We are unlikely to see a letup
in pressure on business
in the months ahead, with
payment defaults and
liquidations set to trend
higher, according to Luke
Doig, senior economist of the
Credit Guarantee Insurance
Corporation (CGIC).
The backdrop to his rather
pessimistic forecast is that
much is made of the fact that
official personal insolvency
and corporate liquidation
data is generally improving,
although he suggested
that there were many who
doubted the veracity of this.
Stats SA reported a yearon-
year fall in liquidations of
12.4% in April, with the yearto-
date level rising just 5.6%
compared to the first four
months of 2012 while year-todate
personal sequestrations
are 17.3% lower than in
the first quarter of 2012.
Business rescue is obviously
affecting the figures but
what is the real story on the
ground? Doig asked.
“Civil debt statistics paint a
far more concerning picture.
The number of default
judgments against businesses
in March fell 13.3% with
the year-to-date total of
judgments falling 19.3% over
the first quarter of 2012.
“However, the value of
judgments against firms rose
almost 86% in March from a
year earlier to R144.7 million
with the year-to-date figure
rising 61%. This caused the
average value per judgment
to double from R20 971 in
the first quarter of 2012 to
R41 852 this year.”
According to Doig’s
records, Credit Guarantee’s
claims experience bears this
out. Total May claims
payments, he told
FTW, jumped
almost 32%
and average
year-to-date
values rose
67%. “Our
overdue
payments
indicator has
been trending up for
quite some time and while
it appears to be reaching
a plateau, the year-to-date
trend is marginally up on last
year.”
He emphasised that the
real concern would be if
the economy
failed to gain
traction in the second
half of 2013 with fragile
confidence, further strikes
and disruptions, continued
pressure from rapidly
escalating input costs (with
more to come in the form
of e-tolls) and consequently
demand growing only
marginally.
“Moreover,” he added,
“while the rand continues
to approach R10/US$,
imported inflation may
cause further pain. The
current daily underrecovery
on petrol
and diesel prices is
around 62 cents per litre
and 57 cents per litre
respectively.
“Affordability at many
levels is currently under
severe strain. We expect
that gross domestic product
(GDP) growth will struggle
to exceed 2% in 2013 amidst
sluggish domestic demand
and a lethargic global
outlook.”
INSERT
‘The real concern will
be if the economy fails
to gain traction in the
second half of 2013.’
