Refinement of the
structure of
Household Balance Sheet
in South Africa
Karen Kuhn
OECD - WPFS
3 November 2009
Paris
Background

Household balance sheet data are currently estimated
quarterly.

However, the balance sheet data are not published.

Only the household debt-to-disposable-income ratio is
currently published, while household wealth estimates
are used on an ad hoc basis in economic reports of the
South African Reserve Bank (SARB).

Nonetheless, there is an increasing need for expanded
household balance sheet aggregates for policy
formulation.

Some research has already been conducted.

Implementation of the methodology and procedures
from research.

Refine and extend the scope of household balance
sheet.
2
Ratio of household debt
to disposable income
90
Percentage
80
70
60
50
40
30
20
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
Source: SARB
3
Household tangible assets

Residential buildings and land

Non-residential buildings and land

Construction works

Machinery and equipment

Transport equipment

Agriculture land

Orchards

Inventories
4
Household financial assets

Notes and coins

Deposits with various financial institutions:
– Banks and mutual banks
– Public Investment Commissioner
– Land and Agricultural Bank, and
– Post bank

Deposits with other non-monetary financial institutions

Deposits in participation mortgage bond schemes

Government bonds and public enterprise securities

Corporate bonds and equities

Other loan stock and preference shares

Pension funds and pension funds with long-term
insurers

Foreign portfolio assets
5
Household debt

Consumer credit
– Open accounts: retail trade and motor trade
– Personal loans extended by banks
– Credit cards
• Individuals
• Non-profit institutions
• Buy aids
– Other personal loans
• Agriculture
• Insurers
• Micro lenders
• Loans granted by non-bank institutions
– Hire purchase and leases
• By banks
• Leasing finance
• Instalment sale credit extended by banks and commerce
6
Household debt
(cont.)
– Securitisation:
• Retail and motor trade
• Other loans
– Mortgage advances to households:
• Housing
• Farms
• Residential mortgage securitisation
• Loans granted by participating mortgage bond
schemes, and
• Loans granted by pension and provident funds
– Households debt at local authorities

Bank credit of non –incorporated businesses
7
Methodology for estimating
household assets: Tangible assets

The value of tangible or fixed assets of households is
derived from the existing capital stock at constant
values using the Perpetual Inventory Method (PIM).

The capital stock is then inflated by appropriate price
indices.
8
Methodology for estimating
household financial assets:
Liquid assets

Quarterly data published by Money and Banking
division of SARB by type of depositor.

Deposits with other institutions are derived by
cumulating relevant published flow of funds data.

Notes and coins:
– Total notes and coin issued by the bank
less total notes and coin held by banks.
9
Methodology for estimating
household financial assets: Other

Published data by Capital Markets division obtained
from returns on:
– Deposits in participation mortgage bond schemes
– Unit trust holdings:
• adjusted by subtracting pension fund and longterm insurers unit trust (to avoid double
counting)
– Pension funds and long-term insurers
10
Methodology for estimating
household debt

Bulk of debt is borrowing from bank sector.

Bank data obtained through survey of total banks
balance sheet of Money and Banking division (BA 900
form).

Open accounts estimated from retail trade data and
motor trade instalment sales data.

Other personal loans agriculture sourced from the
Department of Agriculture.

Other personal loans insurers, participation
bonds,
securitisation and loans issued by non-bank financial
companies sourced from the Capital Market division’s
surveys and data.
11
Refinement of assets

Research was done and working paper with procedures
to improve household balance sheet information
published.

A program in micro TSP software was created.

Flow of funds data was accumulated, using appropriate
benchmarks in the base year:
– Short- and long-term government bonds,
– Securities of local authorities,
– Securities of public enterprises,
– Deposits at other financial institutions.

Refinement of the compilation and methodology of
price indices.
12
Refinement of assets (cont.)

A TSP procedure was applied to estimate listed shares at
market value:
– Relevant flow of funds data were cumulated.
– JSE all share index to convert to market value.

Unlisted shares estimated as proxy of listed shares.

Some historic asset data were at book values:
– This data were adjusted to reflect market values.

Foreign assets were included:
– Unpublished data sourced from Balance of Payment
survey.
13
Refinement of household debt

Reporting from banks changed due to the implementation
of the Basel II requirements as from January 2008.

The level of the following aggregates needed to be
adjusted to link old and new levels:
– Instalment credit;
– Personal loans to individuals;
– Mortgage advances.
14
Refinement of household debt

Expand debt at non-financial institutions.

New information collected from Buy Aid organisations
was included.

Households debt at local authorities level was sourced
from the National Treasury.
15
Concluding remarks

Refinement s are in process.

The aim is to publish household wealth and other
selected information on the household balance sheet in
the quarterly bulletin.

Revised estimates of the household balance sheet
information will be completed by mid-2010.

After
the
completion
of
the
current
refinements,
continued improvements/refinements will be undertaken.
16
Thank You
Karen Kuhn
Economist
Research Department
South African Reserve Bank
Karen.Kuhn2@ resbank.co.za
+27 12 313 4318
www.reservebank.co.za