Operating environment

Although the group’s trading environment is not an easy one to navigate, the group is confident that its depth of experience will assist it to unlock long-term opportunities in the markets in which it operates.

Low consumer and business confidence impact Spur Corporation’s customers and financial performance. This also puts pressure on franchisee profitability and affects employees.

South Africa’s real gross domestic product (“GDP”) grew at 1.0% over the 2019 financial year. South Africans continued to suffer high levels of unemployment, a weak currency, an unstable power supply and above-inflation increases in basic living expenses. Expendable income in the average household is shrinking because of sharp increases in the cost of water, electricity, rates and tariffs, the soaring price of fuel and the value added tax (“VAT”) hike from 14% to 15% in 2018.

Scepticism in the state of the economy is reflected in a Bureau for Economic Research report, which confirms that South African consumer confidence declined during the first quarter of calendar 2019.

Source: tradingeconomics.com

The International Monetary Fund (“IMF”) forecasts 3.3% global growth for 2019. However, consumers have reason to be cautiously optimistic. The United States of America (“USA”) has paused rate hikes; Europe, Japan and the United Kingdom (“UK”) have adopted more accommodative stances; and China is stimulating its economy to offset the negative effect of tariffs. The IMF expects a modest pickup in growth heading into 2020.

The 2019 African Economic Outlook from the African Development Bank shows that the continent’s general economic performance continues to improve. The growth of the middle class, higher population density as individuals move from rural areas into cities, and infrastructure improvement due to local and foreign investment will lead to growth opportunities for businesses.

In South Africa, the Reserve Bank’s decision to cut the repo rate by 0.25% in July 2019, means a reduction in the prime lending rate from 10.25% to 10%, which will assist cash-strapped consumers going forward.

Global trends that will define our future operating environment

In response to a challenging and evolving environment, it is necessary that Spur Corporation maintains exceptional operational discipline, backed by innovative marketing to attract customers and prospective franchisees.





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