Lending confidence rebounds: What’s behind the rise in South Africa's credit activity?

Source: Green Building Africa (GBA).

During 2023 and early 2024, loan growth in South Africa remained muted as interest rates climbed to their highest levels in 15 years to combat inflation. The steep borrowing costs led to a surge in the number of consumers and businesses unable to afford additional debt.

Although demand for credit remained strong, banks were constrained in extending loans due to rising inflation and high interest rates placing growing financial pressure on them.

High interest rates initially boosted bank profits, but rising bad debt and credit impairments later weighed on earnings. As inflation fell and rates were cut, loan growth rebounded from 3.2% in April 2023 to 4.1% by January 2024.

Significantly, the drop in inflation meant credit extension returned to positive real growth for the first time in almost a year. Real year-on-year growth in total loans and advances resumed in August 2024, ending a 10-month contraction.

The Reserve Bank noted business lending outpaced household credit in 2024, growing 4.8% versus 3%—the lowest household rate since February 2021—as banks shift focus to corporate clients amid household affordability constraints.