Nompumelelo Magwaza

Debt stress among businesses continued to ease in the first quarter of this year despite the decline in gross domestic product (GDP) during the quarter, the Experian business debt index showed yesterday.

The business debt index received a strong boost from the fact that a measure of outstanding debtors’ days continued to decline over much of the first quarter, with the exception of January, as it has been doing for the past five years.

“The number of debtors’ days outstanding declined, and the duration of outstanding debts shortened considerably in February and March.”

The business debt stress index fluctuates around zero. If it is above zero it means that stress levels are improving and if it is below zero it means debt stress levels are on the rise.

In the first quarter the index recorded a debt stress level of 0.529 points, which was an improvement from 0.422 in the fourth quarter of last year.

The release comprises three main sectors, the business debt stress index, a macro-economic overview and a sectoral debt analysis. It includes a breakdown of the debt situation in each sector by debtors’ days, the age categories of debt, judgments and liquidations.

The sectors that are considered are agriculture, mining, electricity, construction, finance, transport and services.

Experian managing director Michelle Beetar said in the context of the sharp 0.6 percent decline in GDP in the first quarter following 3.8 percent growth in the fourth quarter of last year, one might have expected to see a deterioration in business debt stress levels.

This did not occur, Beetar said, because of the improvement in exports, “which were not affected as one would have anticipated, with business abroad building up inventories to accommodate a latent upswing in demand”.

Beetar believes the decline in stress was also due to more aggressive efforts by credit managers to recover debt owed.

However, this does not mean that businesses are investing in future expansion.

“The investment necessary to grow business at a faster pace is being held back to a minimum. One might hope that the completion of the general elections peacefully and successfully may engender an improvement in the investment environment,” she said.

Beetar hoped that, now that peaceful elections had been completed, and once the mining strike was eventually resolved, firms might start to loosen those purse strings.

Beetar said business debt stress levels were also ameliorated by the fact that producers were finally able to implement price hikes. “Producers specifically benefited in the domestic environment by virtue of the fact that they were able to achieve revenue increase from price hikes at levels well in excess of the inflation rate.”