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
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.
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.
- The global food shortage is a recognised challenge, due to a shortage of water and land for sustainable farming.
- There will be a rise in renewable energy sources as global warming forces the world to become more environmentally conscious.
- There will be a focus on ethical sourcing and the responsible use of resources.
- Food production will become more specialised, with improved logistics and planning. There will be greater automation
in the farm-to-plate food production and distribution chain.
- As a counter trend, this will lead to a rise in the urban farming industry.
INNOVATION AND TECHNOLOGY
- The trend towards online purchasing may contribute to the demise of shopping malls.
- There will be increased automation in how orders are placed and in payment technologies.
- The rise of loyalty data and marketing technology mean that consumers expect mass customisation. This means the group needs to be flexible and focused on what it offers.
- Restaurants need to adopt simpler business models as consumers desire more niche dining experiences.
- Social media means that all brands are under constant scrutiny. Consumers expect accountability and honesty. Consumers question the information available online, as it is perceived to be one dimensional.
- Food quality is non-negotiable. Consumers have become more health conscious, more informed, more aware and more vocal than in the past.
- Consumers want transparency in sourcing. They value their health and want to know what goes into their food. This is shown in the rise in vegetarianism and veganism.
- Consumers want improved responsibility by companies in terms of environmental and social impact.
- In this space, over-regulation can become
- Consumers are becoming more demanding. They want speed and convenience and go to restaurants for the experience.
OUR WORLD OF WORK
- Effective transformation at all levels remains key to a thriving South African market.
- There continues to be a shortage of critical skills in the food services industry. Skills need to become more specialised and cross-skilling is important.
- Work environments are becoming more flexible. Employees want more of a work/life balance and the ability to work remotely if feasible.
- New food service models, like order-in, pop-ups and self-service, will have an impact on restaurant employees.