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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
September 30, 2024

Better than Expected

Private Sector Credit Extension (PSCE)

August 2024

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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