I’ve written about the consumer and retail boom in South Africa many times in recent years – most recently in “SA Mining at ‘Breaking Point'”, “South Africa’s Regressing Economy”, and “Impact of Real Interest Rates on Retail and Manufacturing.”

Retail spending is being funded mostly by borrowing from foreigners and locals selling assets to foreigners. We’re selling our capital stock to foreigners and spending the proceeds, not reinvesting it in manufacturing and productive capacity. A low-real interest rate environment means SA is living beyond its means. It’s a highly bearish long-term development for the SA economy.

Bruce Whitfield had Evan Walker, an analyst from 36one investment management on his show this week to discuss the massive expansion of capital investment by retailers to serve this demand that’s being financed in an unsustainable manner (in a macro sense).

What I see developing down the road is not necessarily much higher consumer goods prices to pay back the capex (although I do think consumer prices are going to go up more), but the potential of a huge overinvestment in the retail space. Real retail rentals and space is going to collapse at some point and it will be much cheaper (maybe very cheap) for young new startups to get into the retail market, or to use the space for other purposes, where it’s extremely expensive and difficult to right now where mostly major retail corporates with access to cheap debt and equity financing flowing have the bidding power.

Interview below. Give it a listen.