Liquidations in transport sector up 68%

Business credit is getting
tighter in the current global
financial crisis, and the
symptoms are also prevalent
in this country, although it
has certain inherent protective
factors against the financial
onslaught.
And it’s noticeably infecting
the freight and trade industries,
with the number of companies
going under because of cash
flow problems on the increase.
Liquidations in the logistics
(transport) sector rocketed
by 68% in 2008 compared to
2007.
What we’re witnessing
is a combination of things,
according to Mike Truter, MD
of Credit Guarantee.
“With the international
crisis,” he told FTW, “the
banking community is running
scared.
“So banks around the world
are tightening up on credit
and acting much more quickly
when they notice customers
having cash flow problems.
“But I feel this may be
an overreaction and only
be worsening the original
situation.”
SA was protected against
the original credit crisis,
when international financial
institutions got themselves
involved in the sub-prime
lending train crash.
In what can be seen as a
fortuitous combination of luck
and good judgment, the SA
government put an end to SA’s
own version of easy credit
when it introduced the National
Credit Act – and slammed
the brakes on banks making
dubious loans.
“Our SA banking system
is in better form than a lot of
overseas international banks
and insurance institutions,” said
Truter. “Our banking system is
well insulated.”
And the main part of this
insulation is on the longlingering
SA exchange control
regulations – which, before
the global credit crisis, were
being attacked by SA financial
institutions that wanted to
spread their monies into the
international arena. But,
looked at retrospectively,
this restriction prevented SA
companies from getting their
financial hands burned in the
global credit collapse.
“We’ve got a situation where
all our five major banks appear
to be pretty solid,” said Truter.
But SA is certainly not going
to remain immune to the global
belt-tightening.
“The situation is going to get
worse before it gets better,” he
said, “and we’ll see a lot more
businesses going to the wall
before this is finished.”