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Credit risk: Doing business in SA

 

In light of a series of factors ranging from local to international, the international trade credit insurance company, Coface, has changed South Africa’s business credit risk assessment form a B to a C- from fairly high to high. What this means for us is that South Africa is now seen as a higher risk for investors, a detrimental position to be in when considering the importance of international investments in our industries.

With a rise in political and social frustrations within the country, as well as global influencers and a climate of very poor growth, the instability has hugely impacted the downgrade. A problematic situation all round, this can have adverse effects on exports as well as our imports. As one of the larger economies in Africa you would expect South Africa to have more growth and stability than most, this is no longer the case. With smaller African economies being upgraded and backed by international influencers, countries like Ghana have seen a rise to our fall. With two consecutive years of bad growth, South Africa is only set to improve marginally in 2017, from 2.5% to 2.7% growth. This increase is however largely influenced by the recoveries of Brazil and Russia in the business sector, offsetting the slowdown in China and slowly boosting BRICS countries. With a shaky outlook for 2017 the credit risk and risk of investing has become a sore topic as South Africa, a country rich in resources and offerings, looks to make a slow climb hopefully towards a better risk assessment.

The lack of real development in world trade however could also be seen as a knock on effect following the election of Donald Trump and the decisions he has made so far regarding foreign policy. Many seek to protect their interests in a traumatic time and thus will not look towards high risk economies like South Africa when investing. As the highest concern in 2017, political risk is tipping the tower so to speak, with unsettled society appearing around the world. With a past year holding huge impact on global trade and standings, events like BREXIT raise concerns to a new peak.

As a year that could go either way, this is the time when you need to have your finances in order. Whether clearing your debt or just getting your savings in order, this is not a year to be living on the brink of over-indebtedness.

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