Ethel Hazelhurst

Growth in credit to the private sector topped 10 percent year on year last month, for the first time since February 2009, the Reserve Bank said.

Data released yesterday by the bank showed credit expansion was ahead of the 9.7 percent forecast by 15 economists polled by Bloomberg, and up on 9.6 percent year on year growth in November.

While the double-digit rise improves prospects for consumption, and economic growth, it could be a sign that households are overextended.

The Reserve Bank figures represent only credit provided by banks while consumers typically use other types of credit, particularly cards issued by retail stores.

According to the National Credit Regulator, which collects data more widely, nearly half of credit-active consumers have impaired records. If overindebted borrowers run out of access to further credit, consumption could stall.

The double-digit growth in credit comes after a long hard haul. Absa Capital economist Ilke van Zyl said: “Compared to the previous credit cycle, credit uptake has been mild at best. This is despite the record low interest rate environment.” The Reserve Bank’s repo rate is 5 percent, after a half percentage point cut in July last year.

Impetus for credit growth in the 12 months to December came from corporate loans, which rose 10 percent to just more than R1 trillion, as well as from households, up 9.7 percent to R1.3 trillion.

Van Zyl said one of the main reasons for the subdued demand for money was that debt levels had been rising since the start of the last decade.

“Although down from its peak of 82.6 percent in the second quarter of 2009, debt as a percentage of household disposable income is still high at 76 percent.” The number compares with 54.8 percent in the first quarter of 2000.

Twelve-month growth in mortgage loans fell below 2 percent, to just over R1 trillion.

Absa property analyst Jacques du Toit said the outstanding mortgage book included both commercial and residential loans.

“Commercial mortgage balances contracted by 0.9 percent last year after growth of 6 percent in 2011. The value of outstanding household mortgage balances increased by 3 percent from growth of 1.2 percent in the previous year.”

Stanlib chief economist Kevin Lings said: “Ideally the composition of credit growth could be a lot more balanced, with more mortgage activity and less use of personal loans. Importantly, during most economic upswings, the initial part of the recovery is driven by a rise in incomes [cash sales] and not a rise in credit.

“Credit demand, typically, emerges a little later in the recovery. Hence we expect all forms of credit to continue to gain momentum in 2013.”

Economists expect interest rates to remain unchanged this year. No cut is on the cards because the Reserve Bank expects inflation to breach the ceiling of its 3 percent to 6 percent target range in the third quarter.

And a hike is unlikely because the bank has revised its growth forecast for the year from 2.9 percent to 2.6 percent.