e-spaces

By Tom Robbins in Cape Town

Building materials retailer Cashbuild surprised the market with buoyant sales figures yesterday, but commentators said the global downturn would catch up with the lower end of the market, which has been resilient up to now.

Mass-market food retailers such as Shoprite have continued to release strong sales figures.

But it was expected that the market for discretionary goods, such as window frames and cement, would slow.

Cashbuild said yesterday that sales in the quarter to December had continued to grow at a steady 26 percent from a year ago.

Higher-income groups have been cutting back spending on their homes for some time.

Earlier this month Massmart said sales at its Massbuild hardware unit, which includes Builders Warehouse, were only 1.4 percent higher for the 26 weeks to December 28.

Builders Warehouse customers, who have housing bonds and vehicle financing to pay off, have been harder hit by high interest rates than the less-indebted lower end.

Carel van Aardt, the research director of the income and expenditure research division at Unisa’s Bureau of Market Research, said that with the growth in affordable housing provision, many more people now had formal houses to maintain.

Abri du Plessis, the chief investment officer at Gryphon Asset Management, said that while he expected Cashbuild’s sales to be better than those of Massbuild, Cashbuild’s strength had nevertheless surprised him.

Du Plessis argued that state social grants in rural areas had kept sales growth relatively steady. The grants had added regular income to many who had only had irregular work.

“There is some left over after paying for food,” he said. “It is new money.”

Retailers with a bias towards rural areas were in the best positions, said Du Plessis.

But he warned that the global slowdown would lead to local job cuts, hurting Cashbuild’s urban sales in particular.

Arthur Kamp, an economist at Sanlam Investment Management, said relatively good wage increases in the second half of last year, just as fuel prices had started dropping, might have resulted in more cash in the pockets of lower-income earners.

Kamp said it was likely that employment would fall this year, but this would be countered by lower inflation for the mass market. Business Watch, page 2