Analysis of South Africas Retail Industry

Analysis of sec Africas sell Industry administrator summary southeasterly Africa is a player in the local and external sell intentness. retail bid alone(a) melody operates and is run intoed by external forces as healthy as internal forces. The external forces argon commun whollyy referred to as macro and micro surroundal factors do a beam or an indirect blow on the sell intentness. sellers do non have much tick off over environmental forces impertinent grocerying variables. It is therefore crucial that every retail agate line enterprise identifies these forces and monitors them in solvent to reduce negative impact on emergence and profit margins.Retail is primarily about buying decisions and behaviours. economicals play a macroscopic go in influencing both individuals and organisations with regard to their buying decisions and behaviours. sulphur Africa like both global player has as a top priority the aim to grow in terms of stintingal activity.The ef fect that the retail sphere has on the SA economy and also on supranational impact of our retail sector on imports and exports ar evaluated. The much business is conducted the more(prenominal) tax is available to the government to fork up appropriate services and instal its several(a) development programmes.Facts that are critical to success of south some Africa retail application are looked in relation to Market size and area of growth of the retail industry in sulfur Africa? Growth prospects and issues related to the industry? Size of segment of the organized market what are its growth prospects? Major players in southerly Afri canful retail industry, their strategies for growth, and their position in the market? Emerging trends in the southeastern African retail industry? Opportunities challenges before the retailers in southeast Africa? advert findings are summarised, presenting the valid instruction relating to the contri furtherion of the retail industry in t he economic growth of the arena. In the final stage of the analysis, a conclusion signifying which segment of Retail is approximately attractive is made, detailing the reasons for much(prenominal) conclusion, from beginning to end showing greatness of the factors contributing to its attractiveness.Retail overviewRetailing encompasses all activities involved in marketing gods or services directly to final consumers for their personal non business rehearse. Although almost retailing is done in retail stores, in recent old age non-store retailing has been growing much immediateer than has store retailing. no(prenominal)-store retailing includes merchandising to the final consumers through direct mail, catalogs, telephone, the internet, TV internal shopping shows, home and office parties, door to door contact, vending machines and otherwise direct sell approaches. (Kotler, 2005) For purposes of this assignment only pull inal retail provide be discussed. on that prove a re different type of retailers classified in terms of some(prenominal) characteristics including the amount of service they offer, the breadth and depth of their intersection point lines and the relative prices charged and how they are organised. Major Store Retail types include Speciality Stores, discussion section Stores, Supermarkets, convenience stores, Discount Stores, Off-Price Retailers and Superstores. (Kotler, 2005 pg368)The sector encompassing wholesale and retail dish out, hotels and restaurants is an Copernican contributor to GDP and employment for southeastern Africa. It is unmingled that the preparations toward hosting of the 2010 FIFA realism loving cup have likely influenced a queen-sized increase in enthronisation in the sector as hospitality services, for example, gear up for this theatre of operations event. That said, the sector has been hard hit by the recent global economic slowd bear, evident in the contraction in growth of the sector itself, as rise as decreases in employment. The latter is of serious maintenance considering that the sector is South Africas third largest and also employs 22% of the ram force, with a large proportion being women from the informal sector. (Climate Risk Opportunity A15 Retail and Tourism, 2009)Key Players in the South African Retail Market Pick n Pay M etc.sh Ltd Massmart Holdings Ltd Woolworths Holdings Ltd Spar Group Ltd Edgars Stores Ltd. jibe to the Economist Intelligence Unit, the South African economy is expected to have contracted by 1.8% in 2009 in the wake of the sharp downturn in global contract and commodity prices, tougher financing conditions, weak household spending and low business confidence. Growth will bounce back in 2010 to 2.8% spurred by the hosting of the World Cup. However, the struggling sectors, mainly manufacturing and retail, will remain in doldrums. at that place is a risk that electricity shortages, will re-emerge in 2010-11, constraining energy-intensive s ectors, much(prenominal) as mining, as virgin base-load power station are not expected to come on stream until 2012. (rru.world desire, 2010)The overall Ease of Doing personal line of credit be slipped this year mainly due to a 22 number drop in the Starting a argumentation Indicator. South Africa simmer down ranks in the top 100 in eight indicators. The lowest ranking is in the Trading Across Borders indicator. (rru.worldbank, 2010)macro environment analysis fit in (Neiman and Bannet (2002), p. 32), Macro Environment fool aways in consideration of all the external influences that seize a bearing in the business, but is not compact infra its direct subject of influence. The importance falls on the renovation that indocile micro-variables bring about, and their implications for the business, yet enduring alongside, each other of changes in the environment, in charge to be able to forecast the changes in the environment which can turn to be a difficult mission.The universe of sociological elements that affect a companys ability to serve its customers or sell its thoroughlys and services. in that respect are six major macro environment forces cultural, demographic, economic, instinctive, governmental, and proficient. The cultural environment includes institutions and other forces that affect the basic values, behaviors, and preferences of the society-all of which have an effect on consumer marketing decisions. The demographic environment includes the study of human populations in terms of size, density, location, age, sex, race, occupation, and other statistical information. The economic environment consists of all factors-such as salary levels, credit trends, and bent-grass patterns- that affect consumer spending habits and purchasing power. The natural environment involves all the natural imaginations, such as raw materials or energy sources, needed by or affected by marketers and marketing activities. The policy-making environment includes a ll integritys, government agencies, and lobbying groups that influence or restrict individuals or organizations in the society. The technological environment consists of those forces that affect the technology and which can create new products, new markets, and new marketing opportunities. (Dictionary of Marketing Terms) regulative and Political EnvironmentRegulatory and political environment denotes local, state, national, and global legal philosophys and regulation which concern businesses. Many business decisions are motivated by the legal and regulatory controls (Solomon, Marshall Stuart. 2006, p. 52). Retail Merchants like other industries are subjected to a number of local and alien regulations. Political and legal factors contribute to the environment in which managerial decisions mustiness be made. (Daniels)1 They are an integral part of the retail operating(a) environment.There are regulations governing the conduct of business in various sectors of the South African E conomy.Regulatory bodies and processesthe South African Retail Council (SARC (Consumer Goods Council)2A co-ordinated retail body that will strengthen retailers position and voice in the industry. The objective of SARC is to deal with issues pertaining to retailers busys, the pressing challenges facing the retail industry as a whole including a fragmented retail representation to linchpin stakeholders and duplication of efforts and costs. As a collective voice for the industry SARC will shape the environment in which retail business takes place in South Africa. Fundamentally, SARC will contract on two event areas as impacting on the retail industry Economic legislative personal business and trade union movement transaction. As a unit within the CGCSA, SARC enjoys the benefit of sharing the active infrastructure and well ceremonious resources currently enjoyed by CGCSA. SARC is mandated to engage in debates and discussions of polity drafting which will impact on retailers to give direct input into the South Africas regulatory manakins. SARCs mandate with regards to labour relations would be to work with the government on labour issues especially regarding shift and justice compliance.Members also have an opportunity to network through seminars, workshops and conferences thus acquire an opportunity to learn and build relationships Information and Resources regular updates on industry position statements, policy papers or briefings and government submissions.Consumer Goods Council of South Africa3The Consumer Goods Council of South Africa is a Section 21 company representing over 11,000 member companies in the retail, wholesale and manufacturing of consumer goods. Its vision is to be a formidable and respected industry voice in South Africa. Its mission is to promote partnership amongst stakeholders crosswise the consumer goods industry in resolving shared non-competitive matters in the most effectual manner to the ultimate benefit of the consumer . (CGCSA)Competition CommissionIn confrontation the objectives to the Competition accomplishments, the commission is foc utilise on restricting anti-competitive holds, eliminating abuse of governing positions and strengthening merger control. Three institutions are created in terms of the acquit to achieve the above objectivesThe Competition Commission, which is independent but whose decisions whitethorn be appealed to the Competition Tribunal and the Competition Appeal addressThe Competition Tribunal, which has legal power throughout South Africa and is independent from the rivalry institutions andThe Competition Appeal Court, which has consideration similar to that of a High Court and jurisdiction throughout South Africa.(Department of flip and Industry South Africa) Sources disposal Communication and Information System, Waksmans Attorneys Business Guide to South Africa, DTIOffice of Consumer vindication4The Office of the Consumer Protection (OCP) functions as part of t he consumer and Corporate Regulation Division of the Department of Trade and Industry (the dti). The OCP administers the Consumer Affairs (Unfair Business Practises) Act 71 of 1988. The office also administers other legislation administered by the dti that contains consumer protection sustenance. The Office of Consumer Protection is committed to protecting consumers against inequitable business practices through complaints resolution, investigations, prosecutions, education and voluntary compliance programmes. It does this byPromoting the aspect of fair trade between consumers and service providersEducating consumers about their rights and dutiesProviding quick and fast resolution of complaints through negotiated settlementsInvestigating and resolving matters relating to unfair business practicesProsecuting OffendersITACITAC was established through an Act of Parliament, the International Trade Administration Act 71 of 2002, which came into force on 1 June 2003. The aim of ITAC, a s stated in the Act, is to foster economic growth and development in order to make headway incomes and promote investment and employment in South Africa and within the common land Customs Union Area by establishing an efficient and effective corpse for the arrangement of multinational trade subject to this Act and the gray African Customs Union (SACU) Agreement. The core functions are customs tariff investigations trade remedies and import and export control.Legal EnvironmentIn the context of Macro Environment analysis a legal system is the mechanism for creating, understand and enforcing the integritys in a specified jurisdiction. The South African Retail environment is a regulated one exhibiting elements of constitutional law, criminal, civil and commercial laws. According to (International Business Environments and Operations 12th Edition, Daniels, Radebaugh, Sullivan Pg 158) The constitution of a country is designed to guarantee an open and just political order, the crim inal law is designed to safeguard the complaisant order, the civil and commercial laws ensure fairness and power of business transactions. Aspects of all three components bear on the decisions made by managers and investors. This accurately describes the legal environment in which the South African Retail market operates.The legislation applicable in the country is a order used by the government to regulate retail business practices, delimit acceptable practices for conducting business transactions, to specific the rights and obligations of parties engaged in the business transactions and to afford legal redress when needed.(Int. bus Environ Operations)The South African legal climate is that of a democratic mixed legal system, engaging, common law, civil laws codified in various legislation, regulations and customary law. South Africa offers a balanced legal and political system safeguarding the interest of consumers as well as corporations, small average enterprises. The pol itical climate as well as the social environment is stable. The legal environment is derived partly from the political climate in a country and has three distinct dimensions to it The internal laws of home country the domestic laws of foreign markets International law in world(a). (http//www.exporthelp.co.za)Domestic laws govern marketing within a country, e.g. the physical attributes of a product will be influenced by laws (designed to protect consumers) relating to the purity, galosh or performance of the product. Domestic laws might also constrain marketers in the areas of product packaging, marking and labeling, and contracts with agents. (http//www.exporthelp.co.za)South Africas commercial legal system has been influenced by position law. English courts create and come through precedents just as South African courts do. (http//www.exporthelp.co.za)Central to all commercial activities is the contract. The purpose of a contract is to congeal the respective rights and obliga tions of the parties to an agreement and outline specific procedures or actions that must take place.Buyers and sellers are at times also subject to international law, which may be defined as that body of rules which regulates relationships between countries or other international legal persons. There is neither an international parliament sceptered to create international law nor an international police force to enforce it. The principal sources of international law are treaties and conventions. Other sources of international law are custom (i.e. international practice that is accepted as law) and the general principles of law recognised by civilized nations or natural law (the basis of human co-existence). The Incoterms (2000), as published by the International bedchamber of Commerce, are not, strictly speaking, part of international law.Another area in which international law plays an important role is in controlling the use of the sea and the environment outside the territoria l waters of countries. The control of international air travel by organisations such as IATA (International Airline rapture Association), or structures such as The Hague-Visby Rules in relation to ocean freight, may also be regarded as part of international law. (http//www.exporthelp.co.za)Legislation touch the Retail Market in South Africa- stab Laws in South Africa (Department of Labour South Africa)5(Employing Workers)Workers in the retail sector are protect by a plethora of legislation (listed below). noably the protection afforded by legislation and regulations deals with wages,, hours of work, leave, prohibition of child labor and termination of employment.Amended Labour Relations Act elemental Conditions of Employment (Amendment) Act, 2002 Basic Conditions of Employment Act, 1997 Basic Conditions of Employment ActLabour Relations Act Labour Relations amendment Act 2002 Employment Equity Employment Equity Act Skills teaching Act Unemployment Insurance Fund Rules fo r the conduct of proceedings before the CCMA Skills culture Act Sectoral Determination 9 Wholesale and retail sector No. 85 of 1993 Occupational Health and rubber eraser Act as revise by Occupational Health and Safety Amendment Act, No. 181 Of 1993Labour RegulationsThere is a plethora of regulations impacting the SA Retail labor and some of these are-Driven machinery, galvanic Machinery, Construction ,As ruffos ,Lift escalator and passenger conveyer, Electrical Installation, Environmental regulation for workplaces, Facilities, protection of competency. South African Paint Manufacturers Association Guide to Health Safety in the workplaceEmployment Equity Code of good practice Employment Equity, EEA 2 Employment Equity report, EEA 4 Income differential statement, EEA 10 Occupational categories, Technical Assistance Guidelines on the employment of people with disabilities) convey and make Laws (Dealing with Licenses, Registering Property)Construction Industry instruction Board Act, 2000 National Building Regulations and Building Standards Act (Act 103 of 1977) Land Reform (Labour Tenants) ActTax Laws (Paying Taxes)tax income Laws Amendment Act, 1999 Taxation Laws Amendment Act, 2004 Value-Added Tax Act, 1991See discussion on Tax below. character of South Africacommercial and Company Laws (Starting a Business, Protecting Investors, Closing a Business)Companies Amendment Act, 2004 Companies Act, 1973 Competition Act, 1998Civil Procedure Codes (Enforcing Contracts, Closing a Business, Protecting Investors)Magistrates Courts Rules of CourtBanking and Credit Laws (Getting Credit, Protecting Investors)Banks Act, 1990 Insolvency ActUnfair Business Practices Act no 71 of 1988EXCHANGE CONTROLS (SOUTH AFRICAN RESERVE BANK)Financial Regulations (Financial Services Board)Consumer Protection Act no 68 of 2008(Data to follow)Consumer Affairs (Unfair Business Practises) Act 71 of 1988The act deals with unfair business practise which is defined as any businesses practice which directly or indirectly has, or is likely to have, the effect of harming relations between business and consumers, unreasonably prejudicing any consumer, deceiving any consumer or unfairly affecting any consumer.Competition Amendment musical note, 20086In 2006 DT reviewed the current opposition regulatory framework. The review of the existing rivalry law regime was intercommunicate by a need to respond to the industrial policy objectives such as promotion of competitiveness Observations on the challenges of the disceptation regimen in dealing with uncompetitive outcomes resulting in artificially high prices to the detriment of consumers e.g. rival problems resulting from labyrinthine monopolies or multi-firm conduct To strengthen efforts on trust enforcement by introducing personal liability on directors who cause their firms to engage in cartel activities. (Department of Trade and Industry South Africa)To address these, the dti proposes to introduce Competition Amend ment Bill, 2008 (Bill). The Bill is not mean to run the current competition regime but is focused on key areas aimed at Strengthening the existing provisions of the Competition Act Providing the competition authorities with extra powers to deal robustly with uncompetitive practices and Enabling the Competition Commission to play a more proactive role in investigating markets and take measures to ensure market transparency.Competition Commission Act7 1998 (Werksmans Publications)The Competition Act affects every business operating in South Africa, and the serious consequences of contravention necessitate a fathom understanding of its basic principles. An overarching law, the Competition Act, prohibits anti-competitive behavior such as price-fixing and tacit consent between competitors, and the abuse of dominance. The Act also provides for a merger control regime in terms of which the prior approval of the competition authorities must be obtained for indisputable mergers and acqu isitions.South African competition law differs from foreign models in that the focus is not purely on competition issues, but also on certain public interest and social goals such as the promotion of small businesses, the interests of employees and black economic empowerment. South Africa has a well-developed and regulated competition regime ground on best international practice. South Africas economic system is predominantly based on free market principles. However, as in most developed economies, competition is controlled.The Act fundamentally reformed the countrys competition legislation, substantially strengthening the powers of the competition authorities along the lines of the European Union, US and Canadian models. The Act provides for various prohibitions on anti-competitive conduct, restrictive practices (such as price fixing, predatory set and calculating tendering) and abuses by dominant firms (firms with a market share of 35% or more).South African authorities embark ed on a major overhaul of competition policy, which led to the formulation of a new policy, the Competition Act, No. 89 of 1998, which seeks to achieve the following objectivesTo promote the efficiency, adaptability and development of the economyTo provide consumers with competitive prices and product choicesTo promote employment and advance the social and economic welfare of South AfricansTo expand opportunities for South African participation in world markets and recognise the role of foreign competition in the democracyTo ensure that small and medium-sized enterprises have an equitable opportunity to participate in the economy andTo promote a greater spread of ownership, in particular to increase the ownership stakes of historically disadvantaged persons (HDIs).Broad-Based Black Economic authorisation Act No 53 of 20038Broad-Based Black Economic Empowerment (B-BBEE) is a specific government policy to advance economic transformation and enhance the economic participation of blac k people in the South African economy. The Department of Trade and Industrys (the dtis) growth strategy includes a focus on kindening participation, equity and access to redress for all economic citizens, particularly those previously marginalised. The Black Economic Empowerment (BEE) Act, No. 53 of 2003, facilitates the dtis work in this area by establishing a legislative framework for the promotion of BEE empowering the Minister to issue Codes of Good Practice and publishing sack Charters establishing the BEE Advisory Council and making provision for matters connected therewith. (Department of Trade and Industry South Africa)International Trade Administration Act 71 of 2002,The object of the Act is to foster economic growth and development in order to sharpen incomes and promote investment and employment in the Republic and within the special K Customs Area by establishing an efficient and effective system for the administration of international trade subject to this Act and t he SACU agreement. (Department of Trade and Industry South Africa)Intellectual Property Rights9South Africa has a developed system of clever property law covering patents, industrial designs, copyright and trademarks. It is also a signatory to most of the international conventions in this field.Environmental RegulationIn terms of Section 24 of the Constitution and the National Environmental forethought Act (NEMA), the Department of Trade and Industry (the dti) is to take care that a sound balance is maintained between environmental and socio-economic aspects in all policies, plans, programmes and decisions, including the encouragement of investment, granting of incentives and all other interventions. the dti encourages existing industries to implement Cleaner toil (CP) as an internationally adopted tool that incurs savings, increases competitiveness and elevates companies to higher levels of resource and energy efficiency.the dti at the 2002 World Summit on Sustainable Developmen t established the National Cleaner Production Centre (NCPC), which implements CP in priority sectors, focusing on textiles, agro-processing and chemicals. NCPC sector projects are conducted in terms of Trade and Investment South Africa (TISA) Customised Sector Programmes (CSP).POLITICAL ENVIRONMENT (http//www.exporthelp.co.za)The political environment has an impact on the attractiveness of economic prospects of a particular country or region, also a companys international activities. The decision on whether or on to transact will be influenced by various factors including monetary penalties on a company or if unanticipated events in the political arena lead to the loss of income-generating assets. (http//www.exporthelp.co.za)The greater the level of involvement in a foreign markets, the greater the need to monitor the political climate of the countries business is conducted. Changes in government lots result in changes in policy and attitudes towards foreign business. Bearing in m ind that a foreign company operates in a host country at the goody of the government concerned, the government can either encourage foreign activities by offering attractive opportunities for investment and trade, or discourage its activities by bossy restrictions such as import quotas, etc. (http//www.exporthelp.co.za).Companies should therefore continually prepare their policies accordingly.Nearly all governments today play active roles in their countries economies. Although evident to a greater or lesser extent in most countries, government ownership of economic activities is still prevalent in the originator centrally planned economies, as well as in certain developing countries which lack a sufficiently well developed hugger-mugger sector to support a free market system. (http//www.exporthelp.co.za)Reflected in a governments attitudes and policies towards business are its ideas about how best to promote national interest in the light of the countrys economic and political resources and objectives. Foreign products and investment seen to be vital to the growth and development of the economy often receive affirmatory treatment from the government in the form of reduced tax, exemption from quotas, etc. On the other hand, products considered by a government to be non-essential, undesirable, or a threat to local industry are frequently subjected to a variety of import restrictions such as quotas and tariffs. It is also important to be aware of the nature of the relationship between South Africa and the foreign take aim market. This was a major consideration during South Africas political isolation. Fortunately, South Africas international relations have normalised and today South Africa is viewed very favourably, from a political perspective, by the rest of the world.The political environment is connected to the international business environment through the concept of political risk. Political risk is find differently for different companies, as not a ll of them will be equally affected by political changes. Political risk is of a macro nature when politically inspired environmental changes affect all foreign investment. It is of a micro nature when the environmental changes are intended to affect only selected fields of business activity or foreign firms with specific characteristics, (possibly by expropriation).When business is conducted in developing countries, the risks of greatest concern are civil disorder, war and expropriation. When business is conducted in industrialised countries, labour disruptions and price controls are generally seen to pose the greatest threats to a companys profitability. (http//www.exporthelp.co.za)Government PoliciesAs in any other industry, the retail trader has to follow and honour laws and regulations of the host country and central regulations. At some level of the state, the retailer has to pay licence fees, and comply with community health and fire, safety standards, as well as zoning and b uilding codes. At the point of the government and central controls can have a variety from pricing to employee hiring to the insurance of credit (Stewart Abbott. 1993, P. 115).South Africa operates an open market economy often retailers have challenges with compliance with the technical standards, regulatory and conformity assessment regimes are substantial, even when they are transparent. (Koch)(Technical Barriers to trade Barriers Faced by South African SMMES Michael A Peet Steven F Koch)Government regulation comes in many forms, such as tax regulation, labour regulation and regulations concerning the import and export of goods. These regulations have both costs and benefits, which government must balance. Regulation is a broad area that impacts on companies in many different ways. A study conducted and using data gathered from a number of South African Company surveys to investigate how government regulations impact on firms showed the following findings-Funding, grants and ini tiativesSources of reenforcement for Companies or individuals doing business in South Africa are mainly from Commercial Banks. Funding from Bank Loans affords tax efficient benefits where the funds are used for the purpose of trade and in the production of income. The interest paid on the impart is tax deductible, subject to the transfer pricing and thin capitalisation provisions. (DTI, 2009)Local borrowing virtually includes all forms of borrowing and financing facilities, e.g. bank loans, overdrafts, facilities and finance leases, credit extended to local suppliers of goods and services, borrowing limits are set on pre-set formula.Types of loans (DTI, 2009) include-Mortgage Loans each commercial bank applies its own policiesUnsecured loans to finance working capital through overdrafts, depending on good standing of the company. Alternatively the banks can require security in the form of personal guarantees by the directors, physical security such as trammel over unbounded prope rty, or a cession of the book debts of the company.Discounting and factor in discounting of e.g. foreign bills, trade bills, bankers acceptances or promissory notes.Corporate Finance for medium sized companies, tailor made solutions for larger or more complex needs.Export Finance and GuaranteesState Assistance The state owned industrial Development Corporation (IDC) finances the private sector to facilitate commercially sustainable industrial development and innovation to the benefit of South Africa and Southern Africa. Finance is in the form of equity, quasi equity and medium tern loan finance. Interest rates are competitive and risk related and based on the prime bank overdraft rate.T