Some of the areas that retailers are now entering, such as Soweto, could be potentially riskier because the target market is more sensitive to interest rate fluctuations, says property economist Francois Viruly.

SA is facing a rising interest rate environment as a result of rising inflation and record consumer debt levels.

"The economic base that the shopping centres in townships are targeting will tend to be more sensitive to macroeconomic movements than the upper end of the market," says Viruly.

He says a 200-basis point hike in interest rates could "severely" affect this market segment. Although we are entering new opportunities in the retail market, I believe they may come at a higher risk. "With the malls going up in Soweto, Atteridgeville and Orange Farm, some of the goods that will be sold, such as basic foods, won't be affected by macroeconomic movements. But I think the higher hierarchy of the retail market will come under pressure in a rising interest-rate environment."

Viruly says townships are experiencing record levels of development. In Soweto alone, four new retail developments will be finished by the end of next year.

Business Day
Publisher: I-Net Bridge
Source: I-Net Bridge