SA businesses more at risk of failure this year

SOUTH African businesses are more likely to fail this year amid low economic growth and tough operating conditions‚ a new study released yesterday says.

Entitled “2016 – a tough year”‚ the study by global trade credit insurance leader Euler Hermes forecasts that the failure of businesses is more likely and that insolvencies will possibly increase about 10% this year. This would be the first outright deterioration in the country since 2009 and the preceding global financial crisis‚ the study said.

The South African business environment was troubled by ongoing structural rigidities‚ including uneasy labour relations and political instability resulting in violent protests‚ Euler Hermes researchers said.

The business environment was weighed down by other factors.

These included weak international commodity prices‚ China’s economic slowdown‚ drought conditions resulting in weakened agricultural output and increased imports of maize and other foods‚ and uncertainties relating to US monetary policy tightening.

A lack of skilled labour‚ limited job creation‚ high unemployment and underemployment‚ infrastructure bottlenecks and weak public sector delivery were among the structural impediments limiting economic growth in South Africa‚ Euler Hermes chief economist Ludovic Subran said.

“With all the challenges‚ doing business in the current environment means taking risks‚ such as late payments‚ bad debts‚ bankruptcies and unpaid invoices.

“In the long-term, credit risk jeopardises the future of the businesses‚” Subran said. – BDlive