In addition to political stability , the Kenyan government continued providing relief to its citizens by once again subsidising the fuel prices in August hence enabling pump prices to remain the same . Households in Kenya appeared to be thrilled by the situation as illustrated by the various indices .
At the forefront , households reported an improvement in general city and country economic conditions as both indices rose by 9 and 8 points respectively . Expenditure also bulged with the discretionary spending index escalating by 17 points and the household spending index growing by 9 points . Household incomes were also boosted with the household income index widening by 3 points while personal finance index increased by 4 points .
The promise of youth employment and financial support , a platform which the President-elect campaigned on , seemed to have marginally enhanced the outlook on jobs following his victory as the job prospects index strengthened by 2 points .
Turning to South Africa , the performance of its consumer confidence index has gone from bad to worse . Following a decline of 14 points in July , the index plunged by an additional 39 points this month decreasing from -48 to -87 which is the lowest level ever realized since the inception of the index . Both the index of future expectations and index of current economic conditions tumbled in similar fashion with the latter losing 31 points and the former collapsing by 42 points .
In August , hundreds of South Africans protested in the executive and legislative capitals of Pretoria and Cape Town against inflation which soared to a 13-year high in July . The protests were led by the trade union group Congress of South African Trade Unions ( COSATU ), a long-time ally of the governing African National Congress . While data from Statistics South Africa shows that the annual inflation rate reduced from 7.8 % in July to 7.6 % in August , Eskom , the primary supplier of electricity in South Africa indicated that they would begin load-shedding ( or powerrationing ) due to a shortage in generation capacity which will be detrimental for local manufacturers who are already facing challenges with managing their production costs .
The most recent Producer Price Index report released in July observes that the annual producer price inflation was 18 % in July 2022 which is a new 14-year high .
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Evidently , the soaring inflation has affected households as their real wages have diminished significantly leading to cutbacks in expenditure . To make matters worse , the higher interest rates means that the option for borrowing is no longer feasible due to the amplified interest payment costs associated with borrowing .
As such , South African households expect the situation to worsen . Despite a modest increase in the job prospects index of 2 points , both the general city and country economic conditions indices dipped by 40 and 44 points respectively . The expenditure and income indices also disintegrated with the discretionary and household spending indices faltering by 64 and 28 points respectively , while the household budget and income indices respectively slumped by 59 and 42 points .
With a surging dollar , retailers depending on imports need to institute measures to protect their bottom-line against currencyrelated losses
From a continental perspective , it is clear that the term subdued best describes the performance of consumer sentiment in 2022 . This is not only supported by the global consumer confidence index , but it is also backed at the individual country level where sentiment indices for most countries are below the January levels . However , the data shows that there are some countries which appear to be experiencing some form of recovery in consumer confidence while on the other hand , there are those countries whose situation is further deteriorating . The big concern for countries like Kenya who seem to be on the way to recovery is whether consumer sentiment will relapse and subsequently crash in the upcoming months .
In spite of this , our analysis suggests that the conditions will continue to be unfavourable for retailers in both the essentials and discretionary goods space . The situation will be even tougher for retailers whose operations depend heavily on imports because , according to the dollar index ( DXY ) which is at its highest level since mid-2002 , the value of the US dollar is on an upward trend . Therefore , these retailers must re-evaluate their operations to minimize the impact of an appreciated dollar on their bottom-line . The notion of passing on the increased cost to consumers may prove to be difficult especially in the discretionary goods space as this is going to result in further tightening by households who are currently faced with reduced real wages and diminishing job prospects . Instead , retailers may consider mechanisms to hedge against the rising dollar , or they could opt to source their inputs from local suppliers which will depend on their contractual obligations with international suppliers .
Despite the challenging environment with rising inflation , increasing interest rates and supply chain issues , businesses in Africa have an opportunity to turn these challenges into opportunities . There are opportunities to reduce reliance on import by sourcing locally , strengthening manufacturing to improve quality and price , and lastly meeting the changing needs of consumers .
For businesses that believe the status quo is sustainable , it will become increasingly difficult to pass on the rising cost to consumers and they will feel the impact on their top line but also their bottom line . This is especially crucial with the holiday season around the corner .
Yannick Lefang is the Founder of Kasi Insight , Africa ’ s leading decision intelligence company empowering business leaders and entrepreneurs to make crucial decisions with confidence . You can commune with him via email at : Info @ kasiinsight . com .