Global Courant 2023-04-20 20:00:26
By the end of 2023, the global and local economy is likely to stabilize, says Capitec CEO Gerrie Fourie.
Speaking to BusinessTech after the release of the group’s latest results, Fourie said the next few months of the year are hard to call – with things getting better or worse – but in either case, the situation will likely clear up by September or October. normalize. .
This includes things like inflation, which surprised positively for March. Echoing the sentiments of the South African Reserve Bank, the CEO of Capitec said headline inflation would begin to fall over the course of the year, while interest rates should stabilize alongside the supply chain.
“If you really look at it, China was locked down until about February and normally you need four to six months to get that production cycle going. So China is really starting to produce. So the supply side will be resolved,” he said.
“Due to artificial inflation, which we are now seeing in America, inflation has fallen from 7 to 5%. We see the same similar trend in the UK.”
Fourie said it will be “very interesting” to see what global inflation numbers look like in the coming months.
“All economists say it will normalize and we will return to normal trends; that will then force us and the US Fed to stop raising interest rates. That’s what everyone is predicting now. The signs look like this, but it remains to be seen how it turns out.”
South Africans have taken major blows to their financial stability with record high interest rates and skyrocketing inflation, leaving more people to rely on credit for their daily livelihoods.
According to the latest data from StatsSA, consumer price inflation rose to 7.1% in March, up from 7% in February – surprising analysts who suspected a slight decline.
The rise in inflation comes after another surprise for poor South Africans, where on March 30 the South African Reserve Bank (SARB) raised interest rates by 50 basis points.
The hike was the ninth in the interest rate cycle that began in November 2021. Rates are now at the same level as they were during the 2009 global financial crisis.
However, SARB’s rate hikes are seen by Fourie as the right move for inflation. He said the central bank has two responsibilities: one responsibility is to look after inflation – the other is to protect the rim.
“If the US Fed raises interest rates in America, you are basically forced to raise here as well…because if you don’t, the rand/dollar will only weaken,” the CEO said.
“And if the rand dollar weakens, it costs more to import, and then you have higher inflation. So the moment the Fed stops raising rates, we’re all likely to see our rates stay stable here as well.”
Fourie said South Africa does not operate as an island in itself, but rather within an entire global economy. This was also raised by the SARB at the last meeting of the Monetary Policy Committee in March.
However, there are still quirks – and local inflation factors such as tax shedding continue to have an impact. As a result, South African households remain under pressure and are cutting spending, changing habits and increasingly turning to credit and debt to stay afloat.
In Capitec’s latest financial results, the bank flagged these challenges and recorded a massive 80% increase in loan losses, amounting to R6.3 billion.
The company attributed the increase in loan losses to borrowers experiencing difficulties in repaying loans.
In the face of major economic pressures on average South Africans and an undesirable turn to relying on credit for day-to-day living expenses, Fourie said the bank had limited its credit facilities – making more than 900 changes to its credit policy purely because of the risk the bank sees with people currently turning to credit.
The bank further reported in its results that consumers faced several challenges in 2022. Thanks to the bank’s more than 20 million active customers, the bank has a vast amount of financial data on about a third of the country’s population.
This data enables the bank to understand its customers and the impact the current deteriorating economic conditions are having on South Africans, Capitec said.
“Our customers have spent an average of 8% more on groceries and 16% more on fuel over fiscal year 2023 than last fiscal year.”
“The rise in grocery spending was tempered by the effect of customers purchasing more affordable products. The value of average annual collections for home loans increased by 20%, and the average amount of collections for car loans grew by 15%.’
Capitec also reported that average revenue growth on client accounts only increased by an average of 4%, compared to 10% in the comparable period.
Read: Forecast South Africa: gloomy with high risk of recession
