Liquidations in transport sector up 68%

Business credit is getting tighter in the current global financial crisis, and the symptoms are also prevalent in this country, although it has certain inherent protective factors against the financial onslaught. And it’s noticeably infecting the freight and trade industries, with the number of companies going under because of cash flow problems on the increase. Liquidations in the logistics (transport) sector rocketed by 68% in 2008 compared to 2007. What we’re witnessing is a combination of things, according to Mike Truter, MD of Credit Guarantee. “With the international crisis,” he told FTW, “the banking community is running scared. “So banks around the world are tightening up on credit and acting much more quickly when they notice customers having cash flow problems. “But I feel this may be an overreaction and only be worsening the original situation.” SA was protected against the original credit crisis, when international financial institutions got themselves involved in the sub-prime lending train crash. In what can be seen as a fortuitous combination of luck and good judgment, the SA government put an end to SA’s own version of easy credit when it introduced the National Credit Act – and slammed the brakes on banks making dubious loans. “Our SA banking system is in better form than a lot of overseas international banks and insurance institutions,” said Truter. “Our banking system is well insulated.” And the main part of this insulation is on the longlingering SA exchange control regulations – which, before the global credit crisis, were being attacked by SA financial institutions that wanted to spread their monies into the international arena. But, looked at retrospectively, this restriction prevented SA companies from getting their financial hands burned in the global credit collapse. “We’ve got a situation where all our five major banks appear to be pretty solid,” said Truter. But SA is certainly not going to remain immune to the global belt-tightening. “The situation is going to get worse before it gets better,” he said, “and we’ll see a lot more businesses going to the wall before this is finished.”