BD Credit Management

Business Day Insights

Optimism as market conditions improve

Opportunities to expand into new regions and sectors if credit risk is managed properly, writes Pedro van Gaalen

Business sentiment in South Africa is showing cautious optimism for 2026, driven by anticipated economic reforms, infrastructure investment, buoyant equity markets, a strong rand and lower interest rates.

“The country is experiencing a convergence of economic positives not seen in more than a decade, says Frank Knight, CEO of Debtsource.

We are seeing some of the lowest systemic credit risk levels in quite some time. Our delinquency ratios are sitting at historically low levels, with legal recovery cases sitting at just 0.128%, based on a large national dataset. This tells us that, overall, the market is healthier than it s been for years.

Knight says the improved market conditions are reinforced by global trends. “International interest rates have softened, funding pressures have eased and trade credit insurance often a bellwether for systemic stress is at its cheapest in more than a decade as claims ratios remain low and insurers compete for business.”

However, while corporate balance sheets are flush with cash, at least at the top end, for many businesses on the ground, particularly SMEs and mid-sized suppliers, Knight says the reality remains stubbornly familiar.

“Customers are still paying late, working capital remains tight and access to affordable credit remains uneven.

Knight explains that smaller businesses remain heavily dependent on expensive alternative finance and trade credit, and invoice discounting,

supply-chain finance and other non-bank facilities routinely price at multiples of prime.

“For smaller businesses, that can mean paying effective interest rates of 36% to 60% a year. That kind of cost puts enormous strain on cash flow, especially when customers are slow to pay, says Knight. In the mid-market, demand for additional credit lines remains subdued, despite lower interest rates.

“In the current stagnant growth environment, we have seen slow investment. As such, clients are not utilising facilities as much as in growth environments, says David Minty, Head of Credit for Investec Commercial Banking.

Geopolitical factors

Uncertainty due to prevailing geopolitical factors is also impacting local credit extension. Business owners cannot discount the impact of a backlash from geopolitical events and its effects on the economy, exports, foreign investment and rand strength.

These geopolitical tensions and the rise of private credit globally are influencing the cost and availability of credit for South African businesses.

“Economics teaches us that geopolitical uncertainties often trigger ‘risk-off’ behaviour in global capital markets, prompting investors to move towards safe assets and away from emerging-market exposure, says Dr Velenkosini Matsebula, Director of the African Centre for Development Finance at Stellenbosch Business School.

In practice, this has the potential to raise sovereign and corporate risk premia, increase bond yields and make offshore funding conditions tighter. Even with accommodative domestic monetary policy, these external factors can prevent the lower policy rates from fully impacting corporate borrowing costs as intended.

The global rise of private credit adds to the market complexity by keeping borrowing costs high and making access to finance more volatile, says Matsebula.

While this has expanded access to funding, it has kept borrowing costs relatively high because of illiquidity premiums and strict lending conditions. Moreover, non-bank lending, while good for financial inclusion, tends to shift risk rather than remove it, making the system more vulnerable to global liquidity shocks.

Wayne Mostert, MDat ASI Wealth, adds that operational risks related to logistics, infrastructure and service delivery have become a primary driver of business credit risk in 2026.

These structural constraints now translate directly into cash-flow volatility. For example, logistics disruptions can delay inputs and

deliveries, extend debtor cycles and compress margins, while water insecurity and infrastructure fragility can result in production downtime, increased operating costs and unplanned capital expenditure.

In this environment, Mostert says businesses that can demonstrate contingency planning, operational flexibility and diversified revenue streams will be better positioned to manage credit risk than those reliant on stable operating conditions.

“Sustainable credit outcomes in 2026 will depend less on the price of credit and more on how effectively both consumers and businesses convert cash-flow relief into long-term financial resilience.”

Looking ahead, Knight is optimistic. “While geopolitical uncertainty and global volatility remain ever-present, the domestic indicators are broadly supportive. Assuming common sense prevails globally, the next 18 to 24 months look like a genuine growth period.”

For businesses, he believes the message is clear. This is the time to have your credit processes properly oiled. There is an opportunity to expand into new markets and sectors, but only if you manage credit risk properly.”

Rates relief offers chance to revise financial habits

Over the past 24 months, the interest rate cycle in South Africa shifted from its sustained peak at a 13-year high to an easing cycle as inflation pressures began to subside.

Following the first 25 basis point cut in September 2024, the repo rate has fallen to 6.75%.

Despite the SA Reserve Bank holding rates steady in January 2026, economists expect further relief ahead, with an additional two to three cuts this year.

While lower interest rates offer welcome relief for overindebted consumers, Alfred Ramosedi, CEO at Bayport Financial Services, says they are unlikely to lead to increased discretionary spending.

As lower interest rates help reduce pressure on monthly repayments, customers are using the rate relief to catch up and stabilise, not take on new debt. That breathing room creates an opportunity to improve financial habits and affordability, rather than falling back into the same borrowing cycle.

This trend is reflected in TransUnion data, which shows a year-on-year increase in demand for credit, but a lag in consumer take-up despite lower interest rates.

grows faster than incomes.

“When this happens, the system becomes fragile. Even if people are paying down debt, small shocks such as a medical expense or a service delivery failure can quickly push households into trouble,” says Ramosedi.

Furthermore, aggressive lending in this environment often shifts risk rather than solving it. People may appear solvent on paper, but are relying on short-term fixes to manage ongoing financial pressure.”

Bayport s data shows that while some re-borrowing after consolidation is normal, the key is what happens over time.

“With the right support, customers reduce the number of loans they hold and move towards more stable forms of credit. Without support, the same behaviour can quickly become a risk for households and the system as a whole, says Ramosedi.

Consumers are still trying to manage household finances and navigate the current cost of living by reducing debt repayments,” says Fatgie Adams, Head of Credit Risk Solutions at TransUnion.

Despite inflation cooling, the economic shocks experienced in 2023 and early 2024 from persistently high interest rates and administered prices, and real income erosion, are taking time to unwind, creating a long tail to the debt hangover.

What we see is rising demand in nontraditional credit lines, such as microlending and other shorter-term loans, especially among the younger generation, as financially stressed households look to make ends meet,” adds Adams.

Ramosedi says it is vital that consumers capitalise on the opportunity to pay down debt, especially as the lower rates environment makes financial wellness interventions more effective.

“When employees are under less pressure, education, consolidation and aftercare have a higher chance of success. In that sense, the rate-cutting cycle supports rehabilitation, not just borrowing.”

Leonie van Pletzen, CEO of the Credit Association of South Africa, adds that a lowgrowth environment also leads to rising declines and exclusion. Approval rates have fallen steadily as lenders contend with weak income growth, rising household expenses and increasing credit risk.

This is reflected in higher rejection rates reported through the National Credit Regulator, particularly for lower-income and thin-file applicants.

According to Van Pletzen, the structural driver of this tightening is the misalignment between economic conditions and an outdated regulated rates and fees framework.

With fees and interest caps unchanged for more than a decade, lenders are unable to price adequately for higher default risk, increased compliance costs and more intensive affordability assessments. As a result, credit is rationed rather than expanded, with smaller loan sizes and higher-risk consumers most affected, creating systemic vulnerability,” she says.

This is reflected in Bayport’s post-consolidation data, where about 80% of customers are in a better financial position, and nearly 90% of customers remain below national average debt-toincome ratios.

Reducing debt amid lower interest rates is also critical given South Africa’s low-growth environment, which often means credit typically

People may appear solvent on paper, but are relying on short-term fixes to manage ongoing financial pressure

Need for more inclusive lending models: study

About 20-million individuals in South Africa are excluded from the formal economy because they lack the credit history required to access the regulated financial sector.

Addressing this legacy issue is vital to help individuals build life-changing assets and navigate financial emergencies without the crushing burden of predatory debt. Widening access to credit also fuels entrepreneurship, job creation and economic resilience.

Credit remains a vital tool for long-term financial mobility and drives economic prosperity, yet access in South Africa remains uneven, says Fatgie Adams, Head of Credit Risk Solutions at TransUnion.

According to TransUnion s latest Q4 2025 Consumer Pulse Study, only 42% of respondents feel they have adequate access to credit, while 33% believe they do not.

“The new-to-credit consumer segment has no credit history, which effectively makes them invisible in the formal credit market, says Adams.

And anyone who is paid and transacts in cash will find it hard to move from the informal to the formal economy.”

Deepening debt cycle

According to Adams, this exclusion pushes individuals into the informal credit market, which charges high interest and imposes punitive costs in instances of nonpayment, deepening and perpetuating the debt cycle.

The Consumer Pulse findings highlight a need for more inclusive and transparent lending models, with alternative data seen as the remedy to broaden inclusivity to thin-file consumers.

The broader use of alternative data, such as rental and utility payments, telco accounts, airtime purchases or buy-now-pay-later payment histories, helps lenders assess creditworthiness in the absence of a credit history, enabling them to provide fair access to credit while supporting responsible borrowing.

Cellphone accounts and prepaid purchases offer valuable insights into how consumers buy and use airtime and data. These signals or behaviours are highly correlated to managing credit, which we use to develop a scorecard that assesses credit-invisible consumers, says Adams. Francois Grobler, Chief: Decision Analytics at Experian Africa, says the combination of machine learning (ML) and alternative data offers additional solutions.

“A recent study by Forrester Consulting, commissioned by Experian, reveals a growing

Machine learning models are revolutionising risk assessment by analysing vast datasets and identifying patterns beyond traditional scorecards

consensus among senior decisionmakers on ML’s potential to democratise credit: 70% of respondents across 11 countries believe the improved accuracy from ML solutions enables them to serve consumers who would otherwise be denied credit.

ML models are revolutionising risk assessment by analysing vast datasets and identifying patterns beyond traditional scorecards.

In this way, ML enables more accurate predictions of repayment behaviour. The results in South Africa are compelling, with 93% of surveyed organisations that use ML reporting improved acceptance rates for credit cards, while 89% have seen reductions in bad debt.

For lenders, Grobler says this means smarter decisions and the ability to serve new markets profitably.

“For consumers, it means opening doors to financial inclusion. The research is clear: ML isn t just improving risk models, it’s redefining inclusion in a diverse, fast-evolving economy. South Africa s experience shows that inclusion and innovation can go hand in hand.

While some nonbank lenders have invested in alternative data, different affordability assessments and digital onboarding to broaden access, Leonie van Pletzen, CEO of the Credit Association of South Africa, says more is needed to translate these developments into meaningful, system-wide inclusion.

“In practice, many regulated non-bank lenders remain unable to serve thin-file or new-to-credit consumers at scale, explains Van Pletzen. The primary constraint is economic rather than technical. Small-value lending to higher-risk consumers requires intensive affordability checks, ongoing servicing and higher compliance and fraud-prevention costs.

As a result, thin-file consumers are increasingly excluded from formal credit, not because demand is absent, but because loan sizes cannot grow and margins cannot absorb the cost of responsible lending.

While thin-file consumers present elevated credit risk, Van Pletzen says the current framework leaves little room for responsible innovation. “The consequence is a growing gap between policy objectives around financial inclusion and the realities of credit provision, with exclusion, rather than overlending, becoming the dominant risk.

Digital boom fuels surge in fraud risk across South Africa

South Africa’s digital economy is expanding rapidly – the International Trade Administration anticipates annual growth in the local digital sector of 10%-15% over the next five years.

However, the explosion in digital channels exposes businesses and consumers to increased fraud risk, necessitating better awareness and stronger controls.

The increase in new digital application channels and non-bank fintech vendors has opened new attack vectors to fraudsters,” says Fatgie Adams, Head of Credit Risk Solutions at TransUnion.

According to the H2 2025 TransUnion Top Fraud Trends Report , account creation is the highest-risk stage between H1 2024 and H1 2025, the rate of suspected digital fraud attempts for account creation increased 26%.

Adams says identity theft and deepfakes have emerged as prolific challenges in the application process, with consumer scams targeting authorised usage and account takeover fraud putting existing customers and businesses at risk.

Innovation is needed to introduce the right amount of friction to make it difficult for fraudsters, but not so much that it frustrates consumers

The TransUnion report highlighted a 141% uptick in the volume of digital account takeovers from H1 2021 to H1 2025.

Research commissioned by Experian and conducted by Forrester Consulting identifies sector-specific trends, with social engineering and identity theft rising in financial services and telcos, and friendly fraud and refund abuse increasing in ecommerce.

“Faced with the evolving threat landscape, businesses need solutions that protect lenders and consumers from bad actors, says Adams.

While advising consumers to regularly review their credit report to proactively identity suspicious activity, Adams says businesses need solutions that balance security with user experience.

“Innovation is needed to introduce the right amount of friction to make it difficult for fraudsters, but not so much that it frustrates consumers.

In this regard, Adams says multifactor authentication offers a friction-less, not frictionless, digital experience when accessing credit online.

In response to the need for more stringent security measures, the Experian study shows that passive checks are gaining traction in South Africa – 78% of local business leaders plan to invest in fraud technology rather than in human analysts. Fraud was never a static challenge, it s constantly evolving,” says Bree Caprin, Chief Customer Officer Experian Africa.

Faced with more advanced threats from generative AI, which has dramatically increased the speed and sophistication of attacks, Caprin says businesses need to urgently modernise their fraud strategies.

“The fact that businesses are investing more in fraud technology than in human analysts is a clear signal manual reviews and rules-based systems are not enough to combat these new threats.

The Experian report shows that businesses plan to invest in new tools, including device intelligence, behavioural analytics and machine learning (ML).

Accurate detection

As additional datasets, such as device and behavioural data, are now essential for accurate fraud detection, businesses realise ML is needed to make sense of these large datasets.

The biggest advantage of ML is real-time detection, along with the ability to retrain models on new data to keep pace with evolving fraud tactics.

The Experian research reveals 77% of local ML users reported measurable improvements in detection accuracy since implementation, and 78% agree ML helps detect fraud that rules-only systems would miss.

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