30 May 2017

PSCE update: Growth in private sector credit extension rises in April on low statistical base factors

Annabel Bishop

Chief Economic

Private sector credit extension lifted to 5.9% y/y in April from 5.0% y/y in March on low statistical base factors.

PSCE Update Figure

Specifically, there was a technical correction to the household credit data in April 2016, pertaining to the inclusion of new African Bank data.

This has been an influencing factor on the contraction in the unsecured household credit category since April 2016 (see figure 1). Specifically, in April household unsecured credit extension rose 4.8% y/y versus contractions in each of the prior 12 months.

Mortgage advances, the largest component of household credit accounting for nearly 60% of total household debt, rose by a moderate 3.1% y/y in April, versus 3.0% y/y in March. Growth in mortgage advances has been relatively pedestrian since 2009, compared to pre-crisis levels in excess of 20% y/y.

The combined growth of household installment sales and leasing finance contracted for the tenth consecutive month, by 0.2% y/y in April (see figure 3). This credit category typically represents vehicle finance and suggests weakness in new passenger vehicle sales.

Overall, household credit extension increased by 2.9% y/y in April versus an average of 0.6% in Q1.17.

In April, corporate credit growth rose 8.5% y/y compared to a prior 8.8% y/y, mainly on account of a rise in general loans and advances and continued growth of mortgage advances. General loans and advances comprise the bulk of total corporate liabilities at 49.5%, followed by mortgage advances at 22.2%.

According to the SARB’s Financial Stability Review “(t)he weak domestic economic environment continues to impact on credit growth.” This coupled with persistently depressed business confidence is likely to continue to be reflected in suppressed investment needs, and by extension in credit demand (see figure 4).

The Financial Stability Review also assessed that the household financial position weakened over the last year. Growth in disposable income slowed from 7.9% y/y in Q1.16 to 6.6% y/y in Q4.16, mainly on account of “tax bracket increments, moderate salary increases and higher medical insurance costs” (see figure 5). Household savings have remained low and growth in net wealth slowed. 


Although the ratio of household debt to disposable income improved to 73.4% in Q4.16 from 75.4% in Q1.16, households remain highly indebted (see figure 6). As such, the household financial position remains vulnerable to “changes in taxes, prices and/or interest rates”, according to the SARB.  

PSCE Update Figure
PSCE Update Figure
PSCE Update Figure
PSCE Update Figure
PSCE Update Figure