the ghost train
THE FINANCE GHOST: I don’t want a Mercedes-Benz showroom in today’s economy
Under-pressure South African consumers are now driving Chinese SUVs and Suzukis instead of high-end luxury German sedans
Fast-moving consumer goods companies in South Africa are dealing with a rather harsh reality: South Africans are cutting back on most things. When you consider the pressures of general inflation, an effective double tax on the middle class and up (they pay tax and then pay private school fees and medical aid and the like) and then all the other joys such as much higher vehicle prices thanks to a weak rand, it’s really no surprise that there are fewer treats in the shopping basket. In fact, there are just fewer items overall.
This isn’t just an anecdotal statement. In the past week, numbers came out from Libstar and RFG Holdings. In both cases, sales volumes moved in the wrong direction. Pricing increases and mix effects were necessary to try to get earnings moving in the right direction. This makes it exceptionally difficult to manage gross margins. Though pricing increases obviously help with margins, the problem is that manufacturing businesses are all about throughput a...
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