The Experian Data Insights Check-In brings you key insights based on the Q4 2022 Business Debt Index. The BDI is an indicator of the overall health of South African businesses as it measures the relative ability of businesses to pay their outstanding creditors on time.
Apr 2023 |
Data Insights | BDI
The Experian Data Insights Check-In brings you key insights based on the Q4 2022 Business Debt Index.
The Experian Business Debt Index or BDI report is an indicator of the overall health of South African businesses as it measures the relative ability of businesses to pay their outstanding creditors on time.
This index incorporates bureau-sourced debtors’ payment profiles as well as a range of macroeconomic variables.
Our analytics experts have extracted key highlights to give you a good understanding of the current trends we’re seeing in the market.
Short and to the point, these key trends help you better understand the overall health of South African businesses.
Get the Q4 2022 BDI Report for a more detailed view of the overall health of South African businesses.
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Experian Data Insights Check-In – Q4 2022 BDI Key Insights
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The Experian Data Insights Check-In brings you key insights based on the Q4 2022 Business Debt Index.
The Experian BDI combines macro-economic metrics, including GDP, interest rates, inflation, considering both local and US measures, with bureau metrics in the form of debt age ratios, to provide a view on the prevalent business conditions in South Africa.
The metric is demeaned and standardized, so that the BDI value is distributed around zero: A positive BDI signifies ‘improving business conditions’, whilst a negative BDI indicates that business conditions are deteriorating. The bureau metrics provide a view on the degree to which debtors are overdue agreed payment terms for invoiced amounts and are referred to as ‘Debt Age Ratios’. This data is provided by subscribers to the ‘Portfolio’ product here at Experian.
As expected, the 2022 Q4 BDI showed a Q-o-Q decline, moving down from 1.59 to 1.0. This significant drop was principally driven by the level of electricity loadshedding that intensified sharply in Q4, with the predominant level of loadshedding moving to Stage IV in Q4 from Stage II in Q3, which caused a slump in South Africa’s GDP. Other factors contributing to this GDP slump included a two-week strike at Transnet in October, which negatively affected the country’s ability to export raw material and also the unprecedented increase in interest rates through 2022 aimed at quelling inflationary pressures.
From a sectoral perspective, there was a universal decline in BDI across all sectors. The sector that ended 2022 on the highest BDI was the Transport and Communication sector coming in at 1.47 in Q4.
The only sector closing 2022 in negative BDI territory, and in fact showing the steepest decline of all, was Electricity, which moved down from 1.22 in Q3 to -0.42 at the end of Q4. This is not surprising, given the increased intensity of load-shedding that South Africa has been exposed to over the last few months.
The BDI in all other sectors remained positive, even if down substantially compared with Q3.
In the case of Agriculture, the deterioration observed can be explained by the persistent episodes of loadshedding, higher input costs, rising protection in some export markets, animal disease outbreaks, rising interest rates, intensified geopolitical tensions which disrupted supply chains, and ongoing weaknesses in municipal service delivery and network industries. These events all contributed to the significant deterioration in Agricultural GDP seen in 2022 Q4.
Electricity production has shown a decline Y-o-Y in Q4 of 4.65%. Electricity production in South Africa has shown Y-o-Y reduction over the last 5 quarters (following the statistically induced increase in production a year after the pandemic struck). If we were to disregard the growth in electricity production during that period, electricity production has actually been showing Y-o-Y deterioration since early 2019 already.
South Africa’s GDP decreased by 1.3% Q-o-Q in Q4 of 2022. As stated already, the intensified loadshedding affected all other sectors of the economy, so that the GDP pertaining to these sectors also at best slowed down significantly in the rate of growth. We have seen from the latest Stats SA data that most sectors saw a significant Y-o-Y deterioration in GDP. Some of the most significant of these were:
- 3.3% decline Q-o-Q in GDP for agriculture, which had a -0.1-percentage point impact on GDP growth. Field crops and horticultural goods were both reported to have decreased economic activity over this period.
- 3.2% Q-o-Q decline in GDP for mining and quarrying, which had a negative 0.14 percentage point impact on GDP growth.
Loadshedding continues to have a particularly detrimental impact on both South African consumers and businesses.
Debt age ratios are the component of the BDI that is based on the payment profile data we hold and maintain on the bureau.
There are two such ratios computed and incorporated in the BDI:
- 30-60 day debt age ratio and
- 60-90 day debt age ratio
These debt age ratios show us the percentage of the overdue owed amount, one- or two-month(s) in arrears, relative to the ‘within terms’ amount, lagged by the relevant period. Thus, these ratios represent a metric of the distress businesses are facing in general, when it comes to honoring the payment terms they committed to.
For both the 30-60 and the 60-90 day ratios we notice a slight increase (i.e. deterioration) in the last quarter. For 30-60 days, we saw the ratio increase from 24.7% to 27.7% and for 60-90 days, the ratio increased from 7.4% to 7.6%. This could have been driven by the cost pressures businesses are experiencing due to rising interest rates as well as the income pressures brought on by the loadshedding.
Looking forward to Q1 of 2023, we expect to see a decline in Q1 2023 – probably also followed by further declines in ensuing quarters, as the country battles to keep the lights on. Loadshedding has intensified further, with outages at Stage VI being more frequent during Q1 2023.
In addition, interest rates have been raised further in recent months, with the repo rate having been hiked by a further 25 basis points in January 2023. We will probably witness yet another increase of at least 25 basis points in March 2023. Cumulatively over the past 16 months, the repo rate has been raised by 4% from its 3.5% low prevailing between May 2020 and November 2021.
Subdued economic growth linked to loadshedding and the deterioration in the country’s infrastructure more generally also stands to contribute towards difficulty in raising government revenue to fund government expenditure, carrying the risk of a deterioration in the country’s fiscal metrics, with the concomitant threat of an accelerated increase in the trajectory of public debt-to-GDP ratio.
Get the Q4 2022 BDI Report for a more detailed view of the overall health of South African businesses.
Download the BDI Report
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Watch our video in which Ans takes you through the various graphs that bring these data insights to life.
Ans Gerber
Head of Data Insights and Marketing Services | Decision Analytics
Experian South Africa
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A data scientist in the Innovation team of Experian, Ans has experience in Analytics across various disciplines. In her current role, she is part of a dynamic team that continues to push the boundaries of what is deemed ‘typical’ bureau activities, by finding and creating new data sets, building new products and creating value propositions that address industry needs and also help to build an inclusive credit economy for Africa, by empowering consumers.