In 2015 what can unsettle the trade credit applecart? Rather too much, if you listen to Luke Doig, senior economist at Credit Guarantee Insurance Corporation (CGIC). He pointed to numerous uncertainties that may make the trading environment risky. And some of these events he termed “leftfield”, including increasing terrorism, nuclear weapons being used in a Far East conflict, and a war between two countries in Eastern Europe. All extreme, but all equally possible given the rather tense state in which the world currently finds itself. So let’s start with the good news first. Doig pointed to the fact that the World Bank had just trimmed its 2015 global growth forecast to 3%. But, he added, this is still above the estimated 2.6% outcome last year. Also, he gleefully noted that SA exporters would benefit from the move in the rand/US dollar exchange rates, where a 10.6% weakening of our local currency would make SA exports to the US more costcompetitive. But he then adopted a more doleful stance, when he noted that the opposite was true in Europe. The rand’s 10.9% strengthening against the Euro would, in turn, see SA exports struggling in that continental marketplace. There are also happier times for both motorists and transporters alike, with petrol and diesel prices having moved from highs of R14.39 per litre and R13.38/l respectively last year to prices of R11.24/l and R10.28/l respectively in January (Written on January 30, before the February 4 prices were announced, but when over-recoveries were around the R1/litre level). “In fact,” said Doig, “this price cut implies that monthly fuel savings by consumers, producers and businesses alike amount to some R5.5 billion – similar to a massive tax cut. “Unfortunately, electricity shortages may trim our 2% gross domestic product (GDP) growth forecast for the year. And, although the Eskom maintenance situation is evidently receiving due attention, load shedding is possible on almost every weekday until end April, and the implications of a full scale blackout would be sizeable. “After the 2008 load shedding crisis, the energy regulator, Nersa, estimated the loss to the economy at R50bn. It would appear that the current situation raises an even higher likelihood of total blackouts and the impact on domestic output may be catastrophic.” Also, in this volatile and unpredictable world, there are numerous other uncertainties which may make the trading environment risky, Doig added. “A national rating downgrade for SA by Standard and Poor’s (S&P) to non-investment grade (from the current BBB-) is most likely. If such a downgrade were to occur, extreme currency weakness is likely amidst massive capital outf lows. Government bond yields will spike, inf lation will accelerate and prompt action from the SA Reserve Bank will potentially put the country into recession.
