BU S I N E S S DAY.CO. Z A
Business Day Insights CREDIT MANAGEMENT
Thursday 26 February 2026
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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 Frank Knight. 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, MD at 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 Dr Velenkosini Matsebula. 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. “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.” 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
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 Alfred Ramosedi. 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. 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.
People may appear solvent on paper, but are relying on short-term fixes to manage ongoing financial pressure