Thousands of shoppers excitedly gathered at the end of April for the opening of one of the largest malls in South Africa set between Johannesburg and Pretoria.
The Mall of Africa has opened.
The Mall of Africa has over 300 shops, including global brands such as Zara, H&M and even Starbucks. The push for these global brands is to attract the increase of young consumers in Africa’s economy, which is thriving on the demand for commodities.
However, the opening comes at a time where the economy is worsening in South Africa with rising interest rates and increased pricing makes buying more of a luxury than a necessity and demand for exports like gold and other metals in waning. A portfolio manager at Gryphon Asset Management Reuben Beelders hints at risk for “overbuilding in South Africa.”
The central bank is predicted to raise interest rates to slow down inflation that has been driven by wage hikes and surging food prices after the worst drought seen in decades.
“Interest rate hikes and slower salary increases will limit the employee’s ability to spend. This is bad news for large item sales like cars and furniture. It is likely that retailers will struggle for real growth in the next few months.” ~ Mike Schüssler, chief economist at Economists.co.za
With political uncertainty unsettling the rand currency, imports are more expensive and investors more frugal. Nevertheless, retailers are optimistic.
“We see a lot of potential in South African and in Africa…this is our third flagship store that we have opened in a matter of six or seven months.” ~ Amelia-May Woudstra, the public relations country manager for H&M South Africa
New malls have created thousands of jobs, which is needed. Currently, nearly half of all credit-holding South Africans or 9.9 million people are overindebted, according to Debt Rescue.
Nevertheless, this massive mall is satisfying the needs of South Africans. Retail sales grew by 4.1 percent year-on-year in February but are predicted to slow down.