Lending will become increasingly difficult

The banking sector will remain conservative in the eye of the economic storm, not parting with money unless they have the reassurance that borrowers will survive the current crisis. This was the warning from independent banker and consultant Gary Wels at the annual Road Freight Association Convention in Vanderbijlpark recently. He said with repossessions on the increase credit had gone into a downward spin while other factors such as the lower market liquidity and interbank lending had also played a role. “We are now seeing some 6000 to 7000 vehicles being repossessed monthly while there is an estimated 50% increase in truck repossessions. Banks don’t just lend money to lose money and with a glut of trucks in the market and the second hand value of trucks having decreased, there is no doubt that banks are not going to give credit unless they know for a fact that the person they are lending the money to is going to survive the storm.” With liquidations up 65% for the first quarter of 2009, indications are that South Africa, much like the rest of the world, is facing some tough months ahead. Wels said transporters could expect to see reduced lending while credit could also be declined in future through more stringent credit vetting measures.