S. African Retailers Jump to Record as Oil Eases Rate Threat

South African retailers jumped to a record, led by Lewis Group Ltd., as a lower oil price eases pressure on the central bank to raise interest rates.

“Rates can stay low for longer simply because the oil price has fallen steeply,” Sasha Naryshkine, an investment manager at Johannesburg-based Vestact Ltd., which oversees more than 2.1 billion rand ($187 million), said by phone today. “That just puts money in consumers’ pockets almost immediately.”

The FTSE/JSE General Retailers Index gained 1.1 percent to 73,334.52. Lewis, the second-largest South African furniture retailer, climbed 8.3 percent to 76.00 rand by the close of trade in Johannesburg, the highest since May 2012. The company’s larger competitor, JD Group Ltd., increased 7.7 percent to 28.00 rand, an eight-month high and paring 2014 losses to 3.2 percent. Mr Price Group Ltd., which sells most of its clothing and housewares for cash, advanced 3.1 percent to 244.50 rand, an all-time high.

Oil has collapsed into a bear market amid a supply glut, with Brent falling to below $80 a barrel. That is improving the outlook for inflation in South Africa, which relies on imports for 70 percent of its crude needs. The Reserve Bank, which meets to decide on interest rates next week, left the benchmark rate unchanged at 5.75 percent on Sept. 18. Retail sales growth quickened to 2.3 percent in September from a revised 2 percent in August, Statistics South Africa said this week.

‘Getting Better’

“Some of the local retailers, their sales updates haven’t been that bad,” Naryshkine said. “If this is the worst of it then you would think it would probably start getting better from there. It’s not like retail sales are contracting.”

Mr Price, which releases a full results report on Monday, said on Oct. 23 that fiscal first-half earnings per share before one-time items rose as much as 24 percent. Lewis said on Nov. 10 that a slowing increase in debtor costs and the end of strikes in South Africa may reflect a stabilizing credit environment and boost sales.

Shoppers in Africa’s second-biggest economy have struggled to repay loans as unemployment remains above 25 percent and economic growth this year is set to be the slowest since a 2009 recession. Lewis competitor Ellerine Holdings Ltd. started voluntary rescue proceedings in August after parent African Bank Investments Ltd. withdrew funding because of persistent losses.

Before it's here, it's on the Bloomberg Terminal.