With a possible call for a lockdown looming in South Africa, people are stockpiling for the worst case scenario. Although some may think it’s too early to be taking such panic-driven action, it seems this behaviour is perfectly aligned with global consumer behaviour trends caused by the different stages of the Coronavirus outbreak.



A recent<a href="https://www.nielsen.com/us/en/insights/article/2020/key-consumer-behavior-thresholds-identified-as-the-coronavirus-outbreak-evolves/?utm_source=sfmc&amp;utm_medium=email&amp;utm_campaign=newswire&amp;utm_content=3-18-2020">
Nielson’s report</a> highlights that there are key consumer behavioural changes that
occur parallel to each stage of the virus’s evolution. Nielson identifies that
these consumer changes are being mirrored by every country that is currently
trying to flatten the curve. Nielson identified the following stages together
with changes in consumer behaviour at each stage:



<figure class="wp-block-table"><table class=""><tbody><tr><td>
 Stage
 </td><td>
 Coronavirus Event Markers
 </td><td>
 Consumer Behaviour Change
 </td></tr><tr><td>
 Stage 1
 Health-minded Buying
 </td><td>
 Minimal localised cases of
 Covid-19 generally linked to arrival from another country.
 </td><td>
 Consumer’s interest rises in
 products that support overall maintenance of health and wellness.&nbsp;
 </td></tr><tr><td>
 Stage 2
 Reactive Health Management
 </td><td>
 First local transmission with
 no link to other location and first Covid-19 related death/s.&nbsp;
 </td><td>
 Prioritise products essential
 to virus containment, health and public safety. E.g., face masks
 </td></tr><tr><td>
 Stage 3
 Pantry Preparation
 </td><td>
 Multiple cases of local
 transmission and multiple deaths linked to Covid-19
 </td><td>
 Pantry stockpiling and
 shelf-stable foods and a broader assortment of health-safety products; spike
 in-store visits; growing basket sizes.&nbsp;
 </td></tr><tr><td>
 Stage 4&nbsp;
 Quarantined Living Preparation
 </td><td>
 Localised Covid-19 emergency
 actions, percentage of people diagnosed positive continues to increase.
 </td><td>
 Increased online shopping, a
 decline in-store visits, rising out-of-stocks, strains on the supply chain.
 </td></tr><tr><td>
 Stage 5
 Restricted Living
 </td><td>
 Mass cases of Covid-19.
 Communities ordered a lockdown.
 </td><td>
 Severely restricted shopping
 trips, online fulfilment is limited, price concerns rise as limited stock
 availability impacts pricing in some cases.&nbsp;
 </td></tr><tr><td>
 Stage 6
 Living a New Normal
 </td><td>
 Covid-19 quarantines lift
 beyond region/country’s most-affected hotspots and life starts to return to
 normal.&nbsp;
 </td><td>
 People return to daily routines
 (work, school, etc.) but operate with a renewed cautiousness about health.
 Permanent shifts in the supply chain, the use of e-commerce and hygiene
 practices.&nbsp;
 </td></tr></tbody></table></figure>



(table <a href="https://www.nielsen.com/us/en/insights/article/2020/key-consumer-behavior-thresholds-identified-as-the-coronavirus-outbreak-evolves/?utm_source=sfmc&amp;utm_medium=email&amp;utm_campaign=newswire&amp;utm_content=3-18-2020">source</a>)



Although South Africa has yet to
have any deaths, our own consumer behaviour is following this trend almost
exactly. Derek Cikes, COO of online payment solution Payflex has been following
the effects of Coronavirus on retail closely since the outbreak and says that
South Africa is somewhere between stages 4 (Quarantined Living Preparation) and
5 (Restricted Living).



“We’ve seen a significant
increase in online shopping both in our own data and at our merchants. South
Africans are looking to online stores to keep goods flowing while we all
prepare for a possible lockdown. But we’re also seeing the limitations and strain
put on online retail because of this surge in users,” says Cikes.&nbsp;



In line with Nielson’s stage 5
attributes, South Africa is clearly seeing the strain put on online grocers and
their supply chain due to the demand of social distancing and self-quarantine.
Checkers launched their app sixty60 to major SA cities promising to deliver
your groceries within 60 minutes only to have to adjust that promise due to
increased demand for the home deliveries. Pick ‘n Pay’s online store is also
showing signs of a supply chain disruption as a large percentage of goods are
unavailable or sold out.&nbsp;



In order to ease the strain on
the supply chain caused by panic buying, both Checkers and Pick ‘n Pay have
implemented rationing, meaning that consumers are only allowed a certain number
of each product per purchase. This action hopes to ensure that all South
Africans are able to get what they need for the weeks ahead. Other online
grocery apps such as OneCart are seeing an unprecedented increase in users. For
example, OneCart is usually able to deliver groceries within an hour, but
because of increased demand, now have a 2 to 3 day delivery time.



In its <a href="https://www.bain.com/insights/defending-retail-against-the-coronavirus/">Situational
Threat Report Index</a>, Bain &amp; Company states that the concept of the shopping
journey in physical stores is taking on a new meaning and importance, given the
potential for transmitting the virus at each interaction.&nbsp;



According to Bain &amp; Company’s
index, the world is currently sitting at a level 6 global threat which is
called Markets and Public in Multiple Major Nations Reacting Strongly. The
index combines official data with Bain’s own modelling. It evaluates
Coronovirus’s effect on global business, grading it from 0 (a negligible
threat) to 10 (severe global recessionary conditions).&nbsp;



South Africa is no different,
with stores and businesses scrambling to find innovative solutions to keep
customers safe and secure. For example, a Spar franchise in the north eastern
suburbs of Johannesburg recently put up perspex glass panes at each till to
create a physical divide between shopper and cashier while delivery services
such as Woolworths allow the drivers to drop the goods in a safe area outside
the house without coming into contact with customers. Uber Eats and Mr D have
implemented similar regulations.



Bain &amp; Company also note that
in most segments, the outbreak will probably reduce traffic and revenue. They
say that retailers of all types must be prepared to act quickly to mitigate the
impact of such turbulence, while also learning from the experience of their
counterparts in China and other hard-hit countries. And even as they strain
every sinew to address short-term disruption, retail executives also need to
begin medium-term planning for an eventual recovery.



Falling in line with Nielson’s
stage 6 “A New Normal”, Cikes believes that there will be a permanent change in
the way South Africans use e-commerce.&nbsp;



“If there was anyone who was reluctant to use online shopping as a viable way to get both necessities and luxury goods, Coronavirus is sure to change this. It’s forcing people to get online and this may change the way South Africans shop forever. This will also push retail to think about bringing their own stores online if they haven’t already,” says Cikes.



Content provided by Nielson

gettyimages-1208025894-594×594

Op-Ed: These Are The Six Stages Of Changes In Consumer Behaviour Led By The Coronavirus Pandemic

Kenya’s attraction of foreign direct investment (FDI) has no doubt been impressive in the past few years, buoyed by demand in consumer and real estate sectors.
East Africa’s largest economy for instance received an estimated $1.9 billion in FDI in 2015, a 65% climb from 2014, data by the African Development Bank (AfDB) shows, cementing its unique position among countries with no significant natural resources that are receiving significant FDI inflows targeted at their consumer-oriented sectors.
In its medium-term economic framework, Kenya actually aims to tap FDI proceeds to help boost its economic performance amid wobbly returns from agriculture that has for decades been its mainstay in terms of GDP contribution.
A new regulation sneaked through the East Africa nation’s Parliament requiring foreign companies to allocate 30% shareholdings in their operations in Kenya to local investors. This threatens to reverse gains in FDI attraction.
“It may be very expensive, if not impossible, for Kenyan individuals to purchase or invest at least 30 percent in a foreign company. The process of carrying out due diligence in a company in another jurisdiction to effect the share sale or allotment would not only be time consuming, but also expensive,” says a lobby of United States investors, the American Chamber of Commerce, in Kenya.
Investors who fail to comply with the fresh ownership rules will be slapped with a fine of KSh5 million ($50,000), so states clause 975(2b) of the Companies Act 2015 that was adopted last November.
“This requirement may do more harm than good to the Kenyan economy. To start with, this 30 percent rule flies in the face of Kenya’s goal of being a regional business hub. A major concern is the conflict between this rule and the fact that Kenya is a liberalized market economy which embraces the free-market ideology. This rule is a form of protectionism,” says Lois Musikali, a legal expert at the Nairobi-based Centre for Applied Research in Law and Policy (CARLP).
Several leading foreign firms, including Vodafone, Coca-Cola, Diageo, General Electric (GE), and Bharti Airtel, have operations in Kenya and authorities should strive to maintain a friendly and predictable business profile that would attract more investors.
“There are concerns that foreign companies will look elsewhere for an investment partner. It is also true that many Kenyans will find it almost impossible, in terms of cost, to acquire a 30 percent stake in a foreign company that wants to register in Kenya,” says Musikali, noting that the absence of guidelines for foreign companies on how or where to find these Kenyan citizens creates a loophole for rent seeking, whereby corrupt public officials could acquire stakes in foreign firms seeking registration in Kenya using taxpayers money thereby advancing crony capitalism.
These resentments are weighty and Kenya has no option but to expunge the regulations from its laws to prevent polarizing investment.
Kenya’s Attorney General Githu Muigai says the regulation will be repealed through the Finance Bill 2016 that is currently before Parliament.
“The clause was unilaterally inserted and does not reflect the investment policy of the Kenyan government. The rule will be repealed through the Finance Bill 2016 that is at the committee stage in Parliament,” he says.
Nonetheless it is baffling that the regulations were allowed to see the light of day because Kenya has previously unsuccessfully tried to introduce a local ownership rule in its telecoms industry after it emerged hat foreign firms were facing difficulties in securing local partners with the right expertise and financial muscle to support the business.
Under this rule foreign companies investing in the telecom sector were required to reserve at least 30% of their shareholding for local partners. This shareholding was reduced to 20% and eventually reviewed for discouraging foreign capital flows in the country.
Kenyan authorities must pull off this path or risk causing ripples among foreign investors given the realities of other outlier factors such as the prevailing global economic slowdown.
The International Monetary Fund (IMF) projects that Kenya’s FDI will fall by nearly a quarter this year, thanks to declining inflows into hydrocarbons exploration and an adverse global economy. According to the latest IMF update on the Kenyan economy, FDI could fall by 23.7% to $981 million.

No Choice But To Drop Contentious Rule

Retail and consumer markets are buoyant in developing countries throughout the globe. Personal incomes in many of these regions have increased steadily over the years, prompting the emergence of a growing middle class. Africa is no different. According to World Bank estimates, our continent is home to more than a billion people, a figure expected to increase to more than 2.5 billion by 2050. Perhaps, more crucially Africa has one of the fastest growing youth populations in the world.
PwC recently released a report, So Much in Store, which is an in-depth study into sub-Saharan Africa retail and consumer goods industries. The findings are compelling. The report provides a five-year outlook by focusing on 10 African economies that PwC believes offer substantial opportunities for retail and consumer businesses looking to expand into African markets. These countries include: Cameroon, Ethiopia, Kenya, Nigeria, Tanzania, Zambia and Côte d’Ivoire. Despite a slowing Chinese economy, and subsequent lower commodity prices, having a knock-on effect on real GDP growth in a number of African economies, there appears to be a silver lining. African economies predominantly reliant on commodities are beginning to diversify.
The growing consumption of the middle class in Africa has been driven by several key factors, such as: an increase in internet usage and accessibility; ubiquitous use of social media; private healthcare; and budding retail property developments (malls). Consumers in sub-Saharan Africa in particular are becoming more brand conscious and aspirational; they are willing to satisfy their needs and wants at a whim provided they can afford it.
“Africans are becoming more connected to global trends than ever before as a result of growth in internet penetration and travel,” says Anton Hugo, PwC Africa Retail and Consumer Industry Leader.
There’s been a spike in the level of consumer discernment when it comes to their purchasing decisions, thereby stimulating retailers to create new products to meet this demand.
One issue highlighted by PwC is that there are several misconceptions about doing business in Africa. Like going into any new business venture, there’s no such thing as a one-size-fits-all approach. Firstly, Africa is home to more than 50 countries, with even more languages, including indigenous dialects. It’s integral that companies seeking to enter African markets get their hands dirty, on the ground, to gain an understanding of the region. A business can ill-afford going into any part of Africa with preconceived notions. Instead, firms should take the approach of immersing themselves into the culture of the local people to understand the dynamics of business in that country.
In addition, having the right strategy cannot be over-emphasized. Strategy can strengthen or decimate a business in an instant. Some firms fail to recognize a strategy that has been successful in South Africa, for example, does not necessarily translate to success in other African countries. Firms must formulate a unique and well-thought strategy for the different markets it aims to enter to avoid becoming another casualty, similar to Woolworths in Nigeria.
Despite the varying challenges that are slowing growth in the retail and consumer businesses in Africa, the PwC report assures companies that the opportunities far outweigh the impediments. There are enormous opportunities yet to be realized: retail trade in Africa is still largely concentrated in informal markets; the online retail industry is still in its infancy and intra-African trade is incredibly low.
“Each country in Africa has its own value proposition. Smart investing in Africa means investors need to understand key regions and local markets. Furthermore, investors need to note that there are specific risk factors underlying the development of Africa. Despite these risks, investors and retailers will continue to see the African market as a huge opportunity,” says Hugo.
When opportunities aren’t realized, they remain idle. Development in Africa and expanding African retail and consumer businesses in Africa will require collective action from business and governments. Governments need to invest in infrastructure, such as transport networks, in order to open more markets.
It will be interesting to witness the progress of the African retail and consumer business sector in the next five years. The odds are in its favor; now let’s see whether it can thrive.

Opportunities must be seized

Private equity firms are becoming increasingly important in investing in thriving businesses and contributing to the development of African consumer markets. Numerous industry analysts are predicting that 2016 will see significant growth in this industry throughout sub-Saharan Africa as investors seek alternative asset classes to generate robust returns.
The private equity industry in South Africa has seen steady growth over the past decade and has attracted the cream of the crop of the banking sector, including investment bankers, merger and acquisition executives, management consultants and asset managers to name a few. Over the years, the number of these individuals who’ve elected to join private equity firms has increased. The audacious among them have opted to set up their own private equity funds to have autonomy over their investment strategies. The growing demand to recruit these executives, coupled with the increase in new private equity start-ups, indicates growth prospects for the industry at large. It also helps that the industry offers attractive remuneration packages and prestige that will elevate their career profile.
The Southern African Venture Capital and Private Equity Association (SAVCA) contends that although “&#8230;private equity is still under-represented in sub-Saharan Africa, the asset class presents an opportunity for investors to invest in a region that is experiencing strong economic growth and which is generating robust returns.” Some surveys have gone as far as predicting that around 80% of investors expect African private equity to outperform the African listed equity market in the next decade. This is a bold prediction, but one which cannot be dismissed.
Recent stats of the South African private equity industry are compelling. SAVCA reported in their latest RisCura-SAVCA South African Private Equity Performance Report that, “by mid-year 2015, the South African private equity industry delivered a ten-year internal rate of return (IRR) of 21.7%, up from 20.5% in March 2015. This performance compares with the 17.1% return from the FTSE/JSE All Share Total Return Index (ALSI) over the equivalent ten-year period.”
The reality of the matter is that the fast-growing African region presents countless opportunities for businesses and investors alike. When economies experience tangible growth they enable other industries and sectors to expand via the multiplier effect. For instance, Africa presently requires extensive investments in infrastructural development, energy, entrepreneurial support, skills development, research and development, and numerous others to drive economic growth.
Take a look at the need to improve transport infrastructure throughout Africa for instance. The construction of road networks, together with the upgrading of ports and airport facilities, will be done by engineering and construction firms. Some of these firms will be based in Africa and will require private equity partners that can provide the necessary financial and human capital support. Through this support, firms will have the backing and potential to grow exponentially.
The South African private equity market amounts to R170 billion ($10 billion) in assets under management, and although this may not typically appear large when contrasted with other asset classes, it is significant in the context of a niche asset class. SAVCA believes that the industry is maturing and this is demonstrated by the emergence of specialist private equity funds which are dedicated to focused industries or sectors depending on the scale of the fund. In addition, South African-managed funds have broadened their focus by exploring investments outside the country, indicating that the South African private equity market has developed over the years.
In the past, the private equity industry was largely concentrated in the developed markets in the United States and Europe. However, a number of emerging markets, such as South Africa, have seen significant growth over the past decade and, if future projections are anything to go by, the trend seems likely to continue.
Africa is teeming with opportunities for businesses to expand and private equity firms are the formidable partners that can bring this to fruition. Watch the space.

Watch this space

In recent years, African countries have steadily emerged as strong consumer markets at a time when emerging economies are struggling with sluggish local demand. Fast-growing economies have greatly improved household incomes over the years as reflected by the rising household consumption expenditure.
Already international consumer businesses have taken notice of this and are planning to invest. A recent Deloitte EMEA survey: Consumer businesses priority markets for 2014-2015 ranked Africa third, behind the European Union and China, as an important market for investment this year by European consumer businesses. The survey confirmed a growing trend since the close of 2013, retail and consumer sectors are among the top three investment sectors by foreign direct investments.
No doubt, more households with discretionary spending means Africa’s consumer market is poised for even greater growth. Data from the World Bank shows that between 2000 and 2012, Africa’s household final consumption expenditure grew at an average annual rate of 10.7%, rising from $360 billion and reaching nearly $1.3 trillion. Consumer demand is now projected to add around $ 1.1 trillion to Africa’s Gross Domestic Product (GDP) by 2019, with Ethiopia, Uganda and Mozambique expected to be the fastest expanding markets. Clearly, rising prosperity is slowly becoming an important component in Africa’s future growth.
It is widely believed that much of the increasing demand is attributed to the growing middle class. Owing to their ever expanding varied tastes and preferences, this group has served as an important force behind the current consumer boom. Over the three decades ending in 2010, the middle class has grown by 3.1%, compared with the overall population growth of 2.6% effectively accounting for 34% of Africa’s population or 355 million people by the end of that year. It is forecast that by 2030, about half a billion Africans will join this class and a further half a billion by the year 2060.
Another important factor contributing to the African consumption story is the rapid urbanization. Migrations to bigger cities have created large clustered urban centers which are supporting growth in domestic demand. According to the United Nations (UN), Africa’s urban population as a percentage of the total population stood at 40% last year, up from 27% in 1980. The same research projects that urban population will grow to 47% by 2030.
Closely tied to urbanization is the young population. Younger Africans who form a large share of the rising middle class, are estimated to number at more than 200 million, or just over 20% of Africans. This dynamic demographic is expected to grow to 321 million by 2030 which translates into a 57% growth from 2010. Potentially, young African consumers are expected to account for even stronger demand for consumer goods in the future. Already demand from the 15-year-old to 24-year-old age group is driving growth of the modern retail and sales of branded goods. Interestingly, a recent Deloitte survey of this group revealed that the majority of younger consumers use mobile phones to access internet. Investors need an effective channel to engage with this group, especially across large markets.
In view of all this, it is highly probable that as wealth, which historically has been concentrated within the elite, begins to trickle down to the masses, the region will become a magnet for international capital. Evidently, for companies seeking to invest, it is clear that Africa is not suffering from a lack of demand, but perhaps from a lack of supply. With growth projected by the World Economic Outlook at around 7.7% annually to 2019 (this is twice the rate projected for advanced economies in the same period), potential investors can rest assured of a sustainable growing consumption trend.
Presently, the region is the second fastest growing economic region behind Asia. Certainly, it is undeniable that Africa is indeed an attractive consumer market that is worth tak

half a billion reasons  to be optimistic

Consumer services and industries are overtaking resource extraction as the most attractive investment area in Africa, a trend that is being overlooked by many global investors.
According to the African Development Bank (AfDB), consumer spending amounted to $680 billion in 2008 – up from $150 million in 2000 – and comprising nearly a quarter of the continent’s gross domestic product. It is set to nearly quadruple to $2.2 trillion by 2030, with sub-Saharan Africa making up the lion’s share of spending.
This puts the region on course to become the world’s fastest-growing consumer market over the next two decades, says UK-based research company Capital Economics. Spending will be driven by the continent’s rapid population growth, rising real incomes, increased urbanization and better access to financial services.
Africa’s population is currently estimated at one billion and is expected to more than double to 2.4 billion by 2050, making it bigger than India and China combined. The key question is whether the continent’s strong pace of economic growth and development can create the employment and living standards necessary to support the anticipated surge in consumer demand. So far, the omens are good.
The AfDB believes that Africa’s middle class – those earning between $2 and $20 a day – will climb to 1.1 billion, or 42% of the population, by 2060. That compares to 350 million, or 34%, at present.
“Consumerism in Africa is a really big opportunity over the medium – to long-term – there are lots of people looking to buy lots of things. Huge parts of Africa are under-represented in terms of daily items – this is underplayed to some extent,” says Simon Venables, deals leader for Africa at PricewaterhouseCoopers.
Nonetheless, rapid growth of investment into consumer products and industries on the continent has already begun, according to Ernst &amp; Young (EY). In 2007, extractive industries represented 8% of foreign direct investment (FDI) projects and 26% of capital invested in Africa; in 2012, it was only 2% of projects and 12% of capital – despite the booming oil and gas sectors.
In comparison, services accounted for 70% of projects in 2012, up from 45% in 2007, while manufacturing activities accounted for 43% of capital invested in 2012, up from 22% in 2007. In an EY survey of 500 business leaders last year, mining and metals was still perceived as the sector with the highest growth potential in Africa, but the number who believe this, dropped to 26% from 38%. In contrast, interest in African infrastructure projects is increasing rapidly, with 21% of respondents identifying this as a growth sector versus 14% in 2012 and only 4% in 2011.
“These changing perceptions of relative sector attractiveness in Africa reflect the changing fundamentals of many African economies,” says Mark Otty, EY’s area managing partner for Europe, the Middle East, India and Africa. This included “the diversification of sources of growth – the increasing contribution of services and the growing consumer class – and of the actual FDI flowing into these economies.”
Overall, Africa’s appeal as an investment destination has been growing in recent years, in step with its average annual pace of growth of 5% during the past decade. FDI flows to Africa increased by 5% to $50 billion in 2012, while global FDI fell by 18%, according to the United Nations Conference on Trade and Development. The global financial crisis placed the continent on investors’ radar screens as its economic performance outshone many other global regions.
Global consultancy firms such as PwC, EY and KPMG have all reported a significant increase in enquiries about Africa’s investment potential in the past year.
KPMG Africa chairman Yunus Suleman says that telecommunications remains a big growth area as the continent still has the lowest teledensity rate. Financial services offer another opportunity – there are four bank branches per 100,000 people on the continent compared with up to 18 in other emerging regions. Health care is attractive, as is agriculture, since the continent has 60% of the world’s unused arable land.
Africa’s poor infrastructure is both a challenge and an opportunity for investment – the AfDB estimates that it needs $93 billion a year, mainly in transport and power generation. This has already taken off. In 2012 there were 800 infrastructure projects worth an estimated $700 billion in Africa.
Nonetheless there are other big barriers to investment on the continent, with negative perceptions still globally entrenched. The EY survey showed that 86% of businesses in Africa rate the continent as the second most attractive regional destination after Asia, while those with no business presence rank Africa as the least attractive.
“We are seeing some realism creeping in but distant and uninformed investors with no knowledge of emerging markets will find it difficult to get the risk/reward balance right,” says Venables.

More Middle Class Means Money

Tis the season to reconsider one’s investment portfolio for 2014. It is advisable to use a top-down approach by assessing the leading markets and then looking at emerging markets.
Most economists believe that there will be upside surprises, especially in the United States, but also in Germany and China. According to Nariman Behravesh, chief economist at IHS Global Insight, a global economic research firm, American consumers are feeling more upbeat.
“A lot of the unpleasant news is off the front page, like the government shutdown – and gasoline prices are down. The job situation is improving.&#8221; He provided a good holiday season that would build momentum going into 2014” he said. To back his theory, the Commerce Department reported that November retail sales rose by 0.7%, the biggest gain in five months. In conjunction with a revised stronger number for October, Americans had a strong start to the holiday shopping season. Some economists even upgraded their Q4 Gross Domestic Product (GDP) outlook based on the November retail sales number; Barclays raised its Q4 forecast to 2.2% from 2% and J.P. Morgan raised it to 2% from 1.5%. Consumer spending, or consumer sentiment, is the largest part of aggregate demand at the macroeconomic level. The attitudes of households towards the economy is a strong component of consumer spending. If consumers’ attitudes regarding the state of the economy is negative, they refrain from spending. Alternatively, if the state of the economy is good, people spend and invest with confidence, which makes consumer sentiment and spending a powerful predictor of the economy.
The next question is whether the Federal Reserve Bank (FRB) will taper? With the October government shutdown – where 800,000 FRB employees were told to stay at home because Congress failed to enact legislation appropriating funds for the 2014 fiscal year – a median of 40 responses in a Bloomberg News Survey of economists believe that the FRB will delay the first reduction in its bond purchases until March 2014. Because the government shutdown slowed Q4 growth and interrupted the flow of data, policymakers will pare the monthly pace of asset buying to $70 billion from $85 billion at their March 18-19 meeting. The US government has been trying to stimulate their economy through a bond-buying program known as quantitative easing (QE). This occurs when the Federal or any central bank creates money by buying bonds or other financial assets from banks. In turn, the banks then have more money available to lend. Higher loan growth makes it easier to finance projects in which people work, thereby helping the economy to grow.
The first program of QE saw the US government inject $600 billion into their economy. In total, the FRB bought more than $2 trillion treasury bonds and mortgage-backed securities, which is nearly 10 times the annual rate of bond purchases during the previous decade. In 2012, the stock of bonds on the FRB’s balance sheet rose more than 20%.
Quantitative easing was not intended to last forever. However, Ben Bernanke, former chairman of the Federal Reserve Bank, stated that the flow of purchases will depend on the incoming data and the assessment of how the labor market and inflation is evolving in the US. Therefore, tapering quantitative easing would mean that policymakers are regaining confidence in the US economy. Though bonds sold off sharply in the wake of Bernanke’s first mention of tapering and stocks exhibited higher volatility than previously, tapering will not be an immediate or dramatic event. It is likely to take place over an extended period of time so as to create minimal market disruption. The FRB may pull back slightly if the economy continues to strengthen. It can increase the program again if the economy slows or the financial markets are shaken by an unforeseen crisis. Because the tapering threat has been ongoing for so long, I believe that the markets have now either factored in or discounted that news. Therefore, the market will most likely react marginally upon an initial tapering.
Most economists do not expect interest rates to rise until 2015. The FRB’s policymakers will not raise rates from the current 0%-0.25% range until the unemployment rate falls below 6.5% – so long as inflation is contained. A recent Producer Price Index (PPI) report showed wholesale prices fell 0.1% in November, the third consecutive drop. The PPI is up just 0.7% on a year-on-year basis, while the core rate is up 1.3%. Bernanke would have preferred the rate of inflation to be around 2%, and is hoped that more “monetary accommodation” would push inflation up and the unemployment rate down.
I forecast a stronger dollar. Though it could hurt the US economy as it makes exports more expensive for foreign consumers, it also attracts investors, which is positive for the US economy. A stronger currency will also make it easier for the US to borrow and finance its debt, all other factors being equal.
In Europe, GDP expanded by 0.3% in the first three months of 2013, which signaled the end of the longest contraction in continental Europe in over 40 years. However, unemployment remained at 12.2% in September, which means the region’s faltering economic recovery has yet to be felt in the job market. The Commission said it expected the Eurozone’s GDP to grow by 1.1% in 2014.
“There are increasing signs that the European economy has reached a turning point,” said EU Economic and Monetary Affairs Commissioner Olli Rehn.
With the majority of economists forecasting a positive change in market sentiment in leading economies, due to progressive improvement in economic data, this is bound to build momentum in the emerging markets, which will export more into the US and Europe. Africa’s stock markets should gain upside momentum in 2014 as economies steadily improve.

Where The Money Is Going In 2014

It is a Saturday afternoon and like many other shopping malls, this Johannesburg center is thronged with people running errands and lugging shopping bags. Escalators and elevators are full. At the tills bored tellers ring up purchases as snaking queues of customers wait their turn, while others push packed trollies through chaotic aisles.
One would be forgiven for mistaking this scene for the Christmas rush, except that this is a weekend in mid-January. The number of shopping malls mushrooming around the country and the expansion of shopping centers cannot keep up with South Africa’s insatiable consumer culture. Shopping has gone from being a fun to an arduous and time-consuming task. It is no surprise then, that 2013 saw the largest increase in online shopping. This trend is bound to continue in 2014.
“It’s true that e-commerce in South Africa is booming and it’s incredibly exciting to be part of this adventure, which is partly what drove me to relocate from Germany: the opportunity to be part of this evolution,” says Kalahari.com’s new CEO, Caren Genthner-Kappesz, who relocated to Cape Town last year to head up the online retailer.
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“There have been a number of new entrants to the market in the last few years, which is fantastic because the more players there are, the more innovation there will be, and the more reasons people will have to enjoy the benefits of shopping online.”
It is hard to believe that before 1999, the word Kalahari meant the desert located in the west of Southern Africa. Today, the word lends itself to a pioneer in South African online retail. Last year, the Online Retail Brands Report ranked Kalahari.com as South Africa’s leading online retail brand, ahead of Amazon. That global online giant has aggressively dominated the online retail market in the United States. It is currently establishing its global footprint with localized branches in Europe and South Africa. Kalahari’s timeous delivery and the ease with which online shoppers can order anything from appliances to beauty products, has placed the brand in a strong position, according to Acentric Marketing Research, the agency that compiled the report.
“Kalahari.com has managed to maintain our lead as South Africa’s number one online store, and we believe that the key to doing this is to always keep your customer at the core of your business. We are extremely sensitive to our customer base and utilize various means to maintain open dialogue with them and actively action necessary innovation to improve the kalahari.com experience.”
With nine years of experience as general manager at shopping.com and as a director and general manager for eBay Express, both in Germany, Genthner-Kappesz fine-tuned the customer experience. She has also worked as a chief operations officer at brands4friends, an eBay subsidiary and market leader in flash sales in Germany. Genthner-Kappesz, who holds a PhD in Mathematics, maintains that the human element is what drives Kalahari.com’s success.
“It’s also essential to have the right team, and I’m very proud to say that I believe I am supported by some of the best and brightest available.”
Spurred on by the growing online shopping environment in South Africa, fashion vendor Style36.co.za and online furniture retailer 5rooms.com launched ‘Cyber Monday’ this December, as the festive season shopping frenzy began. The initiative was based on ‘Black Friday’, the day after American Thanksgiving in the United States, when items are marked down to a fraction of their price. With the tagline ‘One Day. One Sale. One Massive Discount’, the South African version was an exclusively online sale that offered discounts of up to 80%.
The inaugural ‘Cyber Monday’ sale was a bold move by the two smaller retailers that became an effective advertising vehicle as more South Africans turn to online shopping. The furniture retailer 5rooms.com had their biggest sale day since the site was launched in 2012, while fashion retailer Style36.co.za saw a record of 100,000 visitors in 24 hours and became one of the most-visited websites in the country on the day.
Despite the boom in online shopping, retailers still face stiff competition from shops and have to be a step ahead.
“At the end of the day retail is retail, and pricing is a key element of that. Obviously online retailers need to plan and negotiate very carefully in order to offer value,” she says.
“We are very big on malls and we like to taste and touch and see and feel. The more you move down in the pyramid the more tactile they are with objects. They’re looking at the stitching on the shoe, they’re feeling the fabric for how thick it is. They’re testing the stitching, they’re yanking and pulling and you can’t do that online. I don’t think that the trust is there yet for online shopping, and that’s understandable because we don’t even trust the stores we’re going into, we’re still inspecting everything very closely,” says Genevieve van Vuuren at the Consumer Insight Agency
The Cape Town-based consumer trends analyst also recalls the challenges faced by a Kenyan client who established an online shoe shop. While the website had a fair share of visits, customers preferred to try on the shoes before buying them. This made the website more of an advertiser than a vendor.
“I think as a culture we’re getting there, especially with electronics and stationery and stuff that you don’t have to try on like clothing,” says van Vuuren.
Building trust and a desire to purchase are key to building an online presence. In aspirational cultures like South Africa, products that consumers can’t purchase in their home country are most popular, but this has its drawbacks.
Kalahari.com has launched a cellphone application that could prevent customers from ever wanting to leave their couches. The Kalahari.com Scan and Shop app allows customers to find the best deals by scanning the barcode of a book, DVD, CD or gadget they’re eyeing out in a shop. The app compares the shop’s price to that of the online retailer’s price. Following in the footsteps of Amazon, Kalahari also offers a mobile shopping app as well as its own e-book reader.
“We believe that mobile internet is really the future in South Africa and we aim to be at the forefront of this. A recent survey of our customer base indicated that over 95% of smartphone users either already use shopping apps or would consider doing so. The development of a proprietary app allows us to deliver a much more sophisticated user experience to the user and also opens up the native technologies of the device to us.”
Since joining Kalahari.com in March last year, Genthner-Kappesz has tried to harness the popularity of mobile internet in South Africa.
Smaller retailers have fewer resources to throw at advertising and consumer innovations rely heavily on word of mouth. My Sister’s Closet is a popular women’s fashion boutique in Johannesburg, owned by sisters Sharna and Louise Darko. The shop carved a niche for itself by offering London’s latest trends to Johannesburg’s fashionistas. Last year, the Darko’s felt that the only way to expand the shop was through cyberspace.
“Going online was a natural progression for us as we were avid online shoppers back home in the UK. That coupled with the emerging global trend of online shopping, we knew South Africa would soon be jumping on the bandwagon. We were already getting requests from our customers to courier items to them if they couldn’t get to the store,” says Sharna Darko.
In February 2013, the sisters launched their e-commerce website. While they entered a market that was already dominated by online clothing fashion stores, such as Zando.com as well as retail giants Mr Price, it was well received. After observing a noticeable dip in their boutique’s foot traffic, they decided to trade solely online from August of that year.
“I think the size of our business works in our favor as we’re able to add that personal touch to our customer service. We also offer exclusivity, as we’re not shifting thousands of units of the same item,” says Sharna Darko.
Many e-commerce websites are reaping the benefits of engaging online with their clientele. My Sister’s Closet actively uses social media platforms, such as Facebook and Twitter, to communicate with their customers. The online fashion retailer also sponsors the wardrobes of popular television presenters. So, if a potential customer liked the kente cloth pencil skirt that they saw on the box, they can tweet the boutique. In minutes they’ll know about the availability of their size and will be directed to the online website – all from the comfort of their lounge. If the skirt is not the right fit, it can be easily returned without the hassle of an in-store exchange or the unforgiving harsh light of a fitting room.
Online retailers still need to build unfaltering consumer trust, as ultimately this will encourage customers to shop from the comfort of their homes rather than the inconvenience of bustling shopping malls. This means no pushing or shoving, no long queues when you have so many other things to do. One thing online retailers are getting right is that the customer’s time is limited.

Tag: Consumer

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