South Africa has a long tradition of December being the party season, and if Black Friday, when FNB customers alone spent R3 billion, is anything to go by, 2022 will be the country’s first “normal” December in two years.
As of December 2020, the country was in lockdown level three. There were more than one million confirmed cases of coronavirus as of December 28, 2020, and more than 50,000 new cases were reported after Christmas Eve.
December 2021 was marred by the Omicron variant, with an alert level set to one from October 1, 2021 to April 4, 2022.
Once again, the South Africans missed out on their December.
Wayne McCurrie, a senior portfolio manager at FNB Wealth and Investments, said December of this year would be “reasonable”, the telltale sign being the good data that has been released lately, such as third-quarter GDP results.
South Africa’s GDP posted an unexpectedly strong rebound in the third quarter, rising 1.6%.
Eight industries posted positive growth between the second and third quarters of 2022, according to data released by Statistics South Africa.
“If you look at all the bank transaction updates, people are borrowing money. The negative is that interest rates are higher and that will reduce [borrowing] a little. But I think we’ll have a reasonable December, it’s not going to disappoint,” McCurrie said.
Nedbank said in its business update for the 10 months to October 31, 2022 that it had been lending more even as interest rates kept rising.
The fourth quarter usually works well; even 2021 figures showed consumer demand picked up in the fourth quarter, with household spending rising 2.8% as consumers increased spending across all product categories. The biggest positive contributors to household spending were food and non-alcoholic beverages, restaurants and hotels, according to Stats SA.
Rosemary Anderson, national president of the Federated Hospitality Association of South Africa, said the hospitality sector was in a better position than it was in the festive season last year, because travel bans had been reintroduced with the rise of Omicron. .
“It has been a steady but slow recovery journey with many headwinds and tailwinds along the way. In terms of tailwinds, there is incredible pent-up demand for travel, much of it last minute, making it difficult for hotel companies to plan, while economic pressures, geopolitical tensions such as the war in Ukraine, shortages of staff in the travel industry and to some extent, there is still some uncertainty, it is still a factor in the decision to travel,” he said.
The luxury hotel segment recovered stronger than other segments.
“Accommodation types that have also done well are self-catering providers and hostels. Consumers are spending more on their travels, staying longer and opting for more luxuries, having deprived themselves during the pandemic.”
According to Stats SA, total revenue for the tourism accommodation industry increased 79.3% in September 2022 compared to September 2021, with hotels posting the largest year-on-year increase at 90.9%.
The City Lodge Hotel group recently released its voluntary operational update in which it said that based on current demand, it was optimistic that December occupancy levels could exceed 2019 levels.
The group said that monthly occupancy at its hotels had risen from 52% in July 2022 to 60% in November 2022. The average occupancy level so far this financial year has been 56.5%. Room rates increased 9.5% compared to the previous year, bringing City Lodge back to 2019 levels.
Thambo Mthwalo, equity analyst at Citadel Investment Services, said: “The relief that the leisure industry gets from tourism and at this time of year is quite significant. I doubt it will change this year.
“You can expect the same level of activity as a ‘normal’ December,” but, he cautioned, “I don’t think you’ll see the same spending. I think people will go places but not necessarily spend as much money because fuel costs are still high.”
The energy department announced that 93 and 95 unleaded gasoline will increase 59 cents a liter for the month of December.
Marcel von Aulock, chief executive of Southern Sun Hotels, said the industry is doing “much better” but has only really started to pick up in recent months.
Although the hotel group lost almost R500 million in the first year of the pandemic and managed to rebound in the second year, “I was expecting a pretty good season, although December is not our peak month,” he said.
“Coastal properties are doing well, but many of the business related hotels have a quieter month in December. For Southern Sun Group as a whole, February and March are our biggest months and are looking pretty good for 2023. We’ll have to see how business travel picks up in the new year.
“We substantially restructured the business and saw some recovery in trade. It is only now that we are getting closer to some sense of normality, Von Aulock said. “In the short term, the group remains optimistic that trading levels will continue to improve during the summer season.”
The fifth annual Summer Spending survey, in which short-term lender Wonga surveyed 8,500 people, found that food and drink would account for more than 35% of holiday spending.
This was followed by transport, which accounts for around 17% of holiday budgets, with South Africans spending an average of R171 each to travel to their holiday destinations.
Their favorite way to celebrate the festive season is by getting together with family and friends (77%), according to the survey.
December generally boosts leisure sectors such as retail, hospitality and beverage, which were doing “extremely well,” McCurrie said.
“South African Breweries continues to see steady growth in its products and expects this trajectory to continue to grow through the festive season,” according to Kanyisa Ndyondya, SAB’s Senior Media Relations Manager.
Although SAB’s lost potential sales revenue amounted to R42.2bn during the four lockdown-induced alcohol sales bans, beer remained a key contributor to the economy and this festive season would be no different, Ndyondya said. .
For years, Black Friday has been something of a precursor to how much the country will spend over the festive season. FNB said the R3 billion spent this Black Friday was the highest Black Friday spending in four years.
But does this mean that there is money for everyone despite the rising cost of living?
McCurrie said South Africans are not as indebted as often perceived, which shields them from higher interest rates and means they may have some extra money to spend.
“And if you manage to keep your job, you’ll actually have a reasonably good pay raise this year. Salary increases were up between 5% and 7%, which is not bad at all. So people are in a little better shape than you sometimes read…and this December won’t let you down.”
