South African Credit Growth Slows to Four-Year Low: Week Ahead

By Nasreen Seria

June 29 (Bloomberg) -- South African credit probably rose at the slowest pace in more than four years in May as banks tightened lending conditions and consumers curbed spending, a survey showed.

Growth in borrowing by households and companies eased to an annual 8.1 percent from 8.7 percent the month before, according to the median estimate of 13 economists surveyed by Bloomberg. The Reserve Bank will publish the data at 8 a.m. tomorrow.

Banks, including Standard Bank Group Ltd., Africa’s biggest lender, and Absa Group Ltd., the country’s largest retail bank, are granting fewer loans as consumers default on payments. Manufacturers and miners have also scaled back investment after the global economic recession curbed export demand.

“Banks remain strict in their lending criteria as they wait for non-performing loans to peak,” Gina Schoeman, an economist at Macquarie First South Securities in Johannesburg, said in a note to clients. “Until this loosens up, credit growth will remain in single digits.”

The Reserve Bank has cut its benchmark interest rate by 4.5 percentage points to 7.5 percent since December to spur consumer spending and pull the economy out of its first recession in 17 years. The bank left the repurchase rate unchanged on June 25, concerned that rising energy costs will keep inflation above the 3 percent to 6 percent target range.

The second-quarter consumer confidence survey, published by First National Bank and the Bureau for Economic Research tomorrow, will give further indication of consumer spending. Vehicle sales, which plunged 34.7 percent in May from a year ago, will be published by an industry body on July 2.

Trade Deficit

South Africa’s trade deficit probably widened to 2 billion rand ($252 million) in May from 1.5 billion rand in the previous month, according to the median estimate of nine economists surveyed by Bloomberg. The South African Revenue Services is scheduled to publish the data at 2 p.m. tomorrow.

Kagsio Securities will release the June Purchasing Managers Index on July 1. The index gained for the first time in four months in May to 37.3.

In corporate news, Naspers Ltd., Africa’s largest media company, will report annual income tomorrow. The company said on June 18 that per-share earnings, excluding one-time items and goodwill amortization, climbed as much as 10 percent.

The FTSE/JSE Africa All Share index fell for a third week, dropping 0.4 percent to 22,308.28. Lonmin Plc, the world’s third-biggest platinum producer, fell 7.6 percent, the biggest decline of the top 40 companies on the stock exchange. ArcelorMittal South Africa Ltd., Africa’s biggest steelmaker, declined 6.8 percent.

The rand gained 2.4 percent to 7.9099. The yield on the R153 government bond, due 2010, surged 47 basis points to 7.33 percent, the highest level in five months.

Event                                             Date
Naspers Ltd. annual earnings                      June 30
BER consumer confidence survey                    June 30
M3/private sector credit                          June 30
Trade deficit                                     June 30
Kagiso purchasing managers index                  July 1
NAAMSA vehicle sales                              July 2

To contact the reporters on this story: Nasreen Seria in Johannesburg at nseria@bloomberg.net