Debt stress amongst S.African businesses deteriorates in Q2 2014


The Experian SA and Econometrix have released South Africa’s Experian Business Debt Index (BDI) for Q2, a vital and unprecedented indicator of the overall health of businesses, as well as the South African economy.

“The Experian BDI declined in Q2 compared with Q1, from a reading of 0.4997 to 0.2840,” noted Michelle Beetar, managing director of Experian SA.

Beetar added that the decline in the BDI for Q2 of 2014 is in line with predictions reported on the Q1 reading in May, which expressed the view that in the event that the platinum mining strikes were to continue, which it did for the full duration of Q2, there was likely to be an impact on business conditions.


(READ MORE: Strikes put Anglo American Platinum in the red)

“Interestingly, this did not impact on businesses’ ability to keep up with repayments,” said Beetar.

“The evidence suggests that there was no marked deterioration in the repayment of debts by businesses in Q2.”  

The index noted that the average number of outstanding debtor days in fact improved marginally to 46.6 days in Q2, from 46.9 days in Q1.

The ratio of outstanding debts of more than 90 days decreased relative to those outstanding of less than 60 days, to 7.4 times in Q2.

“One explanation for this decrease is due to the interest rate increases which occurred in January – a first such increase in interest rates in more than six years. Expectations of further interest rate increases later on in the year might have encouraged businesses to reduce outstanding debts more speedily in order to prevent the potential interest burden from escalating,” Beetar explained.

Despite the decline of the BDI, the Q2 reading was still significantly above the 0.0 level which distinguishes between improving and deteriorating business debt conditions and indicates the financial state of businesses as still improving albeit much more slowly than previously.

Promising global conditions augured well for an improvement in exports by the domestic economy to be supported further by the enhanced competitiveness arising from a rand which was 30 per cent lower in real terms than three years ago.

(READ MORE: S.Africa dodges recession as Q2 GDP grows 0.6%)

“The domestic economy also managed to recover to positive GDP growth in Q2. Although still extremely weak, at 0.6 per cent, Q-O-Q annualised GDP growth domestically posted an improvement compared with the negative growth of -0.6 per cent recorded in Q1,” notes Beetar.