Data released by Capitec reveals that South Africans are experiencing a decline in their financial situation. As reported by News24, the bank serves around one-third of the population and has said that its clients became poorer in the financial year leading to end-February due to the failure of their income levels to keep up with inflation.
Despite using more affordable products, Capitec’s clients spent 8% more on groceries on average and 16% more on fuel than the previous year. In addition, interest rate increases led to a 20% rise in the value of the average loan debit order and a 15% increase in the average vehicle finance debit order.
Central banks globally raised rates aggressively to control inflation, and experts expect South Africa’s growth to drop to almost zero in 2023 due to load shedding. Additionally, recent statistics reflect a continued decline in consumer confidence in South Africa.
Capitec’s 2023 financial results statement released on Tuesday explains that the bank has access to the financial data of roughly one-third of the population, enabling them to understand the impact of the current economic conditions on South Africans. For example, despite a 4% increase in the average income of client accounts, Capitec reported a rise in credit losses due to clients having less disposable income than before and a significant interest rate increase.
Capitec reported a sharp increase in its credit loss ratio to 8% in the year ending February in its retail banking division, compared to 4.9% a year before. Furthermore, the interest paid on retail transactional accounts increased by 80% YoY to R1.8 billion due to higher rates. However, the bank relieved some of the strain on its clients by reducing SMS notification fees and scrapping charges on in-app notifications, which saved clients R510 million.