Vehicle sales are a major economic index — but they also serve as a useful demographic indicator.
This week vehicle finance bank Wesbank released figures showing that over the past 10 years the value of vehicle loans to black clients increased tenfold, from R736-million in 1994 to R7,6-billion in 2004. This increase occurred against the backdrop of a 490% increase in the bank’s total book.
The shift in the racial composition of the book of Wesbank, a large vehicle finance-provider, indicates growth in the black middle classes.
Wesbank marketing manager Chris de Kock defended the bank’s use of racial categories, pointing out that the Financial Sector Charter required financial institutions to promote access to finance for previously disadvantaged individuals. He added that “from a marketing perspective it is essential that the bank knows its clients, whether they be female/male, different income groups or racial groups”.
Giving details of the “shift in the risk associated with our African book”, De Kock said that in 1994, black borrowers accounted for 7% of loans and 17% of total arrears — an arrears ratio of 2,5%. It was now down to 1,3% — 17% of total loans and 23% of total arrears.
In 2004 African book arrears ratio is roughly on a par with the rest of the Wesbank individual loan port- folio. “This shatters the myth that the African market is inherently riskier than other markets. The facts show that that is a legend.”
Wesbank also finds that all South Africans are managing their debts better. The household debt-to-income ratio is down from 60% in 1996 to 52% in 2004, comparing favourably with Australia, where the debt-to-income ratio of households was 125%, the United States (102%) and the United Kingdom (122%).
Wesbank sees a culture of repayment developing among South African borrowers. Arrears of a month have declined from 4,2% of the 1994 loan book to the current level of 1,9%.
De Kock was also bullish about future car sales. He said South Africa was entering a phase of relatively stable interest rates and inflation that would enable motor vehicle manufacturers to price their products “properly”.
If vehicles become more affordable for entry-level buyers, De Kock predicts a growth in sales over the next decade exceeding the 30% increase experienced between 1994 and 2004.