Retailers set to ring up sales in 2017

December 23, 2016
Source: oxfordbusinessgroup.com
Retailers set to ring up sales in 2017

Cooling inflation, positive consumer sentiment and an expected rebound for the economy should underpin a strong performance for Ghana’s retail sector in 2017.

In its monetary policy committee (MPC) statement for November, the Bank of Ghana (BoG) reported a drop in inflation over the year, from a peak of 19.2% in March to a 28-month low of 15.5% .

The improved inflation environment enabled the MPC to cut the monetary policy rate to 25.5% in November, the first time in six years that it had moved from 26%.

The BoG expects inflation to continue to drop into next year, settling back into the medium-term target of between 8% and plus or minus 2%. The central bank also noted an improvement in consumer sentiment, citing the trend as supportive of its positive outlook for the Ghanaian economy.

Shift in mood

In its latest global survey of consumer confidence released at the end of November, data and analytics firm Nielsen also noted a strong upswing in consumer sentiment.

Quarter-on-quarter improvements were seen in the survey’s three confidence indicators: employment, personal finance and immediate spending intentions. In addition, half of Ghanaian respondents reported having spare cash, an increase of 16 percentage points on the previous quarter.

These factors – all of which bode well for retail sales – combined to give Ghana a consumer confidence rating of 109 points, significantly above the global average of 99. This growth was the first shift in sentiment in three quarters, with the rating having remained at 104 points since the end of 2015.

For its survey, Nielsen used mobile technology to accumulate data from respondents in Ghana and two other sub-Saharan African countries – Nigeria and Kenya. Of these three nations, Kenya had the highest consumer confidence score of 120, while Nigeria registered 113 points.

“In Ghana, there are signs of general mood improvement as power supply, exchange rates and inflation stabilises,” Abhik Gupta, managing director of Nielsen, East and West Africa Cluster, stated in the report.

On the back of lower-than-expected growth of 3.3% this year, Gupta’s optimism is bolstered by the IMF’s prediction that GDP will rise by 7.4% next year and by 8.4% in 2018 – growth that should feed into stronger domestic earnings and household spending.

Tax cuts to lift sector

The retail sector should also be one of the beneficiaries of policy changes planned by the incoming New Patriotic Party (NPP) government of president-elect Nana Akufo-Addo.

The NPP has committed to reducing the corporate tax rate from the current 25% to 20% and cutting value-added tax (VAT) for micro- and small-sized enterprises, measures that could help retailers at both ends of the sector.

Early in the election campaign, Akufo-Addo said he wanted to affect a transformation in the domestic economy, shifting the retail sector away from its focus on cheap imported goods. This indicates the new government may support greater development in the fast-moving consumer goods sector.

The President-elect also said that his government would introduce new legislation to protect the interests of small-scale Ghanaian enterprises in domestic retail trade against the perceived rise in overseas retailers entering the lower end of the market.

Room to grow

That market is set to expand strongly in the coming years, according to consultancy AT Kearney’s latest global retail development index, which ranked Ghana 28th of its top-30 developing countries for retail investment. Ghana was absent from the previous year’s index, highlighting the expansion of its retail sector over the past 12 months.

The report points to strong growth potential of both the online and direct sales components of Ghana’s retail sector, noting the shifting pattern in the nation’s retail habits away from informal shopping and towards organised brick-and-mortar retail.

“Like most sub-Saharan African countries, informal trade dominates, but rising disposable incomes are increasing the popularity of modern-style malls that offer one-stop shopping, variety and less crowding,” the report states.

Five other sub-Saharan African nations also made the top-30, reflecting what the consultancy said was the region’s significant retail potential.

Of these countries, Nigeria ranked first at 19th, followed by Côte d’Ivoire (21st), Zambia (23rd), South Africa (27th) and Kenya (29th).

Within the region, Nigeria – Africa’s most populous country – had the highest retail sales at $125bn; however, Ghana’s market was ranked least saturated, underscoring the expansion opportunities available to new and existing retailers.

Côte d’Ivoire and Zambia joined Ghana as newly listed nations on AT Kearney’s index this year, with the consultancy pointing to rising economic stability and demand for modern retail as reasons for their inclusion in the top 30. The report also noted the potential for growing mobile phone penetration to kick start e-commerce in the three economies, opening another avenue for sector growth.

Credit :oxfordbusinessgroup.com/