Private sector credit grew 4.59% year on year in January, falling short of most forecasts from leading economists who had expected stronger growth due to base effects and improved corporate lending.
This improvement, up from 3.8% year on year, “was mainly driven by the bills and investments category”, Nedbank economists said in response to the SA Reserve Bank data.
“Growth in mortgages was steady at 3.2%, while ‘other loans and advances’ and ‘instalment sales and leasing finance’ softened further,” the bank said.
On a month-on-month basis, private sector credit declined by 0.23%, reflecting a slight pullback after December’s stronger credit uptake.
The year-on-year growth is in line with the 4.5% year-on-year forecast by Investec’s Lara Hodes, and well below Absa’s projection of 4.9% year on year, which was driven primarily by a rebound in corporate loans. It also missed Nedbank’s optimistic forecast of 5% year-on-year growth.
Private sector credit extension (PSCE) measures the total amount of loans, advances and credit extended to both households and corporations in the private sector.
It is a key indicator because it shows how much borrowing is happening, reflecting both credit demand and banks’ willingness to lend.
The corporate sector led the monthly contraction, with corporate credit falling by 1.24% month on month, while household credit rose modestly by 0.54% compared to December.
Old Mutual chief economist Johann Els said mortgage lending — the largest component of household credit — remained weak.
Hodes drew on the latest FNB Property Barometer, which showed that “affordability challenges and the lingering effects of the cost-of-living crisis continue to weigh on certain areas of the market”.
“However, it indicates that the housing market is showing encouraging signs of recovery, with improving sentiment, shorter selling times, and increasing activity in the middle-to-high price segments,” she said.
Credit to households increased to R2.201 trillion, translating to 2.87% year-on-year growth.
On a month-on-month basis, household credit grew by 0.54%, driven largely by instalment sales and leasing finance, while home loans and overdrafts remained subdued.
The data suggests that households continue to shy away from big-ticket debt like mortgages, relying instead on short-term credit to cover essential spending.
“Household credit growth, on a year-on-year basis, was much lower than last year’s average. I believe the two-pot system, which allowed individuals to access their retirement savings to settle or reduce debt, played a role in this slowdown. However, I expect household credit to increase significantly over the next few months,” Els said.
Credit card usage — which he said was “very high” — grew by 8.8%, indicating that consumers were still using credit to finance spending.
Corporate credit increased by 5.33% year on year in January, easing slightly from December’s 5.37% pace, dragged down by general loans.
Nedbank economists said: “General loans, which are usually used to finance fixed investment, slowed to 4.2% from 5.3%, suggesting that companies are not rushing to expand operations while recovering from high operating costs and sitting on excess capacity.”
They noted growth in commercial mortgages and instalment sales and leasing finance was unchanged, with overdrafts jumping off a low base to 11.5% year on year from 5.9%, and credit card usage accelerated to 8.2% from 3.9%.
Month on month, corporate credit declined 1.24%.
Loans and advances, which exclude bills and investments, slowed to 4.1% year on year from 4.2%, with growth in household and corporate loans easing.
“Household loans eased to 2.9% from 3%, suggesting that consumers remain cautious about taking on additional debt despite improving household finances and falling interest rates,” Nedbank said.
The investment category logged growth of 1.6% month on month (11.5% year on year). Hodes said: “Indeed, business confidence picked up further in the last quarter of 2024 with, expected business conditions improving.”
Els concurred: “Greater confidence from both lenders and consumers will be key to unlocking stronger mortgage credit growth, and early signs of this confidence returning are beginning to emerge. As a result, we are likely to see a gradual improvement in mortgage credit extension in the coming months.”
Nedbank said overdrafts had contracted again after recording no growth in December, while personal loans contracted further by 1.6% from 1.5%.
“Credit growth was subdued in 2024 as high interest rates continued to bite. However, we expect it to improve in 2025.”
Nedbank expects credit growth to rise to 5.5% by the end of 2025, up from 4.2% at the end of 2024.
Update: February 28 2025
The article has been updated with more information and reaction.
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