Latest AFSCI Index shows credit extension increase
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Keith Lockwood, Independent consultant talks about Altron FinTech’s latest Short-term Credit Impact (AFSCI) Index for the third quarter of 2022 shows a 0.9% quarter-on-quarter increase in net short-term credit extension.
The index tracks the impact of short-term credit extension on the South African economy on a quarterly basis.
“Based on National Credit Regulator (NCR) data for the second quarter of 2022, there was a significant increase of almost 10% in the AFSCI Index when compared with the first quarter of the year. However, relative to a year earlier, the index is down just over 1%,” says independent economist Keith Lockwood.
Data from trends in short-term credit extension that are now supported by data from Altron FinTech, providing a useful indicator of likely trends in the third quarter of 2022, points to a further quarter-on-quarter increase in net short-term credit extension of 0.9% in the third quarter of 2022.
Another key finding is that, while short-term credit made 12% less of an impact on the economy in the second quarter of 2022 than it did at the start of 2015 – the baseline year of the index – it is now making 111% more of an impact than it did at the height of the Covid-19 lockdowns in the second quarter of 2020.
“The South African economy was impacted by a range of developments in the second and third quarters of 2022. Russia’s invasion of Ukraine further disrupted global supply chains – already impacted by Chinese Covid-19-related lockdowns – causing food and energy commodity prices to spike,” says Lockwood.
“This contributed to rapidly rising inflationary pressures and monetary tightening both globally and in South Africa, which caused the post-Covid-19 recovery to lose momentum. Many countries, particularly those where household debt to disposable income levels are already at historically high levels, are experiencing a cost-of-living crisis and there are concerns that a number of advanced economies will experience recessions.”
While South Africa was spared some of these impacts owing to its comparatively lower household debt levels, household spending remains under pressure because of persistently high unemployment levels, rising inflation, higher debt servicing costs and extended declines in real per capita incomes.
“The domestic economy has also faced additional headwinds from increased industrial action – particularly at Transnet – and from increased disruptions to electricity supply from Eskom.”
With a large number of South African households generating income below the poverty line, with average monthly household expenditure ranging from as little as R920 a month to R7 450 a month in Expenditure Deciles 1 to 5, and given other expenditure priorities, the capacity of these households to take on, and service, additional debt is limited.
The index tracks the impact of short-term credit extension on the South African economy on a quarterly basis.
“Based on National Credit Regulator (NCR) data for the second quarter of 2022, there was a significant increase of almost 10% in the AFSCI Index when compared with the first quarter of the year. However, relative to a year earlier, the index is down just over 1%,” says independent economist Keith Lockwood.
Data from trends in short-term credit extension that are now supported by data from Altron FinTech, providing a useful indicator of likely trends in the third quarter of 2022, points to a further quarter-on-quarter increase in net short-term credit extension of 0.9% in the third quarter of 2022.
Another key finding is that, while short-term credit made 12% less of an impact on the economy in the second quarter of 2022 than it did at the start of 2015 – the baseline year of the index – it is now making 111% more of an impact than it did at the height of the Covid-19 lockdowns in the second quarter of 2020.
“The South African economy was impacted by a range of developments in the second and third quarters of 2022. Russia’s invasion of Ukraine further disrupted global supply chains – already impacted by Chinese Covid-19-related lockdowns – causing food and energy commodity prices to spike,” says Lockwood.
“This contributed to rapidly rising inflationary pressures and monetary tightening both globally and in South Africa, which caused the post-Covid-19 recovery to lose momentum. Many countries, particularly those where household debt to disposable income levels are already at historically high levels, are experiencing a cost-of-living crisis and there are concerns that a number of advanced economies will experience recessions.”
While South Africa was spared some of these impacts owing to its comparatively lower household debt levels, household spending remains under pressure because of persistently high unemployment levels, rising inflation, higher debt servicing costs and extended declines in real per capita incomes.
“The domestic economy has also faced additional headwinds from increased industrial action – particularly at Transnet – and from increased disruptions to electricity supply from Eskom.”
With a large number of South African households generating income below the poverty line, with average monthly household expenditure ranging from as little as R920 a month to R7 450 a month in Expenditure Deciles 1 to 5, and given other expenditure priorities, the capacity of these households to take on, and service, additional debt is limited.
