Private credit extension increases in April

SOUTH Africa’s private credit extension last month rose to its fastest since last October driven by higher corporate activity.

Data from the South African Reserve Bank (SARB) yesterday showed that the credit extension increased to 5.9 percent in April, up from 5 percent recorded in March.

SARB said household credit extension increased 2.9 percent year-on-year while corporate credit growth rose 8.5 percent on a yearly basis compared to 8.8 percent in the comparative period, while mortgage advances rose by a moderate 3.1 percent year-on-year in April, against the 3 percent recorded in March.

Growth in the broadest measure of money supply (M3) accelerated from 7.4 percent on a yearly basis in March to 8.4 percent last month, better than market expectations of a rise to 7.6 percent year-on-year.

Investec economist Kamilla Kaplan said that the inclusion of new African Bank data resulted in a technical correction to the household credit data in April 2016.

“This has been an influencing factor on the contraction in the unsecured household credit category since April last year,” Kaplan said.

According to Trading Economics, private sector credit in South Africa has averaged 14.11 percent reaching an all time high of 35.88 percent in 1981 against a record low of -2.35 percent in 1966.

Growth in overdrafts during the period rose marginally to 22.8 percent year-onyear up from 22.2 percent in March, while unsecured loans increased by 17.2 percent yearon-year and mortgage advances saw a 10.4 percent uptick on a yearly basis.

Vehicle finance slowed to 8.3 percent in the period compared to 8.9 percent recorded in March.

Meanwhile, data from quarter 1 2017 TransUnion Consumer Credit Index (CCI) showed that South African households appeared to be in better shape to weather economic storms than they were last year, with the index climbing at its fastest pace in two years.

The union said the index, which measures overall credit health among borrowers based on data gathered on 53.8 million accounts and a revolving credit value of R146 billion, jumped from 49.7 to 52.4 points.

TransUnion chief executive Lee Naik said that the improved rate of debt repayment, despite weak cash flow was partly due to a lower overall household credit extension during the same period.