With regards to social indicators, Sisonke is the smallest district municipality in the prov- ince, having a population of 500 000 in 2010, and a population growth rate less than 1% from 1997 to 2010. This is less than half the provincial average. This was accredited to shifting dynamics, rural-urban migration patterns, and HIV/AIDS (preva- lence at 14% in 2010 and rising). Furthermore, the population is concentrated in the 3 largest local municipalities in the district – Umzimkhulu, Ingwe, and uBuhlebezwe. This makes service and infrstructure delivery extremely costly, thereby causing glaring ine- qualities across geographical divides.
Apart from low population rates and the consequences thereof, Sisonke face other social problems. Poverty was as high as 66% in 2010, although this is a reduction from 74% in 2001. Low income is also a problem as the high dependency of grants suggests, illiteracy rates are high, at 11%; however this is less than the provincial average, which lies at 15.7%. Unemployment however, is almost double the provincial average, and lies at 48&.
However, despite the gloomy outlook, Sisonke district has a very strong agriculture sector, with favourable soils, and a dairy industry that supplies 10% of all milk consumed in South Africa, and 35% of Clover’s total milk intake. Forestry, maize, potatoes, and beef farming are also very strong in the area. The tourism sector is also playing a significant role, with the public sector management team expressing a deep commitment to promot- ing the industry in the district. Sisonke is thus looking to utilise its comparative advantag- es.
Real Retail sales growth in January 2013 slowed to 1.9% year-on-year, from 2.2% in December 2012. This comes as little surprise, and is in line with a prior expectation of broad weakening in growth going into.
Monthly data can be volatile, and for this reason we prefer to focus on the 3-month moving average to analyse the short term trend. For the 3 months up to and including January, the real year-on-year growth rate in retail sales was 2.5%. This is slightly higher than the 2.4% for the 3 months up to December, due too a very poor October growth rate exiting from the 3-month total in January. However, we are not convinced that the slightly better 3-month growth figure in January means any looming upturn in growth, but rather a broad stabilization at best.
The late 2012 slowing in real retail growth was not only expected, but also arguably appropriate, given that real household disposable income growth has been broadly slowing on a year-on-year basis since a very high 6% peak reached in the final quarter of 2010
After often exceeding even the healthy real household disposable income growth rate for much of the last 3 years, it has become time for this real retail sales growth to come down more into line with real disposable income growth.
In turn, real household disposable income growth, after exceeding economic growth by a considerable margin in recent years, appears to be coming back down to earth and into line with economic growth.
From late-2009, the post-recession “Relief Recovery” boosted real household disposable income growth to significantly higher levels than the rate of economic growth at the time. How was this “positive differential” achieved? On top of the economic growth recovery providing the “normal” boost to employment and income, 2010 saw strong double-digit growth in nominal average employee remuneration. This was probably the lagged response of wage growth to the huge 2008 cost of living spike. The “discretionary reward” component of remuneration also normalized (rose) sharply with a lag after the recession. On top of this, 2011 and 2012 saw 15.2% and 16.7% nominal growth in income on investments respectively, after 2 prior years of decline, while 2010 had seen positive consumer inflation developments, with consumer inflation receding to below 4% at a stage. And so, whereas real GDP growth reached a “Relief Recovery” peak of 3.7% year-on-year in the 1st quarter of 2011, real disposable income growth peaked at a far higher 6.04% in the final quarter of 2010
The, perhaps surprisingly, strong real retail sales growth over the past 2-3 years can thus be largely explained by a very strong real disposable income growth rate as certain “normalizations” took place after the big 2008/9 price and recession shock.
But these normalizations appear largely a thing of the past, and the differential between real disposable income growth and the country’s anaemic economic growth rate has gradually become less significant, with real disposable income growing at 3.5% year-on-year, and real economic growth at around 2.5%.
Not all of the past few years’ strong retail sales growth can be explained by strong income growth, however. Accelerating household sector credit growth, driven largely by consumption-related credit growth, must also have played a role
However, the SARB reported that the Household Sector Debt-to-Disposable Income Ratio more-or-less stabilized through 2012, showing no further decline on late-2011.
This, coupled very little downward movement in interest rates in 2011/12, implies very little further progress in reducing debt-servicing costs relative to disposable income, limiting growth in disposable income available for consumption. The Household Debt-Service Ratio (the cost of servicing the total debt burden expressed as a percentage of household sector disposable income), Interest+Capital version, ended 2012 on 11.3%, only slightly down on the 11.5% at the end of 2011. The Interest-only Debt-Service Ratio also declined only marginally through the year, helped by a lone interest rate cut in the 3rd quarter.
So whereas the rapid decline through 2009/10 in the 2 debt-service ratios was steadily freeing up more disposable income for consumption, the almost flat move in the ratios through 2012 has become “neutral-to-negative” for consumption expenditure growth.