Annabel Bishop, Investec’s chief economist in South Africa. Picture: FINANCIAL MAIL
Annabel Bishop, Investec’s chief economist in South Africa. Picture: FINANCIAL MAIL

GROWTH in borrowing by households and private companies accelerated more than expected last month from December 2011, to the highest rate of expansion in almost four years, Reserve Bank figures showed on Wednesday.

This suggests spending spurred growth in the last quarter of last year.

The growth in credit extended to households and private companies — to 10.1% year on year last month from 9.6% year on year last November — could also indicate a strong dependence on credit to fund festive season spending.

"In December, there is usually a pick-up in credit demand because of the festive season. The strong growth could have been boosted by low interest rates and price discounting on certain items," Nedbank economist Johannes Khosa said on Wednesday.

Growth in credit extended to households slowed year on year last month, while that to corporates improved.

Growth in the category that indicates demand for credit by corporates — other loans and advances — improved year on year last month, the Reserve Bank reported.

"We expect this credit category (corporates) to drive growth in 2013 — in response to the cost of credit as well as the increased government projects, notably the renewable energy projects," Standard Bank economist Shireen Darmalingam said.

While corporate borrowing is expected to improve, the same is not forecast for consumers.

Households are expected to face steeper electricity, food, and fuel costs this year, according to analysts, which will cause a slowdown in the growth of household consumption expenditure.

There was continued growth in unsecured lending last month, the Reserve Bank said.

Investec’s chief economist in South Africa, Annabel Bishop, on Wednesday said that while unsecured credit would be problematic if it were extended to people who could not afford it, it played an important role in enabling small businesses to grow and students to fund their education.

Nedbank expected credit growth to stabilise this year, and growth in asset-backed credit — particularly to individuals — was likely to ease as consumer confidence remained weak due to the poor economic outlook and high debt levels.

Borrowing by households and private companies rose by R240bn last year — much higher than the R129bn recorded in 2011, but still below the levels of about R300bn recorded five years ago, before the recession.

While most of the credit extension components monitored by the Bank — such as instalment sales and other loans and advances — provided support to the strong growth in borrowing last year, mortgage advances were a drag. Mortgage advances are the largest component of credit extension.

"Mortgage advances have shown relatively low growth right through 2012, most probably related to the broader economic environment, which impacted on the consumer and eventually worked through to the property market in terms of subdued demand," Absa Home Loans property analyst Jacques du Toit said.

"I think the state of consumer finances definitely plays a role here, and all this despite the lowest interest rates in 40 years."

The low interest rates have not been enough to lift the property market, as most consumers still do not qualify for home loans due to overindebtedness coupled with tough National Credit Act requirements.

Mr du Toit forecast single-digit growth of 4%-5% for mortgage advances this year.

Ms Bishop said the marginal rise in mortgage advances last month reflected weak housing demand. "Indeed, real house prices continue to fall."