{"id":803016,"date":"2024-12-05T12:00:00","date_gmt":"2024-12-05T10:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=803016"},"modified":"2024-12-05T11:50:08","modified_gmt":"2024-12-05T09:50:08","slug":"south-africa-is-treading-water-nedbank","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/banking\/803016\/south-africa-is-treading-water-nedbank\/","title":{"rendered":"South Africa is ‘treading water’: Nedbank"},"content":{"rendered":"\n

Nedbank says the South African economy is not seeing meaningful growth, but a recovery in credit demand should soon happen. <\/p>\n\n\n\n

According to Nedbank\u2019s latest assessment of the broad money supply and credit for October 2024, growth in private sector credit extension (PSCE) slowed to 4.3% year-on-year (yoy) in October compared to 4.6% in September. <\/p>\n\n\n\n

The Nedbank Group Economic Unit said that bills and investments tend to be volatile, falling by 6.7% mom in October, forcing the annual increase down to 2.8% from 6.5% in September.<\/p>\n\n\n\n

Loans and advances (which excludes bills and investments) slowed to 4.4% yoy from 4.5% due to slower growth in household loans and stagnant growth in company loans.<\/p>\n\n\n\n

Household loans resumed their downward trend, declining from 3.3% yoy in August and September to 3.2% yoy in October. <\/p>\n\n\n\n

“The softer trend was broad-based, suggesting that household finances remain stretched, still weighed down by the high interest rates,” said the Nedbank Group Economic Unit. <\/p>\n\n\n\n

Home loan growth slowed from 2.4% to 2.3%, while vehicle finance (instalment sales and leasing finance) softened from 7.4% to 7.3%. <\/p>\n\n\n\n

The slump in personal loans deepened, dropping to 1.2% after contracting 1%<\/p>\n\n\n\n

Transactional credit also lost momentum despite informal reports of increased consumer spending. <\/p>\n\n\n\n

Credit card usage increased 9.1% from 9.9%, while overdraft growth slowed to 0.4% from 1.1%.<\/p>\n\n\n\n

Corporate credit growth, which includes bills and investment, dropped to 5.2% yoy from 5.7%. <\/p>\n\n\n\n

“The loans and advances component held steady at 5.6% yoy. Slowdowns in vehicle finance and overdrafts were balanced by faster growth in general loans, commercial mortgages, and credit cards.” <\/p>\n\n\n\n

“Significant base effects continued to impact the outcomes for most categories, contributing to volatile swings from one month to the next.” <\/p>\n\n\n\n

“General loans, which consist of unsecured credit to companies, normally used to finance capital expenditure, rose to 4.5% off a low base last year, up from 3.8% in September.” <\/p>\n\n\n\n

Commercial mortgages also improved for the fourth consecutive month, rising from 4.6% in September to 4.9%.<\/p>\n\n\n\n

Credit card usage also rose to 2.4% from 2.1%. In contrast, overdrafts slowed from 17% to 13.1%.<\/p>\n\n\n\n

However, vehicle finance eased off a high base to 6.2% from 6.6%.<\/p>\n\n\n

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Outlook<\/strong> <\/p>\n\n\n\n

“October’s credit numbers are disappointing, suggesting the economy is still treading water. Even so, the fundamentals needed to bring about a recovery in credit demand are starting to fall in place,” said Nedbank.<\/p>\n\n\n\n

“Rapid disinflation and easing interest rates will eventually reduce the pressure on household finances.”<\/p>\n\n\n\n

“The Reserve Bank has already lowered interest rates by 50 basis points (bps), and we expect a cumulative 75-bps reduction in 2025, which will gradually lift household credit demand.” <\/p>\n\n\n\n

The latest GDP figures highlighted the challenges facing South Africa’s economy, with GDP contracting by 0.3% in Q3 2024 – far below estimates of 0.5% growth.<\/p>\n\n\n\n

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GDP shock for South Africa<\/a><\/blockquote>