9% inflation fear may sway bank

By Tonny Mafu

Johannesburg – The Reserve Bank’s targeted measure of inflation is now tipped to exceed 9 percent after increasing to 8.6 percent last month, raising the odds of yet another interest rate hike when the monetary policy committee next meets in April.

The central bank, which announces its latest decision this afternoon, has lifted rates by 400 basis points since June 2006 to fend off rising inflation fed by strong credit demand. More…

JD Group feels the squeeze in its beleaguered debtors book

By Tom Robbins

Cape Town – Credit sales at the JD Group fell sharply, as expected, but consumer arrears fell only marginally at the company that owns national retail chains such as Morkels and Incredible Connection.

Sales at credit chains fell 13.1 percent in the four months to January 15 compared with the same period in the previous year, according to Business Report’s calculations.
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Banks still on firm footing

Johannesburg – Strong growth and the absence of exposure to subprime mortgages should continue to support robust profitability and asset quality in the South African banking market through 2008 and into 2009, says Standard & Poor’s.

The ratings agency says in a new report South African Banks Balance Robust Growth With Rising Risks In 2008 that banks also face growing macroeconomic and political risks from rising inflation in an overheating economy and from the uncertainty over the presidential succession in 2009, the report says. More…

Use of plastic money rises

China had turned to plastic – and consumer debt – as never before, with its citizens for the first time carrying at least one bank card on average, according to new figures from the central bank. More…

SA’s credit rating under cloud

By Ethel Hazelhurst

Johannesburg – By cutting export revenue and discouraging foreign investment, Eskom’s generation crisis could put South Africa’s investment grade credit ratings at risk, Ian Cruickshanks, head of Nedbank Capital’s strategic research unit warned at the weekend.

A fall to a subinvestment-grade rating would increase the cost of capital to all domestic borrowers, boosting inflation further. More…

National Credit Act receives positive response

BRYANSTON – Synovate today released the results of their survey on the impact of the new National Credit Act (NCA) on ordinary South Africans. Synovate contacted 676 people in metropolitan areas to investigate perceptions of the NCA. Of those, 177 had never even heard of the law. The remaining 499 respondents had heard of the law and 41% believed they had been personally affected by the new law.

Interestingly, only 44% stated that their banks had communicated with them about the NCA.

The highest proportion of those who stated that they had been affected by the NCA were males, as well as respondents in the 20 – 24 year age group. “This is very possibly due to the high amount of credit application that takes place during this lifestage and the fact that in South Africa males are still the primary ‘financiers’ for their families” states Debbie Amm, Client Services Director at Synovate.

Most respondents had applied for vehicle and asset finance, a homeloan or personal / study loan. Very few had applied for store cards or accounts.

A third of those interviewed believe that the NCA will have a positive effect on the local industry, while 37% believe that the act is good for the overall South African economy.  “The fact that there is a substantial degree of public support for the law is very positive,” states Amm. “The NCA is aimed at alleviating over-indebtedness in our country and there has been a lot of negativity around increased administration and restraining of industries that rely on the granting of credit. It is great to see that South Africans back the act”.

When asked about how the credit application process had changed, 34% who had applied for credit described the process as ‘very simple’. “This is very possibly due the fact that, when applying for vehicle finance or even a homeloan, very often the Finance and Insurance department / mortgage originator will take care of your application and you have very little to do until your signature is required at the end of the process” continues Amm.

At the other end of the spectrum, 25% described the process as ‘difficult’ or ‘very difficult’, the majority of which were Black and Coloured respondents.

Of those who had recently applied for credit, 68% had their credit approved. “It is hard to tell whether this is a result of the NCA,” states Amm. “It is very possible that credit applications would yield the same success ratio purely due to the level of the applicant’s income or a bad credit history.”

Are South Africans in Debt?

Almost a quarter of the respondents believe that they are not in a position to pay off all their debts on time.  This is especially pronounced in the Coloured and Black population groups and the younger age groups. “It is natural that younger age groups will have more debt than older age groups. Those between 18 and 34 are typically in the first phase of independence. This means a great deal of initial expense as they start to establish themselves by paying off student loans, buying a car and finding a place to live.” explains Amm.

Interestingly, despite the NCA, a relatively large proportion (28%) of respondents stated that they had recently been contacted by a South African credit provider who offered them credit they had not applied for, either via post (53%) or telephone calls (44%). An overwhelming 91% did not take up the offer of credit – a very positive response from a public that has been criticised for having too much debt.

Another tough year looms

Consumers face nine more months of painfully high debt costs, warns fund manager
January 24, 2008

By Tonny Mafu

Johannesburg – Consumers are set to endure another nine months of tough economic conditions, with the cost of debt already 40 percent higher than in 2006, according to Anil Thakersee, the managing director of unit trusts at Old Mutual Investment Group South Africa (Omigsa).

After more than four years of a benign economic environment, in which credit became cheaper, consumers face a potentially crippling situation. Rising inflation has eroded the purchasing power of disposable income. The Reserve Bank has increased interest rates by 400 basis points since June 2006 to keep inflation under control, but price increases breached the upper limit of the bank’s 3 percent to 6 percent target band in April last year, and have remained above this level since. More…

Ernst & Young forecasts flood of surrenders

Policyholders would start surrendering their policies in great numbers this year because of the credit crunch, Ernst & Young’s insurance spokesperson Tim Rutherford said yesterday.

This was going to make this year a troubled one for life insurance companies, which were only beginning to come out of the doldrums.
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Retail sales central to rates puzzle

By Evan Pickworth

Johannesburg – South Africa’s November retail sales data was keenly watched on Wednesday by the market for direction ahead of the key rates decision on January 31 and CPIX on January 30.

“Rarely has such a number been so closely watched or had such a wide range of economist estimates placed on it,” noted global analysts Lehman Brothers.

Retail sales growth slowed to 0.2 percent year-on-year in November, the lowest in four years, as higher interest rates put a dampener on consumer spending, official data show. More…

Rates slow retail growth to lowest in four years

By Tom Robbins

Cape Town – Retail sales growth has fallen to its lowest level in four years, and with consumers yet to feel the effect of last month’s interest rate hike, the worst is still likely to come.

Statistics SA said yesterday that year-on-year November sales growth at constant prices had fallen sharply to remain effectively unchanged at 0.2 percent. In 2006 November sales climbed as much as 12 percent.

But unlike in the US, sales growth is still positive for now. On Tuesday it was reported that US retail sales for last month had unexpectedly fallen 0.4 percent, sending stock markets from London to Tokyo lower on fears that the world’s largest economy was entering a recession.
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