Budget set to bring more consumers to retailers

Finance Minister Pravin Gordhan's positive tax relief initiatives for the lower income earners will have some positive spinoffs for the retail sector, in particular food retailers, Shanay Narsi, BoE Private Clients' Retail Sector equity analyst, said on Thursday, 18 February 2010.

Gordhan's focus on wage subsidies for the youth, widened brackets for social grants and the R6.5 billion tax relief, which is weighted more towards lower end consumers, should bring more money into the retail space, said Narsi.

"The increased consumer spending at the base level coupled with general positive sentiment around the World Cup should benefit food retailers most in the coming months," he added.

"We have appreciation for the massive balancing act required by the minister given the recession and resultant under recovery.

"However, there was no major shift in fiscal policy and in general the market should be happy.

"The positive initiatives proposed by Mr Gordhan will benefit economic growth, albeit at a muted rate.

"On the negative side, the increase in fuel coupled with the hike in electricity tariffs and the proposed emissions tax will test the upper limit of the expected 6% average inflation over the next year.

"However, on the whole, the positive initiatives should outweigh the negative," he concluded.