Credit controllers advised to exercise caution

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Liquidation figures released by Stats SA recently reveal no change in March 2007's outcome of 241 closures from a year earlier, with 2007's first quarter total coming in 2.6% lower than the same period in 2006. The upward trend in failures has levelled off since October 2006 but leading debtors' book insurer Credit Guarantee believes that these benign conditions may deteriorate somewhat in the future.

Luke Doig, Senior Economist at Credit Guarantee, comments, "Just as the SA Reserve Bank is monitoring inflation developments very closely and trying to assess the impacts of the four 0.5% increases in the Repo rate last year, so are we on the debtor delinquency front. We see things being finely balanced but our overdue advised accounts for the first four months of 2007 lead us to expect some likely fallouts from the cumulative impact of the interest rate hikes, with another 50 basis points rise still possible. As such we see this as a mini downward cycle within a more positive larger cycle but credit controllers would be advised to monitor payment trends and extension requests very closely in the months ahead".