* Cotton On launched in S.Africa in 2011, has 171 stores
* Retail sales rising despite weak economy
By Tanisha Heiberg
JOHANNESBURG, Aug 2 (Reuters) - Australia's no-frills chain Cotton On said it sees its South Africa stores as a key contributor to its revenue growth plans thanks to the rising number of young consumers and the ease of doing business in the country once entry hurdles are cleared.
"Our South African operations have reported double-digit growth every month since opening our first store here in 2011," said the firm's global Chief Finance Officer, Michael Hardwick.
"South Africa still rates as one of the hardest business to get established however it rates as one our easiest business to operate, once you have gotten through that regulatory establishment."
Cotton On will double its revenue in South Africa, where it now has 171 stores, over the next three years. The privately-owned company has an overall revenue growth target of 20 per cent year-on-year, which it has achieved for the past five years.
Its planned expansion comes as South Africa's economic growth is forecast to stagnate this year while interest rates have risen by 200 basis points since early 2014, putting a tighter squeeze on consumer spending.
However, retail sales reached their strongest level in two years after rising 4.5 percent year-on-year in May. with jobs are buying more consumable goods and less durable goods such as motor vehicles, whose sales have dipped steadily since November, when there was small a bounce.
Shiny malls have sprung up throughout South Africa, creating thousands of jobs. But they come amid a backdrop of rising debt levels. Nearly half of all credit-active South Africans, or 9.9 million people are overindebted, according to debt counselling firm Debt Rescue, and the number will swell as interest rates and inflation rise while the economy slows.
"There are certainly some challenges that the country is facing at the moment. The reality is that we still have a fast growing vibrant profitable business here in South Africa," said Hardwick.
Swedish multinational retail-clothing company H&M also plans to capitalize on retail growth by opening a further four stores this year bringing the countries footprint to 9 stores.
Local discount retailer Mr Price MRPJ.J has shown an increase of 8 percent in retail sales and Truworths International Ltd TRUJ.J has upped its retail sales by 11.3 percent. (Editing by James Macharia and Alexandra Hudson)