Business debt improves slightly

Business debt index improves slightly in first quarter and businesses are raising prices to offset soaring input costs and weather the depressed growth climate.

This has implications for end-users including consumers, who have to brace themselves to fork out more money for goods. At the same time, businesses are in a slightly better financial position as a result of the move and are able to repay debt, an index suggests.

The Business Debt index, by credit bureau Experian, showed on Monday that the debt profile of South African businesses has improved slightly. In the first quarter, the index recorded a 0.028 reading, compared to 0.005 in the last quarter of the past year. A reading below zero shows that businesses are struggling to repay their debt, while a reading above this level shows that companies are managing their debt load.

Many manufacturers had been trying to claw back margins after the rand went into free fall in December by raising prices faster than previously. Selling prices could rise again if the South African Chamber of Commerce and Industry’s (Sacci’s) trade expectations index is anything to go by.

Almost 80% of businesses surveyed indicated that selling prices would increase in the next six months. In March, 73% of respondents had expressed this outlook.

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