Flood of foreign shoppers may fuel inflation in SA

JOHANNESBURG – South African shopkeepers are benefiting from a flood of people crossing the border to stock up on goods no longer available in crisis-hit Zimbabwe, but there could be trouble in store on the inflation front.

“We’ve seen a huge escalation in the number of Zimbabweans in the last four weeks. The conditions of (supermarkets) over there is shocking,” said Pieter Koekemoer, manager of a supermarket on the Zimbabwe-South Africa border town of Musina.He said Zimbabweans are coming to Musina to buy basic necessities like rice, milk, bread and the staple maize meal, and he has had to take on extra staff to keep up with demand.What’s good for trade in Musina may not be so good for the Reserve Bank as it struggles to keep a cap on South African inflation.It will add to red-hot consumer demand which is already being blamed for driving inflation.This has breached the upper-ceiling of the central bank’s three to six per cent CPIX target band for three months in a row.Statistics show South African spending continues at a brisk pace.Retail sales for May grew by 9,5 per cent year-on-year from 5,9 per cent in April, appearing to shrug off two percentage points of interest rate increases since June last year.Higher borrowing costs have done little to dampen the spending spree and the central bank has warned that it will act to rein it in.The Reserve Bank again lifted rates by 50 basis points 9,5 per cent in June and has hinted that it may be the start of a fresh monetary tightening cycle.There may be little the bank can do, though, if a new wave of consumers is helping to keep South African sales ticking – and may continue to do so for a long time given the economic troubles of once-thriving Zimbabwe.It is not just Zimbabweans who are flocking to South Africa.”Retailers at the border are reporting up to 75 per cent growth in turnover, their stock is flying off the shelves,” said Munyaradzi Mandizha, Editor of a newly launched newspaper targeting the cross border trading industry.”The copper belt in Zambia is booming, and those who would have sourced their supplies from Zimbabwe are now coming to South Africa.So, we expect more and more traders to come to here, from as far as Kenya,” Mandizha said.Zimbabwe has been battered by crippling shortages in foreign currency, petrol and food.Economists put inflation for May at 4 500 per cent.BUOYANT DEMAND Research conducted by British-funded ComMark Trust last year found that cross-border shoppers could be pouring up to N$20 billion a year into South Africa’s economy, but industry players say this could be a conservative estimate.One bus company official said the number of buses ferrying shoppers from Zimbabwe has doubled in the past year, and the shrinking manufacturing industry in that country has forced Malawians and Zambians to come further south for supplies.Joyce Essel-Mensah, manager of tertiary sectors at Statistics South Africa, said the activity in the border towns is just the tip of the iceberg because most shoppers travel to the financial hub of Johannesburg.”Most people go up to Johannesburg anyway because it is cheaper.Very few shop in the border towns,” she told Reuters.Analysts said the demand from South Africa’s neighbours could help explain the strength in retail sales, even though it may not be the main contributor.”There’s bound to be a big impact in some areas, especially the lower end of the retail market, if you consider that some Zimbabweans in South Africa have started sending groceries instead of money,” said Mike Schussler, economist at T-Sec.Nampa-ReutersThe conditions of (supermarkets) over there is shocking,” said Pieter Koekemoer, manager of a supermarket on the Zimbabwe-South Africa border town of Musina.He said Zimbabweans are coming to Musina to buy basic necessities like rice, milk, bread and the staple maize meal, and he has had to take on extra staff to keep up with demand.What’s good for trade in Musina may not be so good for the Reserve Bank as it struggles to keep a cap on South African inflation.It will add to red-hot consumer demand which is already being blamed for driving inflation.This has breached the upper-ceiling of the central bank’s three to six per cent CPIX target band for three months in a row.Statistics show South African spending continues at a brisk pace.Retail sales for May grew by 9,5 per cent year-on-year from 5,9 per cent in April, appearing to shrug off two percentage points of interest rate increases since June last year.Higher borrowing costs have done little to dampen the spending spree and the central bank has warned that it will act to rein it in.The Reserve Bank again lifted rates by 50 basis points 9,5 per cent in June and has hinted that it may be the start of a fresh monetary tightening cycle.There may be little the bank can do, though, if a new wave of consumers is helping to keep South African sales ticking – and may continue to do so for a long time given the economic troubles of once-thriving Zimbabwe.It is not just Zimbabweans who are flocking to South Africa.”Retailers at the border are reporting up to 75 per cent growth in turnover, their stock is flying off the shelves,” said Munyaradzi Mandizha, Editor of a newly launched newspaper targeting the cross border trading industry.”The copper belt in Zambia is booming, and those who would have sourced their supplies from Zimbabwe are now coming to South Africa.So, we expect more and more traders to come to here, from as far as Kenya,” Mandizha said.Zimbabwe has been battered by crippling shortages in foreign currency, petrol and food.Economists put inflation for May at 4 500 per cent. BUOYANT DEMAND Research conducted by British-funded ComMark Trust last year found that cross-border shoppers could be pouring up to N$20 billion a year into South Africa’s economy, but industry players say this could be a conservative estimate.One bus company official said the number of buses ferrying shoppers from Zimbabwe has doubled in the past year, and the shrinking manufacturing industry in that country has forced Malawians and Zambians to come further south for supplies.Joyce Essel-Mensah, manager of tertiary sectors at Statistics South Africa, said the activity in the border towns is just the tip of the iceberg because most shoppers travel to the financial hub of Johannesburg.”Most people go up to Johannesburg anyway because it is cheaper.Very few shop in the border towns,” she told Reuters.Analysts said the demand from South Africa’s neighbours could help explain the strength in retail sales, even though it may not be the main contributor.”There’s bound to be a big impact in some areas, especially the lower end of the retail market, if you consider that some Zimbabweans in South Africa have started sending groceries instead of money,” said Mike Schussler, economist at T-Sec.Nampa-Reuters