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This page will provide insights into South Africa's credit market. With particular focus on the credit market of private households. Is the South Africa's economy is driven by debt? Are South African's addicted to debt? Are they using debt to buy assets or every day goods and services? Is the debt problem due to South African's not saving enough(and therefore do not have large sums of cash available to buy assets, so they used debt to buy these assets?)
Credit Ratios: The graphic below shows some of South Africa's credit ratios. As can be seen from the graph South African's are pretty indebted. As at end of 2015, 78% of all disposable income from households were spent on debt (the blue bars). This includes home loans, car loans, personal loans, credit cards etc. The yellow bars shows the percentage of disposable income thats paid on the cost of the debt. This increases substantially as interest rates rise. The higher the interest rates, the bigger the portion of debt being paid goes towards paying the cost of the debt, and not actually paying off the debt. And the longer it takes to pay off the debt and the more money being paid to service the cost of debt instead of reducing the actual debt, the longer it will take for consumer spending to grow significantly and sustainably. The green bar shows the total amount of loans and advances in the economy as a percentage of nominal (not adjusted for inflation) GDP. As can be seen from the green bar, the amount of loans being advanced is steadily growing over time as a percentage of the overall economy. Overlapped on these bars is the annual growth of GDP. Has South Africa's economic growth been fueled by credit? Sure looks like it. Problem is credit has to be paid back. Which leaves less money available for spending on other things (so one should not expect fireworks from the biggest sector in South Africa's economy. The private household sector. Low to slow growth in this sector will inevitably lead to low to slow growth in South Africa's economy). |
29 July 2019: Credit card advances per quarter in South Africa
We take a look at the latest numbers published by the South African Reserve Bank (SARB) that touches on the total advances for credit cards in South Africa. How much credit is being advanced to South Africans on credit cards? And are South Africans taking on more debt via credit cards? We take a look at the value as well as the growth in credit card advances up to June 2019.
As the line graph above shows there has been a strong continued upward trajectory in the amount of credit card advances in South Africa for most of the quarters since quarter 1, 2014. The year on year growth line shows that there was a significant decline in the credit card advances in 2016 and 2017 but since then the value of credit card advances have grown significantly and continues to increase. A clear sign that South Africans finances have been under pressure and they are looking towards debt to fund their living expenses. In the 2nd quarter of 2019, the total amount of credit card avances totalled R121.2 billion (that is a whopping R2100 per credit card per person in South Africa). This includes all children, babies elders etc. If we were to calculate this for all those formally employed in South Africa it works out to R11 770 per person that is formally employed. It is a significant amount and the ballooning debt in South Africa must be a serious concern for policy makers (both fiscal and monetary) as well as for government in general. Debt ridden consumers cant really spend a lot, which means sluggish economic growth, which is exactly where South Africa finds itself in.
Credit Card Analysis:
The graphic below shows the number of credit card transactions and the value of these credit card transactions each year. Its clear that the number of transactions using credit cards have been growing substantially over the last 20 years. Peaking in 2007 and hitting a low in 2009 (considerable slow down during the "credit crunch"). Since then there has been a strong increase in the number of credit card transactions and value of spend on credit cards. The number of credit card transactions has increased 63% from 2009 to 2015, while the value of transactions increased by 81.9% (note the effects of inflation has not been removed, and this part of the reason why the growth in value of transactions has increased faster than the number of credit card transactions).
The graphic below shows the Rand value spent on credit card transactions per year as well as the Rand value spent on credit card transactions per person living in the country. What is interesting to note is the strong surge in the value spent per person in the country since 2009. The value of money spent per person staying in the country has increased 82% (while the population has increased by 11.4%). It has to be noted that all values are in current prices (I.e not adjusted for inflation).
Data Disclaimer:
Credit card transactions and value of credit card transactions per year is obtained from the South African Reserve Bank. The value of credit card transactions is in current prices, I.e not adjusted for inflation.
While the population figures of each year is obtained from Statistics South Africa's mid year population estimates.
Source: South African Reserve Bank and Statistics South Africa
Credit card transactions and value of credit card transactions per year is obtained from the South African Reserve Bank. The value of credit card transactions is in current prices, I.e not adjusted for inflation.
While the population figures of each year is obtained from Statistics South Africa's mid year population estimates.
Source: South African Reserve Bank and Statistics South Africa