South Africans turning to credit to make ends meet
Consumption credit products (credit cards, personal loans, retail revolving lines) have continued to experience notable growth.
According to TransUnion’s Q3 2024 South Africa Industry Insights Report, originations have grown by 14.4% year-over-year (YoY) in Q3 2024 as consumers find ways to adapt to the persistently high cost of living in South Africa.
Retail revolving credit saw the highest origination growth among all major products, up 21.9% YoY, and average new credit limits assigned rose by 13.3% year over year.
The credit credit card market saw steady positive momentum in consumer demand and supply.
TransUnion’s Q3 2024 Consumer Pulse Survey (CPS) noted that 13% of consumers surveyed cut back on savings for retirement, potentially leading to more disposable income.
The survey also showed that 25% of consumers said that their household income is not keeping up with the rate of inflation.
However, inflation has now dropped to 2.9% in November. This is below the South African Reserve Bank’s mid-point target of 4.5% and increases the chances of further interest rate cuts in 2025, following a cumulative 50 basis points worth of cuts in 2024.
As inflation dropped below the South African Reserve Bank’s target range in October 2024, the market anticipates further interest rate cuts, which may help in alleviating the high cost of living and borrowing.
“An improving picture of credit performance observed in Q3 2024 further indicates consumers’ priorities for maintaining access to credit, as well as lenders’ strategies for managing risk effectively.’
“As inflation and interest rates ease, consumers may experience an improvement in affordability, which would renew confidence in making larger purchases,” said TransUnion.
| Product | YoY origination growth | Serious account-level delinquency rate** | YoY basis points (bps) change in delinquency rate |
| Credit card | 4.7% | 12.1% | -4 bps |
| Personal loan* | 14.5% | 33.4% | -85 bps |
| Clothing accounts | 6.7% | 27.6% | -254 bps |
| Retail revolving | 21.9% | 17.1% | -202 bps |
| Retail instalment | 18.7% | 28.1% | -183 bps |
| Home loans | -1.3% | 7.2% | 33 bps |
| Vehicle finance | 1.1% | 5.1% | -35 bps |
Vehicle Loans Recorded First Growth in Originations Since 2022
The new vehicle finance industry also recorded growth of 1.1% in Q3 2024 following a significant slowdown since Q3 2022.
Despite vehicle loan originations being up, vehicle sales overall dropped in the same period, down 7.1% YoY.
Sales of new vehicles drove this decline, with a drop of 13.9% YoY.
However, new vehicle prices should start to subside with cheaper manufacturers entering the local market and lower costs of borrowing easing affordability pressures.
“As inflation slows and the cost of borrowing declines, there is potential for more consumers who previously only held unsecured credit products to graduate to the next step in their credit journeys by taking out a vehicle loan,” said Lee Naik, CEO of TransUnion Africa.
“As levels of financial inclusion improve and more underserved consumers are able to secure vehicle and other loans, lenders have a real opportunity to create greater loyalty as well as improve credit education efforts. Putting consumers’ needs first will ensure better credit management and a healthier economy.”
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