By: Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole, Koketso Mano
Consumer pulse check: Credit market dynamics
The credit market showed strong momentum in 2Q25, with new credit up 11.7% y/y to R156.1 billion, however, the debt stock rose only 2.8%, signalling deleveraging and debt restructuring. South African Reserve Banks (SARB) data confirms that this trend persists, with household credit growth averaging 2.9% in 3Q25. Below we examine National Credit Regulator (NCR) data to explain these divergent trends.
Where are consumers getting credit?
Banks remain dominant, issuing R122.7 billion (+11% y/y) and holding 78.6% market share. However, retailers posted the fastest growth, up 24% y/y to R12.2 billion, lifting their share to 7.8%. This reflects the rising popularity of in-store credit, driven by discretionary and durable goods purchases. Non-bank vehicle financiers also expanded significantly by 16.5% y/y to R11.5 billion, while other providers, including micro-lenders, grew modestly (+2.4% y/y) to R9.7 billion.
What types of credit?
The market structure remains strongly shaped by asset-backed lending. Secured credit, primarily for cars and furniture, rose 16% y/y to R51.8 billion, holding the largest share at 33.2%. Mortgages increased 6.5% y/y to R48.6 billion (31.1%), supported by rising property prices and, to a lesser extent, a modest recovery in demand. Combined, these categories account for nearly two-thirds of all new lending.
In contrast, unsecured loans surged 22.1% y/y to R27.5 billion (17.6%), with longer repayment terms becoming more common, a sign of recovery following a period of elevated defaults. Credit facilities, including credit cards and store accounts, grew modestly (+4.1% y/y) to R24.5 billion, with store cards dominating due to their accessibility. Short-term credit rose 8.2% y/y to R3.3 billion, with an average agreement size of R3 000, reflecting broader access and possible cash flow constraints among lower-income segments. Meanwhile, developmental credit, such as student and small business loans, edged up 5.1% y/y to R469 million, though quarterly volatility persists.
Implications
The sharp gap between new lending growth (11.7%) and net debt accumulation (2.8%) signals significant churn in the consumer credit system. Two forces drive this dynamic: firstly, a high real interest rate prompting households to accelerate principal repayments rather than take on new leverage. Secondly, high financial stress leading to elevated defaults and interest write-offs as distressed borrowers turn to debt administration and restructuring solutions. Overall, consumers are focused on repairing balance sheets. Lenders, meanwhile, are adopting a selective approach, funding high-quality borrowers while purging risky debt, creating a two-tiered market where credit access, particularly in the banking sector, is concentrated among financially resilient households.
Looking ahead, as inflation moderates and interest rates ease, the continued balance sheet repair should enable more creditworthy consumers to re-enter the market. This shift could boost net debt accumulation into 2026, supporting a gradual recovery in the overall credit market, though unsecured segments warrant closer monitoring - especially if longer repayment terms slow the pace of balance sheet repair
Week in review
The leading business cycle indicator declined by 1.2% m/m to 114.2 points in September, which reflects 1.1% annual growth versus 3.7% previously. This fall was supported by decreases in four of the seven available components, with the largest contributions coming from a decrease in the number of residential building plans approved as well as a deceleration in the trend growth rate of the number of new passenger vehicles sold. The largest positive contributors were the rise in South Africa's US-dollar-denominated export commodity price index and the acceleration in the growth rate of the real M1 money supply.
Week in review
Producer inflation increased to 2.9% y/y in October, from 2.3% y/y in September. On a monthly basis, prices declined by 0.1%, following a 0.1% decline in the prior month. The main negative contributors were food products, beverages and tobacco, coke, petroleum, chemicals, rubber and plastic products, as well as electrical machinery, communication, and metering equipment. Excluding petroleum-related products, producer inflation rose to 3% y/y, slightly up from 2.9% y/y previously. Food, beverages, and tobacco prices continued to drive headline pressure, coming in at 3.1% y/y, albeit down from 3.8% y/y in September. Other notable increases included coke, petroleum, chemicals, rubber and plastic products (2.5% y/y from 0.5%) and furniture and other manufacturing (11.2% y/y from 9.6%).
Private Sector Credit Extension (PSCE) growth rose to 7.3% y/y in October, up from 6.0% y/y in September. Corporate credit drove the surge, rising to 10.7% from 8.6% in the previous month. The main contributors were credit card advances, which jumped to 14.1% from 6.7%, and general loans, up to 16% from 13.9%. Corporate overdrafts also rebounded, posting a 1.7% increase after a 0.3% decline in September. In contrast, vehicle asset finance slowed to 7.4%, down from 9.9%. Household credit growth remained subdued at 3.1%, slightly higher than the prior 2.9%. Changes within the household segment were mostly minor, except for a sharp recovery in leasing finance, which climbed to 8.1% from a 0.6% decline in September. Overdrafts continued in negative territory, coming in at -7.9% compared to -7.2% previously. Households are showing a cyclical recovery; however, monetary policy remains restrictive and is ultimately weighing on lending appetite and credit uptake.
Week ahead
Manufacturing PMI data for November will be released on Monday. The PMI fell by 1.6 points to 49.2 in October, returning to contractionary territory. Sector activity remained subdued, with both domestic and export demand under pressure, as reflected in a 3.9-point decline to 48.9 in new sales orders. Business confidence remains low, with the sector grappling with external trade constraints, supply-side uncertainties, and persistent cost volatility.
On Tuesday, the 3Q25 Gross Domestic Product (GDP) data will be released. Real GDP grew by 0.6% y/y in 2Q25, following gains of 0.8% y/y in both 1Q25 and 4Q24. On a seasonally adjusted basis, the economy expanded by 0.8% q/q. Growth was broad-based, with mining, manufacturing, and trade each contributing 0.2ppts, while finance, government, personal services, and agriculture each added 0.1ppt. Household consumption rose 0.8% q/q, total investments rebounded on inventory restocking despite weaker fixed investment, and net exports detracted from growth as exports fell more than imports. We expect quarterly GDP growth to have been maintained, albeit at around 0.2%, underpinned by the broader trade sector, alongside the mining, transport and finance sectors. The notoriously volatile agricultural sector presents risks on either side of the forecast.
Also on Tuesday, new vehicle sales data for November will be released. Vehicle sales volumes increased by 16.0% y/y in October, reaching 54 683 units. The increase was mainly driven by new commercial vehicle sales which expanded by 19.1%, while new passenger car sales increased by 14.8%. Sustained sales momentum reflects the combined impact of an ongoing replacement cycle, low and stable inflation, recent interest rate cuts, and resilient demand for entry-level and affordable brands.
On Wednesday, the RMB/BER Business Confidence Index (BCI) for 4Q25 will be published. In 3Q25, the BCI edge down to 39 points, falling below its long-term average of 42, signalling widespread dissatisfaction among businesses. Although the composite index appeared largely flat, this masked substantial sector-level shifts, with confidence in each sector moving by ten points or more, well beyond typical volatility. The survey results indicate that the economy continues to muddle through, with confidence levels too low to catalyse the investment needed to lift South Africa's growth and employment trajectory.
Current account data for 3Q25 will be released on Thursday. Last quarter, SA's current deficit widened to R82.8 billion, up from a R47.8 billion in 1Q25. As a percentage of GDP, the current account recorded -1.1% versus -0.6% in the previous quarter. This was largely driven by a narrower trade surplus on good and services. Elevated precious metal prices, alongside softer oil prices, continued to support the terms of trade.
Also on Thursday, data on electricity generated and available for distribution for October will be released. Electricity production declined by 5.7% y/y in September, following a 3.1% y/y in August. On a seasonally adjusted basis, generation declined by 1.2% m/m in September, after a 1.1% m/m decline in August. The performance for the quarter declined by 1.5%, pointing to a drag on 3Q25 GDP growth.
On Friday, data on SA's gross foreign exchange reserves for November will be published. Gross foreign exchange reserves increased to $71.55 billion in October, up from $69.7 billion in September. The main contributors to the increase were foreign currency and gold reserves, while Special Drawing Right (SDR) holdings declined.
