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How Junk Status is affecting the beauty industry 15 May 2017                                                                                                           The negative effects of the recent downgrading of South Africa’s sovereign credit rating to Junk Status by two international ratings agencies are beginning to trickle down into the beauty industry. “We are finding that ever since the downgrade, people are really budget conscious and stretching their regular once-a- month treatment to once every six weeks,” says Andrea Le Roux, assistant spa manager of Johannesburg day spa, Urban Bliss. She notes that guests are no longer keen to book for courses – such as a course of slimming treatments, for example. “Group bookings have also slowed down,” adds Le Roux. Steve Meyer, co-owner of Viso Bello, a beauty salon in Sandton, believes the downgrade will definitely affect the salon business. “For small businesses like us, anything that adversely affects the economy is a problem, as we have fixed overheads that are increasing above the rate of inflation. The downgrade is beginning to take its toll as we’ve heard of a number of salons either closing down or wanting to be sold. Unfortunately I believe there will be more as time goes by. “The downgrade comes on top of what was already a challenging economic climate in South Africa. Since the middle of last year our clients have been cutting back on the frequency of treatments, as well as retail purchases, and are actively looking for brands that are cheaper. Some clients have recently switched brands in our salon, simply based on price. From what I’ve ascertained, the general feeling in the industry is not great.” The managing director of a skincare supply company who did not wish to be named expects minimal growth for this year, has already seen salons cutting back on staff, and foresees that some salons will be forced to be shut down. Debbie Merdjan of the Camelot Group of Companies and Marine Spa Distributors has a more positive outlook. ‘My advice is – hang in there and don’t panic. The downgrading to Junk Status by two of the three global ratings agencies has affected my businesses minimally, specifically as they haven’t downgraded local bonds, which contributes 90 % of foreign investments to bonds overall. “Our political outcome is not settled yet and very different future outcomes depend on which route the country ends up taking. The Rand depreciation has been contained and the overall effect on business sentiment has been negative, however, maybe our economy is more resilient than we think with the Rand showing resilience. The economy is going to grow slower than anticipated before the downgrade and we need to focus on what we are good at – increasing our income, protecting our jobs and honing in on our skills. After all, our clients still need to de-stress, maintain wellness and look after their skins.” (Report by Joanna Sterkowicz).
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