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A Reuters analysis of a varied basket of goods shows how the COVID-19 crisis has upturned a decades-old consumer model for everything from clothing to food.
South African households remain under economic pressure, impacting their spending power. The slower growth in real disposable income underlines this trend.
According to the South African Reserve Bank’s December 2024 Quarterly Bulletin, household expenditure growth slowed to 0.5% in the third quarter, down from 1.2% in the second quarter.
Household debt in South Africa continues to rise despite the easing economic environment in recent months. According to data from the Reserve Bank, household debt as a percentage of nominal disposable income edged higher to 62.2% in the third quarter of 2024.
Head of the Economic Statistics Department Michael Manamela says households are still incurring debt while servicing legacy debt.
“So, we see that there’s still an advancement of loans to the households, although it’s slowing down. The main categories where we see that loans are slowing down are your secured loans and your mortgages that are slowing down. Whereas when you look at credit cards, overdrafts, and those instalments – that’s where we see that the high increases because those are unsecured loans are quite easy to access.”
This suggests that households are borrowing more, possibly for consumption, to keep up with elevated living costs.
Manamela outlines the outlook from the central bank. “We have always seen that for the rest of 2024, the household debt has been slowing down as banks are using quite strict criteria to lend out, and as a result the banks are only left with what you call creditworthiness clients and basically they are running away from. That’s why you see that. So, in terms of the quantity of loans that has been decreasing as well.”
The Monetary Policy Committee of the central bank lowered the repo rate further by 25 basis points in November after reducing it by the same margin in September following lower inflation outcomes.
The MPC noted, however, that while risks to the domestic inflation outlook are currently assessed as balanced, upside risks emanating from higher prices like electricity, remain in the medium term.
