Relief for South Africans in the next 3 months: Nedbank

Nedbank believes that credit demand will improve by the end of the year amid an improved consumer environment, with early signs already showing that South Africans are getting on top of their debt.

According to Nedbank’s latest assessment of the broad money supply and credit for August 2024, growth in loans and advances grew from 3.8% to 4.8% following the rebound in company loans.

Household credit slowed further, dropping from 3.2% to 3.1%, which Nedbank said highlighted the impact of higher interest rates, weak consumer confidence, strained household finances and tighter lending standards amongst commercial banks.

The performance of the various subcategories was mixed.

Growth in home loans was unchanged at 2.5%, while personal loans dropped for the fifth straight month, down by 1.1%.

Credit card usage also remained relatively robust, growing by 9.8%, which is still slightly lower than 10.6% in July.

Growth in instalment sales and leasing finance were healthy at 6.3%, but overdrafts moderated further.

Corporate credit grew from 4.3% to 6.4%, with all subcategories growing robustly.

Growth in general loans, usually used to finance capital spending, increased from 4.8% to 5.7%.

Overdrafts rebounded to 14.1% year-on-year off a low base, while commercial mortgages jumped to 4%—the fastest growth in a year.

That said, growth in instalment sales and leasing finance and credit cards moderated.

Looking forward

Nedbank said that credit demand is likely to improve in the coming months.

“Lower inflation will boost real disposable income, debt service costs will ease as interest rates fall, and the two-pot system will give households access to a portion of their retirement funds,” said Nedbank.

“These developments will gradually reduce the strain on household finances, boosting consumer confidence and spending.”

However, the outlook for corporate credit is far less certain.

“Company loan growth will likely remain relatively volatile and subdued during the rest of this year as fixed investment is only expected to turn the corner in 2025 as the domestic economy gains more upward traction, global growth picks up some pace, and the general operating environment improves further.”

“We expect credit growth to end the year at just below 5% and accelerate to 6% in 2025.”

Early signs of progress

Other data shows South African consumers are slowly seeing an improvement, with many getting on top of their debt repayments.

The latest Experian Consumer Default Index (CDI) for the second quarter of the year showed a positive turn for the first time in two years, with an improvement in the credit defaulting behaviour of South African consumers across various loan types.

This includes home loans, vehicle loans, personal loans and credit cards.

The CDI noted that rising living costs have impacted consumers’ affordability, causing serious concerns over their ability to meet debt obligations and qualify for new credit.

This trend can be seen in a general decline in new product sales, except Retail Loans, which have consistently grown since January 2024.

Nevertheless, the composite CDI has slightly improved, with year-over-year gains across most products except for Home Loans.

The most notable improvement was in Credit Cards.

Although the CDI has shown a positive turn for consumers, Experian warned that the improvement is also linked to the lender approval rates remaining particularly low.

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