Consumers were slow to react to successive interest rate increases between June 2006 and December 2007, resorting to debt to cushion any discrepancies between monthly income and outgoing expenditure.

Reality bit in December last year when consumers en masse found they had exhausted their options. Credit cards, personal overdrafts and store-cards were at their limit. Inflation was rising - thanks to exogenous factors that were, and still are, pushing up input prices on everything from timber furniture to clothing and food. Wage increases are not keeping pace with inflation and household debt is rising to levels that, in some cases, are not sustainable.

Local manufacturers, having belatedly invested sizeable sums in new facilities to keep pace with retail demand, now find their order books are looking a little thin. Manufacturing data, released by Stats SA in March, showed that manufacturing is under increasing pressure.

This does not bode well for SA's largest textile/clothing manufacturer Seardel. Threatened by imports of far cheaper clothing, it now has the added challenge of rising costs, including fuel, electricity, water and labour.

Without an increase in orders as a buffer, even the rising interest rate, which cost the company R13,5m in the past six months, was enough to dent profitability. The implementation of quotas on imported clothing has had mixed results, says Seardel CEO Aaron Searll. "In the past year China accounted for about 40%, or R5,17bn of all textile and clothing imports into SA." Though this is a decline on previous volumes imported, many orders were brought forward to December 2006, a month ahead of the quota implementation. Quotas are due to fall away at the end of 2008 and SA's textile industry is working feverishly to enhance its competitive offering. "With the active involvement of the major retailers in the Cape and KwaZulu Natal clusters, we have created a platform to address the key competitive issues affecting the domestic clothing supply chain," Searll says.

While furniture maker, distributor and retailer Steinhoff no longer has furniture manufacturing operations in SA - these were sold last year to a private equity consortium for R1bn - subsidiary PG Bison opened its R1,5bn chipboard plant at Ugie in the northeastern Cape this year, creating 3 000 direct jobs. Already the plant, which has a capacity of 1 000 m²/day is working at output levels of 700 m². Though this may change as economic conditions worsen, it seems domestic demand for timber products remains relatively robust. Steinhoff's plans to expand the footprint of its Timbercity and PennyPincher stores should also support demand for the factory's products.

In the past year its retail operations in the UK - Harveys, Bensons for Beds, Sleepmaster and Bed Shed - have been returned to profitability. "We have closed loss-making stores, reduced our trading space and focused on increasing trading densities in profitable stores," says CEO Markus Jooste.

In Europe, Poland's inclusion into the European Union has driven up the value of the Polish zloty and contributed to an outflow of skilled workers, with negative implications for Steinhoff's manufacturing operations there. The operations are strategic because Poland is located close to key markets in the UK and Germany.

"To counter this we are centralising our administration and distribution facilities in a tax-free zone at Rzpin in Poland," says Jooste. "This should result in substantial cost savings for the Polish production facilities." The group continues to source products from China, among other places, and now has an office in that country.

Despite the scale of the group's international operations, Africa is key, bringing in 50% of revenue and a third of profits. This is mostly because of transport company Unitrans, which has interests in distribution, logistics, motor retailing and car rental.

Steinhoff has also not abandoned its retail ambitions in SA following its abortive effort to acquire furniture company JD Group. The company has also extensively researched the Indian retail market over the past 18 months. "We have to be there - it's a growth area - but how we do it has still to be decided," says Jooste.

For companies that import consumer durables for resale in a single geographical area, the effect of the National Credit Act, the sliding rand, rising costs and lower sales has been devastating. According to Amalgamated Appliance (Amaps) CEO Alan Coward the six-month period to December was the toughest trading environment the group has experienced in its 11 years as a listed entity. Amaps and Nu-World Holdings (which has offshore operations in the US, the UK and Australia) supply the retail trade with electronics equipment as well as small and large household appliances and brown and white goods. Both companies reported significantly reduced earnings in the interim period to December. With the UK, the US and Australian economies also under strain, Nu-World chief financial officer Graham Hindle has no illusions: "We just have to ride out this period."

On the other side of the fence is Richemont, whose jewellery, handmade timepieces, writing instruments and leather goods target price-insensitive consumers. Business remains good. Brands include Vacheron Constantin, the world's oldest surviving watch brand; Cartier, which has been making watches and jewellery for 160 years; as well as Montblanc, Dunhill and Van Cleef & Arpels.

It's not for nothing that Richemont appears on the elite list year in and year out. "The company has grown its earnings by 22%/year since 1988 vs 12% for the all share index," says Allan Gray analyst Simon Raubenheimer.

Sales are diversified geographically with Japan and Europe each contributing about 30% and Asia and the Americas accounting for 20%. China and Russia are growing by over 50%/annum, and each accounts for only 7% of sales. "It is an objective of management to grow the US market until revenue contribution (15%) mirrors the US's 30% share of world GDP," Raubenheimer says.

In the midst of a 2003 down cycle, CEO Johann Rupert was quoted as saying that "the only way to wreck a brand is to wreck it yourself". Brands like these, if correctly managed, should survive governments, monarchies and revolutions.

"Stripping out British American Tobacco (Richemont owns 19,5%), net cash and finance income, Richemont's luxury division is trading at a discount to the Alsi," says Raubenheimer. "On a p:e of 11 on earnings for the year ending March 2008, Richemont's luxury division is trading at a 15% discount to its international peer group."