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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
November 1, 2024

Private Sector Credit Extension (PSCE): October 2024

In September 2024, South Africa’s credit from financial institutions rose by 4.6%, nearing expectations, with strong demand for most credit types. Instalment credit sales grew by 0.5%, highlighting consumers’ adaptability amid rising living costs. Anticipated interest rate cuts may further enhance property and asset acquisition in the future!

Credit extended by financial institutions in South Africa grew by 4.6% in September, following a 4.9% increase in August 2024. This growth was slightly below the market expectation of 4.8% for September. Demand for credit increased across most sub-categories, except for mortgage advances, which experienced a small contraction. This category is sensitive to interest rate changes, and a reduction in rates is anticipated to stimulate growth in the coming months, as households and businesses will have more disposable income after a predicted interest rate cut in November.

Instalment credit sales rose by 0.5% in September, up from 0.4% in the previous month, while this category saw a year-on-year increase of 7.4%. Over the past 24 months, it has become clear that consumers are increasingly relying on short-term credit to manage rising financial pressures and the escalating cost of living. This trend is further evidenced by a 5.0% rise in loans and other advances.

Asset accumulation through property and fixed asset purchases remains modest, with mortgage advances growing by 3.1% in September, slightly up from 3.0% the previous month. The growth rate for mortgage advances has notably decreased in the latter part of 2023, largely due to the impact of higher interest rates on the property sector. The expected 25-basis point reduction in interest rates, along with another likely cut in November 2024, should enhance demand for properties and fixed assets. Notably, only when lower rates are implemented across the economy will we see a significant increase in disposable income and fixed asset acquisitions.

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