Clothing, footware boom looming

South Africa’s clothing and footwear industry is poised for growth, according to research by Fitch Solutions.

Fitch Solutions, the research arm of rating agency Fitch, said the sector will show strong growth in the medium term (2022-2026), aided by real disposable income growth and a young urban consumer base.

The entity predicts that South Africans will spend a whopping R121.1-billion buying clothes this year and a further R52.5-billion on footwear.

“The clothing and footwear segments’ resilience to inflation is a further upside to our outlook. Consumers are able to plan and budget more effectively for clothing items, whose prices tend to stay more constant,” Fitch Solutions said in a research report released on Friday.

“South African consumers tend to have well-developed preferences when it comes to clothing and footwear, with a particularly high demand for international sports brands. Wide spread availability of brands such as Nike, Adidas and Puma make a lot of their products aspirational purchases for many lower-middle income households.”

The research agency listed a number of factors that show that the industry is poised to grow. These include:

  • South Africa has a median age of 28.1 years, higher than other large African consumer markets such as Nigeria (18.3 years) and Kenya (20.7 years), which bodes well for retailers as they are accessing slightly more mature and wealthier consumers.
  • The number of young adults, aged between 20 and 39 years of age, is expected to grow from 20.4 million in 2022, to 22.8 million by 2050.
  • The age group between 15 and 19 in South Africa provide retailers with the next batch of consumers who are starting to form their own preferences and will soon have enough money to start buying their own clothing and footwear.

Fitch also said the moderation of clothing price inflation over the medium term will further boost consumer demand, while the growing e-commerce market and wider availability of fast-fashion provide upsides to the industry.

“Despite slow economic growth forecast for the South African economy over the 2022 to 2026 period, widespread accessibility of international brands and access to credit facilities outside of commercial banks, means consumers will be able to increase their spending on clothing and footwear products,” Fitch said.

However, it warned that rising inflation, particularly of food products and utilities provide a downside to its forecast, as both limit the growth of real household incomes. The agency forecast that disposable income per household will average around R181 000 this year and will grow nominally to R214 500 by 2026.

Fitch also expects consumers to continue to focus on essential spending.

“Essential spending will account for 55.2% of total spending in 2022, and is forecast to grow at an average of 6.7% per year, over the medium term.”

Fitch also warned that while South Africa has a strong local textiles industry, a large portion of clothing demand is met by foreign imports. Last year, it found, clothing imports totalled about $960.9-billion, growing from $784.9-billion in 2017.  “China is South Africa’s leading trade partner when it comes to clothing, accounting for just under 48% of total clothing imports in 2021, followed by Madagascar and Mauritius who accounted for 9.3% and 7.5% respectively.

“Neighbouring Ewatini, Lesotho and nearby Madagascar have all benefited from the growth in clothing demand in South Africa, with some South African manufacturers moving their operations to nearby countries to reduce labour and transportation costs.”

 

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