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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
October 3, 2025

Private Sector Credit Extension (PSCE)

August 2025

In August 2025, credit demand grew by 5.9%, slightly below the anticipated market prediction of 6.0% for the month. Since the initiation of interest rate cuts in September 2024, there has been a noticeable acceleration in overall credit growth, with most subcategories showing increases, particularly in July.

However, mortgage advances and credit for acquiring fixed assets continue to be restrained despite the ongoing reductions in interest rates. The South African property market remains sluggish, indicating low capital expenditure from both households and businesses. This sector’s recovery is being hindered by high consumer debt levels, stagnant wages, and the rising cost of living. Nevertheless, the full advantages of lower interest rates are projected to emerge later in 2025, as household disposable incomes are boosted by positive market sentiment and the potential for additional rate cuts by the South African Reserve Bank (SARB).

In August, instalment credit sales rose once more by 0.7% on a month-on-month basis, achieving an annual growth rate of 7.8%. Over the past two years, consumers have increasingly turned to short-term credit to cope with rising living costs, as evidenced by an 8.5% increase in other loans and advances, slightly down from the 8.9% noted in July.

With inflation remaining favourable, further rate reductions are expected to enhance disposable incomes, thereby supporting increased demand for goods and fixed assets in the third and fourth quarters of 2025 and beyond.

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More Coverage

A Watershed Moment: Global Ceasefire and Massive Oil Correction Offer Crucial Relief for the SA Economy

A sudden global shift has delivered much-needed relief for South Africa. Following a Middle East ceasefire, oil prices have dropped sharply and the Rand has strengthened—easing pressure on fuel costs and inflation. While earlier price spikes still weigh on the outlook, this combined correction offers a critical window for economic stability, improved consumer confidence, and renewed growth momentum.

The Great Fuel Buffer

South Africa finds itself balancing global energy shocks with decisive local action. As rising oil prices threaten to strain consumers and key industries, government intervention has softened the immediate impact—highlighting both the urgency of the moment and the need for smarter, more resilient fiscal tools to manage future volatility.

SARB opts for Strategic Resilience

The South African Reserve Bank has opted for a “hawkish hold,” maintaining the repo rate at 6.75% despite headline inflation hitting a milestone low of 3.0%. Governor Lesetja Kganyago emphasised that while the inflation target has been met, the MPC remains wary of a potential “energy tax” on the economy, driven by global oil prices surging above $100 per barrel. Consequently, the Bank has adopted a cautious, forward-looking stance, slightly lowering the 2026 GDP growth forecast to 1.1% to account for these external shocks and ensure long-term currency stability.

Navigating the Geopolitical Crosswinds

South Africa faces renewed inflation risks despite brief market relief, driven by rising fuel costs and import dependence. The SARB is likely to hold interest rates to protect price stability.

The Perfect Storm:

This morning, South Africans received what should have been a crowning achievement for the South African Reserve Bank (SARB). Data from Stats SA revealed that the Consumer Price Index (CPI) cooled to 3.0% in February, down from 3.5% in January. This lands the country perfectly on the SARB’s new, more ambitious inflation target.