At end December 2018, South Africa’s money supply M3 was ZAR3,540 billion ($263 billion) representing a 5.59% rise on a year to year basis. Apart from being below forecasts (+5.78%), the increase of the money supply is the lowest recorded since end December 2012 (when it rose by 5.12%).

According to experts, money supply is the addition of the quantity of money in central banks, the volume of the notes in circulation, deposits and financial assets (treasury bonds).

According to figures published by South Africa’s central bank, the poor performance of the money supply in 2018 was notably due to low credit demand. While during the period under review, the monetary base recorded a 9.13% growth, its highest since 2013, and the net foreign assets also rose but the volume of credit granted recorded its lowest growth (+5.52%) since 2013.

Looking at the volume of notes in circulation, it appears that the poor rise of credits is due to the low credit demand by economic players. Households’ credit demands remained strong and it recorded its highest growth since 2014 (+5.7%). The question is now to know where households spent the funds they borrowed because most of the country’s retailers announced lower profits explaining it by lower sales.

Idriss Linge