WHILE short-term lending was is impacted by Covid-19, there was some recovery in the fourth quarter of 2021, data from the Altron FinTech Short-term Credit Impact (AFSCI) Index showed.
However, National Creditor Regulator (NCR) data for the first quarter of 2022 was expected to show a decline.
Excluding the Altron FinTech data, there was a 2.6 percent increase in the index from the third to the fourth quarters of 2021, and a 3 percent rise year-on-year.
Economist Keith Lockwood said, “The normalisation of economic activity continued. This is reflected in the performance of real gross domestic product and real household consumption expenditure, both of which experienced consistently positive growth from the second quarter of 2021 to the first quarter of this year. Despite this, both indicators were only able to return to their pre-Covid-19 levels in the first quarter of 2022.”
He said despite an uptick in the first quarter of this year, total employment was still 9 percent lower than before the pandemic began, and the number of unemployed people was 21 percent higher.
There were also qualitative shifts in employment. Compared with the pre-Covid-19 period, he said there was a 70 percent increase in the number of unpaid people working in households, a 10 percent decrease in the number of people employed by others, and a 12 percent decrease in the number of employers.
“On the positive side, the average number of employees per employer has been trending higher. After falling from 18.3 people in 2017 to just 11.6 people at the height of the lockdown in the second quarter of 2020, this increased to 15.7 people in the first quarter of 2022,” he said.
These quantitative and qualitative differences effectively meant that there were still significantly fewer people earning regular incomes in the first quarter of this year than before the pandemic started.
“This has implications for the number of people deemed to be creditworthy. Nevertheless, the NCR data indicates that there was a slight decrease in the rate of rejections on credit applications– from 67 percent in the third quarter of 2021 to 66 percent in the fourth quarter, which suggests that there might have been a slight improvement in the financial position of some individuals and households towards the end of 2021, as the normalisation of economic activity continued,” he said.
As at the end of the fourth quarter of 2021, the value of credit still on the books of registered credit providers amounted to R2.11 trillion – up 5.1 percent from a year earlier. More than 52 percent of this consisted of mortgages, with more than 22 percent being secured credit. Short-term credit only accounted for 0.1 percent of the total.
In the year to the end of the fourth quarter of 2021, the total value of consumer credit on the books of credit providers increased by nearly R102 billion.
“However, this increase was supported almost entirely by the growth in mortgages, which accounted for 89 percent of the increase; secured credit 14 percent, and credit facilities 4 percent. Small increases in developmental credit and short-term credit made marginally positive contributions to the growth, but unsecured credit contracted,” Lockwood said.
The index showed that whereas people with monthly incomes of R15 000 and above accessed 88 percent of the total consumer credit in the fourth quarter of 2021, those with monthly incomes of less than R10 000 received only 7 percent of the total.
“By contrast, people earning more than R15 000 per month received 43 percent of the total short-term credit advanced, while those earning less than R10 000 per month accessed 41 percent.”
People with monthly incomes of R5 501 to R7 500 accessed just 2 percent of total credit, and 12 percent of short-term credit, while those earning R3 500 or less received 6 percent of short-term credit and only 1 percent of total credit.
This indicated that the people most vulnerable in South Africa’s economy continue to struggle to access most formal credit markets.