South African retailers sound alarm as sales slump signals economic trouble

South African retailers are sounding the alarm as business confidence crashes to its lowest level in a year, spelling trouble for an economy already teetering on the edge.

Retailer confidence has plummeted from 42% to just 32% in the third quarter of 2025, according to the latest Bureau for Economic Research (BER) Retail Survey.

This dramatic 10-point nosedive marks the first time confidence has fallen below the long-term average of 40% in over a year, dragging sentiment back to the gloomy levels seen at the start of 2024, the survey revealed.

The numbers paint a sobering picture for a sector that's absolutely critical to South Africa's survival.

Retail accounts for nearly 20% of the country's gross domestic product, making it the fourth-largest contributor to the economy, according to a 2022 analysis.

Based on findings from Statistics South Africa's latest figures on economic growth, of 0.8% in the second quarter, economists are now putting full-year gains at anywhere between 0.9% and 1.2%.

This compares badly with National Treasury's expectations of 1.4% - and even that figure is nowhere near the 3% Operation Vulindlela 2.0 is aiming for this year.

Crucially, this sector employs an estimated 30,000 tax-registered businesses and engages nearly 20% of the economically active workforce, positioning it as the second-largest employer in South Africa after government, University of Johannesburg research shows.

Wholesalers, who had been riding high for five consecutive quarters declined dramatically with confidence tumbling from 50% to 38%, the BER survey found.

Their business conditions ticked up but remained stubbornly below the long-term average, signalling a challenging operating environment that's putting the squeeze on businesses across the supply chain.

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The pain is spreading fast. Survey results suggest volume growth in both retail and wholesale sectors likely moderated during the third quarter of 2025, pointing to a worrying slowdown in consumer demand, BER noted.

This cooling comes as the financial lifelines that had been keeping consumers afloat - two-pot withdrawals and low inflation - are set to provide significantly less support in the second half of 2025, according to BER's research.

Yet, new vehicle dealers defied the gloom with confidence soaring by 12 percentage points to 54%, hitting its highest level since the first quarter of 2022, the BER survey revealed.

This surge came despite a slowdown in volume growth and declining business conditions, suggesting the motor trade is operating in a relatively favourable environment even as it signals activity may have peaked.

Statistics South Africa's retail sales data for July 2025, however, showed that retail trade sales jumped by 5.6% year-on-year, with hardware, paint and glass retailers leading the charge with a robust 13.2%.

This was in real terms, which Statistics South Africa uses as its measurement, benchmarking prices without inflationary effects against 2019 to gain a better picture of actual sales.

Clothing and footwear retailers also gained strongly, with a solid 10% increase, while general dealers added 3.3%.

The BER survey indicates that furniture retailers and new vehicle dealers remain bright spots in an otherwise gloomy trade sector, suggesting some consumers - particularly higher-income earners - are still opening their wallets even as the broader market tightens its grip.

This retail retreat appears to coincide with what some economists believe is the end of the South African Reserve Bank's interest rate cutting cycle, which means that disposable income won't increase in amount before the festive season.

The central bank's last meeting this year is in November.

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