South African Lockdown Rules Caused Record Drop in Retail Sales

South African retail sales dropped by double digits in April and May as lockdown restrictions limited the goods that could be sold and caused job and income losses as businesses were forced to close.

Sales plunged 50.4% in April from a year earlier, before recovering slightly to fall 12% in May, Pretoria-based Statistics South Africa said Wednesday in a report on its website. The April drop in sales is the most on record.

Key Insights

• Retailers are set for a tough year with weak consumer sentiment expected to affect sales. A sub-component of the consumer confidence index that measures the appropriate time to buy durable goods plunged to a record low in the second quarter, signaling an extreme wariness by consumers to purchase vehicles, furniture and household appliances.

• South Africa implemented a nationwide lockdown from March 27 to curb the spread of the coronavirus. For five weeks, almost all activities except essential services were halted and most citizens were only allowed to leave their homes to buy food, seek medical care and collect welfare grants. Month-on-month sales rebounded in May and rose by 74.2% as the lockdown was gradually eased and people were allowed to buy things like winter clothing again.

• Food, beverage and tobacco sales dropped 39% in April from a year earlier and 29.1% in May. A ban on the sale of alcohol and tobacco products also is weighing on state finances and led to an under-recovery of more than 1.5 billion rand ($91.2 million) in tax in April alone, according to Edward Kieswetter, the commissioner of the South African Revenue Service. After a renewed ban on alcohol sales from July 13, the industry applied for a deferred payment of more than 5 billion rand in excise duties for this month and next.

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