SA’s private sector credit extension rose modestly in May, supported by firmer corporate borrowing, while household demand for credit remained restrained.
SA Reserve Bank data released on Monday shows claims on the domestic private sector — a broad measure of lending activity — totalled R4.91-trillion in May. It represented a 0.6% increase from April and a 5% rise from the same month a year earlier.
Private sector credit extension indicates the financial system’s health and is a barometer of underlying economic momentum. Sustained increases in credit typically point to rising confidence among lenders and borrowers, supporting consumption and private sector investment.
Credit uptake by corporates, which constitutes more than half of total private sector credit, expanded by 0.8% month on month and 6.6% year on year (up from April’s 5.9%), reflecting an appetite among businesses to finance operations and investment.
Detailed trends show within corporate credit, unsecured general loans and advances — which make up nearly half of all credit extended to companies — rose by 2.6% month on month and 9% year on year, reversing a contraction recorded in April.
By contrast, mortgage advances to corporates, which constitute about 23% of corporate borrowing, increased only 0.2% over the month.
“According to the results of FNB/BER building survey for the second quarter, nonresidential building demand came under further pressure during the quarter,” Investec economist Lara Hodes said.
The FNB/BER building confidence index slipped by five points to 36 during the second quarter, indicating that most firms remain dissatisfied with current operating conditions.
While activity in the nonresidential construction segment decreased, it continued to track above its historical average.
Household borrowing continues to lag behind corporate credit.
While detailed household breakdowns showed small gains in categories such as mortgage advances and instalment sale credit, overall growth in loans and advances to households remained comparatively subdued.
In the household segment, credit demand increased by a modest 0.3% month on month, lifting annual growth to 3.1% from 3% previously.
Mortgage advances, which account for 58% of household credit, edged higher.
“The further 25 basis points cut in the repo rate announced by the Reserve Bank in May, with an additional cut projected in the fourth quarter, should support the property sector,” Hodes said.
“With PSCE [private sector credit extension] growth averaging 4.3% during the first five months of this year, we expect this gradual uptrend to continue in the second half of 2025,” said Oxford Economics senior economist Jee-A van der Linde.
The Bank’s recent repo rate cut “should provide a marginal boost to private sector credit uptake heading into the second half of 2025”.
Nedbank economists concurred, adding “company loan growth will also improve further off a low base, and as the economic recovery starts to place some pressure on existing capacity”.
Nedbank forecasts credit growth to end-2025 at about 5.6%, up from 4.2% at end-2024.
Update: June 30 2025
This story includes additional comment from economists.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.