Confidence in South Africa’s retail sector has fallen to its lowest point in over a year, as rising living costs and tight monetary policy continue to erode household spending power.
The latest Bureau for Economic Research (BER) Retail Survey for Q3 2025 shows that business confidence among retailers retreated to 32%, down from 42% in Q2, falling below the long-term average of 40% for the first time in a year.
Wholesaler confidence also weakened, dropping from 50% to 38%, highlighting a broader slowdown in trade sentiment.
Shoppers Cut Back
South African households, already grappling with high food inflation, elevated fuel prices, and record debt-servicing costs, have sharply reduced spending on non-essential goods. Retailers report that discretionary categories such as clothing, electronics, and furniture have been hardest hit.
“Consumers are under severe financial strain, and their spending behavior reflects that,” said Lerato Mokoena, an independent retail analyst based in Cape Town.
“While grocery and essential purchases remain stable, big-ticket items are seeing double-digit declines.”
Rising Costs, Shrinking Margins
Retailers are also battling supply-side headwinds. Load-shedding, increased electricity tariffs, and logistics inefficiencies have pushed up operational costs.
Many companies face a tough balancing act: either absorb the costs and hurt profitability, or pass them on to customers and risk further denting demand.
The slump in wholesale trade confidence suggests a knock-on effect on retail inventories, with lower wholesale activity likely to result in weaker sales volumes in the coming months.
Bright Spots Amid the Slowdown
Some sectors remain resilient. Confidence among new vehicle dealers rose by 12 points to 54%, its highest level since Q1 2022, and furniture retailers continue to see stable demand, buoyed by higher-income consumers.
Broader Economic Signals
The slump in retail confidence is significant because the sector is a major employer and a key contributor to South Africa’s GDP.
Retail and wholesale trade collectively account for nearly 14% of economic output. A sustained downturn could weigh heavily on growth forecasts for the final quarter of 2025.
“The retail sector is a bellwether for consumer sentiment,” the BER report noted. “The latest survey points to subdued momentum heading into the festive season, which is traditionally a high-demand period.”
Outlook
Analysts expect confidence to remain muted unless borrowing costs ease or real incomes improve.
The South African Reserve Bank has kept interest rates elevated in its fight against inflation, limiting household purchasing power.
Retailers are hoping for seasonal demand in the final quarter, though relief may be temporary.
Structural challenges—including unreliable power supply, logistics bottlenecks, and policy uncertainty—continue to weigh on the industry.
For now, both retailers and investors are bracing for a challenging close to the year, with confidence levels suggesting that South Africa’s consumer-driven recovery remains fragile.
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