Integrated Annual Report

Operating environment

The global operating environment in 2020 was dominated by COVID-19 and its impact as nations took action to slow the spread of the disease. While these actions were necessary, in many cases they exacerbated existing challenges in already fragile economies. With uneven signs of recovery and the pandemic resurging in key regions, further shocks to the global economy are possible.

The aspects of the group’s operating environments presented below are features that are relevant to the group’s ability to create value for its stakeholders and advance its strategic initiatives. Notwithstanding the challenging operating environment, the group’s highly defensive, contextrelevant businesses are able to withstand difficult economic conditions and realise opportunities associated with these trends in their respective markets.


The recovery of South Africa’s fragile economy is expected to lag that of the global economy, with gross domestic product (GDP) only expected to reach 2019 levels by 2024.

  • GDP contracted 17.5% and 6.0% year-on-year in the second and third quarters of 2020 respectively.1
  • Interest rate cuts of 3% during 2020 resulted in the lowest repo rate in five decades.
    • Repo rate at 3.5% at 30 September 2020 (2019: 6.5%), averaging 5.1% for the 2020 financial year (2019: 6.7%).
    • Despite lower interest rates, erosion of household income and increasing over-indebtedness are expected to persist.
  • Currency volatility and persistent weakness driving up prices of imported consumer goods such as new vehicles.
  • Further downgrades of South Africa’s sovereign credit ratings.

  • Unemployment critically high, reaching its highest level in 12 years.
    • Unemployment rate of 30.8% at 30 September 2020 (2019: 29.1%), with more than 2.2 million jobs lost in the second quarter of 2020.
    • Higher unemployment expected to intensify pressure on already indebted consumers, with household debt to income ratio of 72.8% at 31 December 2019.
  • Low wage growth exacerbated by low inflation and pressure on employers, with household income eroding.
  • Consumer disposable income under strain, with further strain expected as payment relief provided by financial institutions and temporary government support expire.
    • Benign inflation outlook of 3.3% for 2020 and interest rate cuts have provided limited relief to over-indebted consumers.
  • Consumer and business confidence remain low, with business confidence reaching its lowest levels in decades.


Impacts of COVID-19 moderated by significant government stimulus programmes, including economic stimulus packages and wage subsidies, as well as a low cash rate of 0.25%.

  • Real GDP expected to fall 1.5% in the year to June 2021 due to slowing household consumption and the impact of widespread bushfires and COVID-19.
    • Resulted in first recession in nearly 30 years.
    • Expected to rebound to 4.75% in 2022.
  • Unemployment forecast to peak at 10% in December 2020 from a pre-COVID-19 level of 5.1%, with a slow recovery to 6.5% expected by June 2022.


Economic impacts of COVID-19 have been uneven across different regions, with a resurgence of cases and return to lockdown in some countries.

  • Overall GDP is expected to contract by about 7.5% in 2020 before rebounding by 4% in 2021.2

1. Stats SA.

2. European Commission Autumn 2020 Economic Forecast.

  • COVID-19 related regulations and directives dominated the year, requiring swift actions to minimise operational disruptions and impacts on clients.
  • Protection of Personal Information Act came into effect on 1 July 2020, with one year from this date for businesses to ensure full compliance.
  • Competition Commission notice of inquiry into land-based public passenger transport was due to be completed by December 2020, but was subsequently extended to 31 March 2021.
  • Other notable draft guidelines and bills include:
    • The publication of the Competition Commission’s draft guidelines for comment relating to lack of competition in the sale and fitment of spare parts and the repair of vehicles.
    • Proposed amendments to the Financial Intelligence Centre Act published for comment on 19 June 2020. This seeks to expand the list of entities that are deemed as accountable institutions to include credit providers, motor vehicle dealers and businesses dealing in high-value goods.