Refinement of the Refinement of the

structure of structure of 

Household Balance SheetHousehold Balance Sheet  

in South Africain South Africa

Refinement of the Refinement of the

structure of structure of 

Household Balance SheetHousehold Balance Sheet  

in South Africain South Africa

Karen KuhnKaren Kuhn

OECD - WPFS OECD - WPFS

3 November 20093 November 2009

ParisParis

BackgroundBackgroundBackgroundBackground Household Household balance sheet databalance sheet data are currently estimated are currently estimated

quarterly.quarterly.

However, the However, the balance sheet databalance sheet data are are not publishednot published..

Only the household Only the household debt-to-disposable-incomedebt-to-disposable-income ratio is ratio is currently published, while household wealth estimates currently published, while household wealth estimates are used on an ad hoc basis in economic reports of the are used on an ad hoc basis in economic reports of the South African Reserve Bank (SARB).South African Reserve Bank (SARB).

Nonetheless, there is Nonetheless, there is an increasing need for expanded an increasing need for expanded household balance sheet aggregateshousehold balance sheet aggregates for policy for policy formulation.formulation.

Some researchSome research has already been conducted has already been conducted..

Implementation of the Implementation of the methodology and proceduresmethodology and procedures from research.from research.

RefineRefine and extend the scope of household balance and extend the scope of household balance sheet.sheet. 2

Ratio of household debt Ratio of household debt to disposable incometo disposable income

Ratio of household debt Ratio of household debt to disposable incometo disposable income

3

Household tangible assets Household tangible assets Household tangible assets Household tangible assets

Residential buildings and landResidential buildings and land

Non-residential buildings and landNon-residential buildings and land

Construction worksConstruction works

Machinery and equipmentMachinery and equipment

Transport equipmentTransport equipment

Agriculture landAgriculture land

OrchardsOrchards

Inventories Inventories

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Household financial assetsHousehold financial assetsHousehold financial assetsHousehold financial assets

Notes and coinsNotes and coins Deposits with various Deposits with various financial institutionsfinancial institutions: :

– Banks and mutual banksBanks and mutual banks

– Public Investment CommissionerPublic Investment Commissioner

– Land and Agricultural Bank, andLand and Agricultural Bank, and

– Post bankPost bank

Deposits with other Deposits with other non-monetary financial institutionsnon-monetary financial institutions Deposits in participation Deposits in participation mortgage bond schemesmortgage bond schemes GovernmentGovernment bonds and public enterprise securities bonds and public enterprise securities Corporate bondsCorporate bonds and equities and equities Other loan stockOther loan stock and preference shares and preference shares Pension fundsPension funds and pension funds with long-term and pension funds with long-term

insurersinsurers Foreign portfolio assets Foreign portfolio assets

5

Household debt Household debt Household debt Household debt Consumer creditConsumer credit

– Open accountsOpen accounts: retail trade and motor trade: retail trade and motor trade

– Personal loansPersonal loans extended by banks extended by banks

– Credit cardsCredit cards

• IndividualsIndividuals

• Non-profit institutionsNon-profit institutions

• Buy aidsBuy aids

– Other personal loansOther personal loans

• AgricultureAgriculture

• InsurersInsurers

• Micro lenders Micro lenders

• Loans granted by non-bank institutionsLoans granted by non-bank institutions

– Hire purchase and leasesHire purchase and leases

• By banks By banks

• Leasing financeLeasing finance

• Instalment sale credit extended by banks and commerceInstalment sale credit extended by banks and commerce

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Household debt Household debt (cont.)(cont.)Household debt Household debt (cont.)(cont.)

– SecuritisationSecuritisation::• Retail and motor tradeRetail and motor trade• Other loansOther loans

– Mortgage advancesMortgage advances to households: to households:• HousingHousing• FarmsFarms• Residential mortgage securitisationResidential mortgage securitisation• Loans granted by participating mortgage bond Loans granted by participating mortgage bond

schemes, andschemes, and• Loans granted by pension and provident fundsLoans granted by pension and provident funds

– Households Households debt at local authorities debt at local authorities

Bank credit of Bank credit of non –incorporated businessesnon –incorporated businesses

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Methodology for estimating Methodology for estimating household assets: household assets: Tangible assetsTangible assets

Methodology for estimating Methodology for estimating household assets: household assets: Tangible assetsTangible assets

The value of tangible or fixed assets of households is The value of tangible or fixed assets of households is derivedderived from the existing from the existing capital stockcapital stock at constant at constant values using the Perpetual Inventory Method (PIM). values using the Perpetual Inventory Method (PIM).

The capital stock is then The capital stock is then inflatedinflated by appropriate by appropriate price price indicesindices..

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Methodology for estimating Methodology for estimating household financial assets:household financial assets:

Liquid assetsLiquid assets

Methodology for estimating Methodology for estimating household financial assets:household financial assets:

Liquid assetsLiquid assets

Quarterly Quarterly data publisheddata published by Money and Banking by Money and Banking division of SARB by type of depositor. division of SARB by type of depositor.

Deposits with other institutions are derived by Deposits with other institutions are derived by cumulating relevant published flow of funds datacumulating relevant published flow of funds data..

Notes and coins: Notes and coins:

– Total notes and coin issued by the bank Total notes and coin issued by the bank

less less total notes and coin held by banks.total notes and coin held by banks.

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Methodology for estimating Methodology for estimating household financial assets: household financial assets: OtherOther

Methodology for estimating Methodology for estimating household financial assets: household financial assets: OtherOther

Published data by Capital Markets division obtained Published data by Capital Markets division obtained from returns on:from returns on:

– Deposits in participation Deposits in participation mortgage bond schemesmortgage bond schemes

– Unit trustUnit trust holdings: holdings:

• adjusted by subtracting pension fund and long-adjusted by subtracting pension fund and long-term insurers unit trust (to avoid double term insurers unit trust (to avoid double counting)counting)

– Pension fundsPension funds and long-term insurers and long-term insurers

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Methodology for estimating Methodology for estimating household debthousehold debt

Methodology for estimating Methodology for estimating household debthousehold debt

BulkBulk of debt is borrowing from of debt is borrowing from bank sectorbank sector..

Bank data obtained through Bank data obtained through surveysurvey of total of total banks balance sheetbanks balance sheet of of Money and Banking division (BA 900 form).Money and Banking division (BA 900 form).

Open accountsOpen accounts estimated from retail estimated from retail trade datatrade data and motor trade and motor trade instalment salesinstalment sales data. data.

Other personal loans agriculture sourced from the Other personal loans agriculture sourced from the Department of Department of AgricultureAgriculture..

Other personal loans Other personal loans insurersinsurers, , participation bondsparticipation bonds, , securitisationsecuritisation and and loansloans issued by issued by non-bank financial companiesnon-bank financial companies sourced from the sourced from the Capital Market division’sCapital Market division’s surveys and data. surveys and data.

Data sour. Data sour.

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Refinement of assetsRefinement of assetsRefinement of assetsRefinement of assets

ResearchResearch was done and working paper with was done and working paper with procedures procedures to improveto improve household balance sheet information household balance sheet information published.published.

A A programprogram in micro TSP software was in micro TSP software was createdcreated..

Flow of funds data was Flow of funds data was accumulatedaccumulated, using appropriate , using appropriate benchmarksbenchmarks in the base year: in the base year:

– Short- and long-term government bonds,Short- and long-term government bonds,

– Securities of local authorities, Securities of local authorities,

– Securities of public enterprises,Securities of public enterprises,

– Deposits at other financial institutions.Deposits at other financial institutions.

Refinement of the Refinement of the compilation and methodologycompilation and methodology of of price indices.price indices.

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Refinement of assets Refinement of assets (cont.)(cont.)Refinement of assets Refinement of assets (cont.)(cont.)

A TSP procedure was applied to estimate A TSP procedure was applied to estimate listed shares at listed shares at market valuemarket value::

– Relevant flow of funds data were cumulated.Relevant flow of funds data were cumulated.

– JSE all share index to convert to market value.JSE all share index to convert to market value.

Unlisted sharesUnlisted shares estimated as proxy of listed shares. estimated as proxy of listed shares.

Some Some historic asset datahistoric asset data were at book values: were at book values:

– This data were adjusted to reflect market values. This data were adjusted to reflect market values.

Foreign assetsForeign assets were included: were included:

– Unpublished data sourced from Balance of Payment Unpublished data sourced from Balance of Payment survey. survey.

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Refinement of household debtRefinement of household debtRefinement of household debtRefinement of household debt

Reporting from banks changed due to the implementation Reporting from banks changed due to the implementation

of the of the Basel II requirementsBasel II requirements as from January 2008. as from January 2008.

The level of the following aggregates needed to be The level of the following aggregates needed to be

adjusted to adjusted to link old and new levelslink old and new levels::

– Instalment credit;Instalment credit;

– Personal loans to individuals;Personal loans to individuals;

– Mortgage advances.Mortgage advances.

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Refinement of household debtRefinement of household debtRefinement of household debtRefinement of household debt

Expand debt Expand debt at non-financial institutions. at non-financial institutions.

New informationNew information collected from Buy Aid organisations collected from Buy Aid organisations

was included.was included.

Households debt at local authoritiesHouseholds debt at local authorities level was sourced level was sourced

from the National Treasury.from the National Treasury.

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Concluding remarksConcluding remarksConcluding remarksConcluding remarks

Refinement s are in process.Refinement s are in process.

The aim is to publish household wealth and other The aim is to publish household wealth and other

selected information on the household balance sheet in selected information on the household balance sheet in

the quarterly bulletin.the quarterly bulletin.

Revised estimates of the household balance sheet Revised estimates of the household balance sheet

information will be completed by mid-2010. information will be completed by mid-2010.

After the completion of the current refinements, After the completion of the current refinements,

continued improvements/refinements will be undertaken.continued improvements/refinements will be undertaken.

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Thank YouThank YouThank YouThank You

Karen KuhnKaren Kuhn

Economist Economist

Research Department Research Department

South African Reserve BankSouth African Reserve Bank

Karen.Kuhn2@ resbank.co.zaKaren.Kuhn2@ resbank.co.za

+27 12 313 4318+27 12 313 4318

www.reservebank.co.zawww.reservebank.co.za