Johannesburg - The financial health of SA businesses is at its lowest point since the 2009 stock market crisis says Experian.
The credit bureau says this is based on its latest Business Debt Index, which fell from 0.237 in the first quarter to 0.127 in the second quarter.
In addition, it warns there isn’t good news, as the index is expected to worsen in the second half of this year.
Slower Chinese economic growth is impacting the demand for raw materials which has resulted in lower commodity prices, the effects of which are likely to reverberate through the manufacturing sector, and to a lesser extent other sectors of the economy, says Experian.
In September 2008, the US experienced a market crash and many financial houses, including stalwart Lehman Brothers, folded as a result. The crisis was brought on by so-called toxic, or subprime, loans, and credit default swaps. SA was not immune to this global issue, sliding into a recession in May 2009 after the economy contracted 6.4 percent.
Currently, economic growth is stagnating and the country’s gross domestic product slide 1.3 percent in the last quarter, a situation that has many expecting another recession.
The latest index shows the steady overall deterioration of the domestic and international growth environments has impacted the financial health of businesses.
Experian SA MD Michelle Beetar notes that, although the debt index is still above the 0.0 level, the latest reading is the worst since the index slid into negative territory in 2009.
“The relative health of the business sector is set to gradually give way to poorer financial conditions on the back of the inability of the global and domestic economies to gain any traction,” notes Beetar.
The index was 0.2 in the last quarter of 2014, having slipped from 0.61 in the first quarter. A negative figure indicates deteriorating business conditions.
Beetar notes the decline shows “the rate of improvement in business debt conditions has indeed diminished significantly, in line with worsening economic conditions both domestically and abroad”.
The deterioration has gone hand-in-hand with a gradual increase in the number of outstanding debtor days from the 43.6 days for October 2013 to 51.4 days in May 2015.
Although June witnessed a countervailing reduction, to 49.2 days, the average number of outstanding debtor days in the second quarter of 2015, of 50.4, was the highest in the past two years, says Experian.
In addition, the share of debts outstanding at 30 to 60 days (as a percentage of those outstanding for less than 30 days) rose to 19.7% in the second quarter, up from 16.9% in the first quarter. The number of debts outstanding for more than 90 days relative to those outstanding for less than 60 days increased to 11.6 percent in the second quarter of 2015, from 11.5 percent in the first quarter.
Experian adds the overall macroeconomic environment also deteriorated in the second quarter. “Global and domestic economic growth rates declined noticeably in the second quarter, with the domestic economy dipping to 1.6 percent on a year-on-year basis, from 2 percent in the first quarter.”
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