Consumer credit in South Africa

Between 2007 and 2022, the number of credit-active consumers in SA increased by almost 10m to 26m people, while the employed base remained mostly flat at about 14.9m persons. In our view, the widening gap between the number of people employed and the credit-active population is concerning and could reflect a higher risk of bad debts.

We think that economically-inactive people, including grant recipients, may have become more prominent in the credit market. However, we have seen no evidence that the Covid-19 Social Relief Distress grant contributed to greater credit activity.

Despite the rise in credit-active consumers outpacing employment, credit quality has improved with more customers having a good-standing rating. The ageing of credit accounts has also improved considerably over the past 14 years. The number of accounts per customer has been stable, suggesting customers have not over-extended by taking on too many credit accounts.

We note a shift to shorter-term debt, which now accounts for 23.6% of total debt compared to only 12.8% in 2008. While short-term debt may bear higher interest rates than long-term debt such as mortgages, the shorter duration of the debt results in repayments constituting mostly capital and a relatively small proportion of interest. We believe the shift to shorter-term debt may soften the impact of rising interest rates.