The South African Reserve Bank (SARB) quarterly bulletin data on Wednesday showed that household debt was at a new record 77,6% from 77,5% in the third quarter, but gross domestic expenditure dipped to just 0,2% in the fourth quarter from a revised 5,4% (5,75%) previously.
Added to this was that household consumption expenditure slowed to 3,8% in the fourth quarter from a revised 4,4% (4,5%) in the third quarter. For 2007 it was at a lower 7% from the 8,2% seen in 2006.
The SARB also noted that gross savings relative to GDP had remained at 13,5% from a revised 13,5% (13,75%) in the third quarter.
The SARB said the national savings ratio in 2007 was marginally higher at 14,1% from 14% in 2006 due to higher saving levels by general government.
“Notwithstanding the minor improvement in the national saving ratio, the country’s dependence on foreign capital to finance gross capital formation increased from 31,6% in 2006 to 34% in 2007. This was the highest rate of dependency on foreign capital ever reached in South Africa owing to sustained strong momentum in gross capital formation,” said the SARB.
The previous highest rate of dependency on foreign capital of 26,1% was recorded in the early 1970s.
Growth in real gross fixed capital formation by the private sector was at 13,4% in the fourth quarter from 14,1% before and at 14,8% for the year from 13,6% in 2006.
Total gross fixed capital formation lifted to 14,1% in the fourth quarter from 12,9% in the third and to 14,8% in 2007 from 13,8% in 2006.
The SARB said it had noticed some impact from higher interest rates.
“Partly reflecting the progressively tighter monetary policy stance from the middle of 2006, spending on durable goods increased at a rate of 5,2% in 2007 as a whole, considerably lower than the increase of 15,9% recorded in 2006,” it said.
However, it noted that despite slower growth in household indebtedness, the ratio of debt service costs to the disposable income of households increased further over the period due to higher interest rates. — I-Net Bridge