Picture: ISTOCK
Business meeting. Picture: ISTOCK

BUSINESS debt stress is at its worst level since the recession, an index showed on Thursday.

Information services group Experian’s Business Debt Index (BDI) fell sharply to 0.082 in the final quarter of 2015 — its weakest level since 2010 — from 0.263 in the third quarter. Values below zero indicate business debt stress.

"Continuing to remain just above the zero line, the index suggests, however, that overall business debt conditions are not yet dire and that we are not witnessing a major collapse in economic activity at this point in time," Experian SA’s MD, Michelle Beetar, said.

The latest data indicate the negative effect slowing economic growth and rising interest rates are having on the margins of small businesses, in particular. Higher interest rates resulted in higher borrowing costs and an increase in business stress, Experian said.

The financial health of businesses was expected to deteriorate noticeably in coming months on rising inflation and interest rates, and once the full effects of drought were felt. The drought had caused food production shortages, necessitating imports and contributing towards rising food prices.

Economic growth is expected to slow even further this year to below 1% from an estimated 1.3% last year. Statistics SA is yet to release growth data for last year.

Interest rates have been raised a cumulative 175 basis points since January 2014.

The deterioration in business debt conditions in the fourth quarter was broadly distributed across most sectors of the economy. Six of the index’s nine major sectors of the South African economy continued to track below zero.