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Frederick Mitchell
September 30, 2024

Private Sector Credit Extension (PSCE): August 2024 – Better than Expected

In August 2024, South Africa saw a 5.0% rise in demand for credit, surpassing expectations of 4.0%. While instalment credit sales and loans showed growth amid increasing financial pressures, asset accumulation via mortgage advances remains low. The recent interest rate cut could stimulate demand for properties in the coming months.

Demand for credit, as indicated by the Private Sector Credit Extension (PSCE) report from the South African Reserve Bank, increased by 5.0% in August 2024, surpassing market expectations of 4.0%. Credit demand rose across all major categories, both month-on-month and year-on-year.

Instalment credit sales grew by 0.5% in August following a contraction in the previous month, and year-on-year, they expanded by 7.5%, compared to a 7.9% increase recorded the prior month. Over the last 24 months, consumers have increasingly turned to short-term credit to maintain their lifestyles amid rising financial pressures and a significant increase in the cost of living. This trend is further supported by a rise in loans and other advances.

In contrast, asset accumulation through property and fixed asset purchases remains low, with mortgage advances growing by only 3.0% in August, following a 2.9% increase the previous month. The growth rate for mortgage advances has significantly decreased in the latter stages of 2023, primarily due to the impact of higher interest rates on the property sector. While a 25-basis point reduction in interest rates is unlikely to cause a drastic uptick in demand for properties and fixed assets, it is viewed positively as a step toward stimulating overall demand. If the South African Reserve Bank announces further rate cuts, this could bolster property demand in the next 12 to 18 months.

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A View on Demand in the Economy: Retail Sales Performance

In 2024, South Africa’s retail sales rose by 6.3%, significantly surpassing the expected 2.1% increase, indicating a rebound in consumer demand. Key contributors included substantial growth in general dealers and household goods. Lower inflation and a potential interest rate cut could further enhance consumer optimism and spending moving forward.

Consumer Inflation

Inflation in South Africa rose slightly from 2.8% in October to 2.9% in November, driven mainly by housing and utilities, food, and miscellaneous goods. Despite price increases, there are signs of slowing growth. The MPC’s recent 25 basis point interest rate cut may ease financial pressures on consumers, supporting future demand and economic momentum.

Manufacturing Production

In 2024, South Africa’s manufacturing production rose by 0.8%, following a 1.4% increase in September. Key contributors included significant growth in petroleum, food, and basic iron and steel sectors. Despite a decline in the motor vehicle sector, the manufacturing industry remains vital, employing 1.6 million people and driving economic growth.

Challenges, Changes, and New Horizons

To reflect on 2024, what a remarkable year it has been! There were significant developments both locally and globally—not just economically but politically as well. We can all agree, “what a year it has been!”

Mining Production and Sales

Mining South Africa rose by 1.4% in October 2024, building on a solid 4.9% growth from September. Key contributors included significant increases in iron ore, platinum group metals, and diamonds. Mineral sales also increased by 1.6%. Despite some challenges, the sector is rebounding strongly, supporting over 484,000 jobs. With improved economic confidence and a focus on stabilising production, the future looks promising for South Africa’s mining industry.
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