The latest release of the South African Bank Lending Practices Survey, which measures lending sentiment of senior credit practitioners across the industry, continues to remain positive following the change in political leadership and the increased focus on governance.
Although land expropriation remains a significant impediment to certain categories of lending, the proposed debt intervention bill, in its current form, has dramatically impacted on the willingness of banks to lend. Sentiment towards lending to the mass market was forecast to turn negative in the run up to the Christmas shopping season, making access to credit significantly more difficult.
The Government stimulus package, announced in September, has also not had the desired impact of stimulating bank lending, possibly as a result of the recognition that there is no new or additional funding to be made available, due to severe fiscal constraints and emerging demands faced by the fiscus.
Banks’ indicated that despite the negative expectations around economic activity and increased perceptions of risk, their collective strategy going forward would indicate a preference for lending to households rather than business enterprises. Credit card finance and credit facilities to households combined with unsecured lending are set to dominate their strategy, a positive indicator that contrasts against the current negative and restrictive lending sentiment towards these categories as the year draws to a close.
Lending to business enterprises will continue to prioritise SME lending, with allocations to asset-based financing for plant and equipment and debtor finance becoming a focus area.
Banks’ have indicated that when compared to five years earlier, lending to households is significantly more stringent and continues to worsen. In contrast, the overall credit stance to business is more favourable than five years earlier with the noticeable exception of the construction sector.