Private sector companies have begun showing great appetite in taking credit to boost their businesses as interest rates, structural reforms and policy direction under the Government of National Unity (GNU) bring certainty to the markets.
The South African Reserve Bank (SARB) yesterday said private sector credit extension (PSCE) increased by 1.4% month-on-month in August, translating to 4.95% when measured on an annual basis, 4.95% year-on-year in August, accelerating to its highest in one year from a five-month low of 3.5% rise in July.
This marked the 38th consecutive month of growth in private credit and the highest level since July 2023 and was ahead of the consensus forecast of 4.25% year-on-year.
Specifically, the SARB said credit uptake by corporates which comprises more than half of total PSCE increased by a notable 2.3% month-on-month, climbing to 6.5% year-on-year from 3.7% year-on-year previously.
The unsecured general loans and advances category which makes up 46% of credit afforded to corporates rose by 1.9% month-on-month and 5.7% year-on-year, up from 4.8% month-on-month recorded in July.
Moreover, mortgage advances to corporates, which makes up an additional 23%, grew to 4.0% from 3.7% year-on-year previously.
This is supported by the results of the latest FNB/BER Building Confidence survey for the third quarter of 2024, which saw sentiment among non-residential builders lift notably.
According to the Bureau for Economic Research, non-residential builders registered renewed optimism in the third quarter, with sentiment jumping to 57, from 41 previously, the highest level logged since 2008.
“An improvement in activity and profitability boosted confidence. Moreover, the rating of insufficient demand for new work (a proxy for order books) declined significantly,” the BER said.
The investment category in the PSCE also lifted markedly in August to 7.1% year-on-year, from 0.3% in July.
“Indeed, business confidence picked up further in the third quarter, with the prolonged suspension of load shedding and an increase in political certainty (on the formation of the GNU) supporting sentiment,” said Investec economist, Lara Hodes.
“Looking at the household segment of the market, credit demand eased modestly on a year-on-year basis to 3.1% from 3.2% logged in July.”
The unsecured general loans and advances category, coupled with the overdrafts grouping, fell by a further 0.9% from 0.7% previously, while the largest category mortgage advances, which make up a substantial 59% of total household credit, remained unchanged at 2.5% year-on-year.
Meanwhile, the SARB said the expansion in the broadly defined M3 measure of money supply surged to 6.11% from a 5.88% gain in the previous month.
BUSINESS REPORT