2% inflation target in May 2024.
After the end of the reporting period, the BoE reduced interest rates from the 16-year peak of 5.25% to 5.0%, the first interest rate relief since the onset of the COVID-19 pandemic in March 2020.
The GfK Consumer Confidence Indicator strengthened to -14 points in June 2024, the highest level since 2021, reflecting the renewed optimism in the UK's growth prospects. Confidence levels have recovered from -24 points in June 2023 and from the record low of -49 points in September 2022.
Economic growth forecasts for the UK have been raised for 2024 and 2025, with the retail sector expected to experience tailwinds from improving sentiment, wage increases again outpacing inflation, the prospect of further interest rate relief and the sustained low inflation environment.
The key factors expected to influence the retail trading environment in South Africa and the United Kingdom in the 2025 financial period are featured in the Review of 2024 and Outlook for 2025 and in the Chief Executive Officer's report.