South African Reserve Bank Governor Tito Mboweni has again expressed concern at the seemingly unabated rate of household spending, raising the spectre of further interest rate hikes.
”It is very clear to me that households continue to finance their current expenditure through debt,” he told the National Assembly’s finance committee on Friday.
”The fact that household debt as a percentage of household disposable income continues to climb should be a matter of concern.”
This was worryingly high at 70%, and, if anything, was moving towards 100%.
”It might mean there’s something wrong in the lending and borrowing market. Maybe the price is misaligned,” Mboweni said.
There might be ”some problems” in the not too distant future, maybe the middle of next year.
”Many people will be returning their four-by-fours to the garage, and there might be lots of houses repossessed, and so on,” he said.
By midyear next year, people would be readapting their behaviour, and if they did not do so, they would be forced to by circumstances.
They would see that money was not as cheap as it was previously.
Mboweni said the banks, and retailers, were not learning any lessons at all and not curbing their lending.
They willingly extended further credit and even solicited further borrowing.
”The willingness to extend credit boggles the mind. Loans and advances are growing at something like 20%, which is something we’ve got to be concerned about,” he said.
However, inflation remained under control, ”although the risks are only on the upside”.
Mboweni said he was satisfied the actions taken would contribute towards the containment of inflation.
Capital inflows also continued to be encouraging, standing at R74-billion in the year to date — more than enough to finance the current accounts deficit.
On jobs, Mboweni said: ”Despite what other people in our society say, the truth of the matter is that we are seeing some improvement in employment growth.”
This was borne out in the figures and statistics — 7,7% in the first quarter of the year, and expected to be about 5% for the year.
However, skills development remained a challenge.
Growth was most robust in the manufacturing and services sectors, demanding a better-skilled human resources environment.
While this was a challenge, considering ”where we come from”, the point could not be belaboured forever.
”So skills development, that is the key,” Mboweni said. — Sapa