Retailers have been cautiously upbeat about festive season sales, but this week they have been given more reasons to look on the bright side. Yesterday the Reserve Bank cut the repo rate by 50 basis points, giving debt-ridden consumers even more relief, as interest rates have fallen sharply since December 2008. |||

Retailers have been cautiously upbeat about festive season sales, but this week they have been given more reasons to look on the bright side. Yesterday the Reserve Bank cut the repo rate by 50 basis points, giving debt-ridden consumers even more relief, as interest rates have fallen sharply since December 2008.

A rate cut just before Christmas should spur spending, which, according to Statistics SA data, is already recovering quite nicely. In September retail sales rose 6.1 percent year on year, up from 4.6 percent growth in August.

But is increased consumer spending really what we want or need? Yes, to a point, as it’s a significant driver in the economy. But if consumers are not using the relief on interest rates to settle debt, what will be the consequences for them when rates start to rise?

Razia Khan, the regional head of research for Africa at Standard Chartered, pointed out earlier this week – when arguing a rate cut was unnecessary – that monetary easing could address demand, but on the basis of private sector credit extension and retail sales data, what the Reserve Bank could hope to influence already appeared to be recovering nicely.

If interest rates had been held steady, South Africans could enjoy the low-interest rate environment for even longer with the impact of earlier rate cuts still feeding through. And should a rate cut be considered necessary in the future – on the basis of a new shock to global demand, say – then the Reserve Bank would be able to deliver, Khan said. But now there is very little slack or room for the governor to manoeuvre left in the system.

Yesterday’s rate cut is likely to be the last and, although rates should not rise anytime soon. For the next move, when it comes, the direction will probably be up.

So consumers should pause for careful thought before hitting the malls in the next few weeks, and they would be wise to seriously consider settling as much debt as possible while the going is good to make sure they are more resilient when the next crisis hits.

Judging from the lessons of recent history that is not a matter of if but when.

Plastic surgery

First Health Finance (FHF), a specialised patient finance company, is apparently inundated with applications for plastic surgery. These are people who are rushing to get their “winter bodies” ready for summer.

According to Jason Sive, the director of FHF, it has received applications in excess of R34 million a month for cosmetic procedures over the past three months. There are 1 700 people who have applied and of these, 48 percent of the applications have been approved.

Sive said pre-summer months were the busiest for most plastic surgery practices because consumers often decided at the last minute to undergo breast augmentation, liposuction and other procedures.

These are elective procedures that are not covered by the medical aid companies. While these procedures are common among women, their popularity among men is also growing.

The FHF database shows that there has been a steady increase in the number of men going for plastic surgery, making up 20 percent of all applications in 2010. Liposuction, tummy tucks, rhinoplasty (nosejob) and hair implants tend to be the procedures of choice.

Sive said the proportion of men had doubled from a year ago, when only 10 percent of applications were from males. He said this was consistent with the overseas market. FHF said statistics from the American Society for Aesthetic Plastic Surgery showed that there were 1.5 million cosmetic procedures performed in the US last year – a 2 percent decline from 2008.

Judging by the stats from FHF, it looks like there is a section of the population that is not feeling the economic downturn. But Sive said consumers were feeling the pinch, although they also felt strongly enough about having certain procedures done and they were happy to finance it.

Sive said applications from over-indebted consumers were declined.

Unilever

Among the most ambitious features of Unilever’s sustainability plan, announced this week, is its promise to halve the environmental impact of suppliers and customers by 2020, as well as the impact of its own direct operations.

So when the consumer products multinational says it wants to cut water usage, that includes the shower in which Joe Average soaps up with a bar of, say, Unilever’s Dove. The company with operations in more than 100 countries says it aims to persuade 400 million consumers to change their shower habits.

It points out that 1 million tons of carbon dioxide emissions can be avoided a year just by persuading 20 million people to cut a minute from their shower time. Let alone the water savings.

Taking on the commitment to change others’ habits is certainly not business as usual. Neither is Unilever’s bold belief that it can both double revenue and halve its environmental impact all at once.

Its executives are talking about decoupling growth from environmental impacts and finding new ways of doing things. The next decade will demonstrate how it walks this talk.

The group readily admits it doesn’t know exactly how it’s going to achieve all of these goals, but is optimistic that the input of its 163 000 employees will help (3 000 of whom are to be found in South Africa).

The local leg of the campaign is likely to take its lead from the global target to improve the health and wellbeing of 1 billion people in mostly developing countries.

That involves persuading citizens of Asia, Africa and Latin America to “wash their hands with Lifebuoy soap at key times during the day”, thus helping to reduce diarrhoeal disease, Unilever says.

Edited by Peter DeIonno. With contributions from Samantha Enslin-Payne, Slindile Khanyile and Ingi Salgado.

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