Johannesburg - Australia’s no-frills chain Cotton On said it saw its South African stores as a key contributor to its revenue growth plans thanks to the rising number of young consumers and the ease of doing business in the country once entry hurdles were cleared.
“Our South African operations have reported double-digit growth every month since opening our first store here in 2011,” the company’s global chief finance officer Michael Hardwick said.
“South Africa still rates as one of the hardest for businesses to get established, however, it rates as one our easiest businesses to operate, once you have gotten through that regulatory establishment.”
Cotton On will double its revenue in South Africa, where it now has 171 stores, over the next three years.
The privately owned company has an overall revenue growth target of 20 percent year on year, which it has achieved for the past five years.
Its planned expansion comes as South Africa’s economic growth is forecast to stagnate this year while interest rates have risen by 200 basis points since early 2014, putting a tighter squeeze on consumer spending.
Rising debt
However, retail sales reached their strongest level in two years after rising 4.5 percent year on year in May.
People with jobs are buying more consumable goods and less durable goods such as motor vehicles, whose sales have dipped steadily since November, when there was small a bounce.
Shiny malls have sprung up throughout South Africa, creating thousands of jobs. But they come amid a backdrop of rising debt levels.
Almost half of all credit-active South Africans, or 9.9 million people, are over-indebted, according to debt counselling firm Debt Rescue, and the number will swell as interest rates and inflation rise while the economy continues to slow.
“There are certainly some challenges that the country is facing at the moment. The reality is that we still have a fast growing vibrant profitable business here in South Africa,” Hardwick said.
Swedish multinational retail clothing company H&M also plans to capitalise on retail growth by opening a further four stores this year.
REUTERS