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Non­per­form­ing loans as a per­cent­age of ad­vances at South Africa’s four big­gest banks were 2.8% by the end of June, ac­cord­ing to Price­wa­ter­house­Coop­ers.

The banks have boosted pro­vi­sions and had a com­bined to­tal cap­i­tal ad­e­quacy ra­tio of 15.4% by the end of June, higher than re­quired by the global Basel bench­mark. They haven’t fore­cast how much bad debts linked to farm­ing loans may rise this year. PSG’s Cloete said he lacked the data from banks to make ac­cu­rate es­ti­mates of what pro­por­tion of the loans ex­tended to farm­ers could turn bad.

The ef­fect of the drought was only likely to be felt to­wards Au­gust, once some crops were har­vested, said Ernst Janovsky, a se­nior agri­cul­tural econ­o­mist at Bar­clays Africa. The bank’s di­ver­si­fied loan book would soften any blow from the weather, he said. Both Bar­clays Africa and Stan­dard Bank said they would con­tinue to lend to farm­ers. “This year will be chal­leng­ing be­cause of a num­ber of de­te­ri­o­rat­ing eco­nomic fun­da­men­tals, slow grow­ing econ­omy, high un­em­ploy­ment rate, a volatile rand that reached record low lev­els re­cently, in­creas­ing in­fla­tion and in­ter­est rates,” said Groe­newald at Stan­dard Bank.

“The drought con­di­tions will add to those chal­lenges.”

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