In July, credit demand in South Africa continued its downward trend, with growth in private sector credit extension (PSCE) falling to 3.5%, the lowest in five months, from 4.3% in June. This decline was observed across most subcategories, particularly in ‘investment and bills,’ which saw a 1.1% month-on-month drop, bringing its annual growth to 0.4%. Instalment sales and leasing finance also decreased, reflecting a slowdown in the vehicle sales market. Unsecured credit to households and companies moderated, and mortgage growth remained stable at 2.9% year-on-year. Corporate credit experienced significant weakness, with a 1.4% month-on-month decline, reducing its annual growth rate to 4.3%.

Despite these challenges, Nedbank’s Economic Unit believes the worst may be over. The bank forecasts that lower inflation and anticipated interest rate cuts by the South African Reserve Bank (SARB) will improve disposable income and stimulate credit demand. The introduction of the two-pot retirement system on 1 September is expected to ease financial strain on households, boosting confidence and spending. Corporate credit demand is also projected to remain firm, supported by increased activity in the renewable energy sector and optimism around structural reforms. While credit growth remains subdued, Nedbank anticipates a gradual recovery starting in August, with growth accelerating towards the end of the year and potentially reaching 6% by 2025.