by Inga Sebata

Debt stress

Businesses’ debt stress level increase

The ratio of business debt rose in the fourth quarter of 2012

Business debt stress indicators, both average debtors’ days, as well the debt age ratio – the ratio of debt owed for more than 90 days as a percentage of debt owed under 60 days – accelerated in the fourth quarter of 2012.

David Coleman, Head of Analytics at Experian SA said: “This reflects negative feedback from the wave of industrial action in the mining and manufacturing sectors over the third quarter of 2012 which weighed heavily on overall economic momentum and culminated in the rise in business balance sheet stress.”

“While economic growth momentum in the Eurozone is expected to remain depressed throughout the year, which will weigh on South Africa’s own economic performance somewhat, this could be counteracted by strengthening trade ties with China. This country is key export market for South Africa’s mineral exports and South Africa has been identified as strategic partner in Africa by China,” said Coleman.

Average debtor’s days for businesses in South Africa rose from 46.1 days in the third quarter to 47.5 days in the fourth quarter. The debt age ratio showed an increase based on the fact that debt owed in the 90 to 120 days and 120-plus days categories showed a relatively sharp increase in year-on-year growth in the fourth quarter, while growth in debt owed in the categories less than 90 days slowed down. In spite of the increase, both measures are still tracking below historical average levels. 

An analysis of the data by sector in the fourth quarter 2012 reveals that the wholesale retail and trade sector accounted for the largest share of total debt owed by businesses to business with a 36.1% share – up from the 33.5% share in the third quarter 2012. This was followed by the transport sector at 13.1% in the fourth quarter 2012. The finance sector was third, with 9.98% of debt in the fourth quarter 2012.

The sector that recorded the highest debtor’s days in the quarter included the household, exterritorial sector at 74.0 days, followed by social and personal services sector at 59.1 days in the quarter. These sectors where impacted adversely by weaker business confidence levels in the fourth quarter 2012.

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