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Johannesburg - If the January hike in the value of judgments against individuals of 25% represents a true expectation for the year as a whole, then non-payment judgments against individuals could top R6.55bn this year, says Luke Doig, senior economist at Credit Guarantee Insurance Corporation.
"Much is made of the fact that summonses issued for debt and judgments both in January 2009 and in the three months to end January 2009 compared to the three months ended January 2008, are lower. This obscures the fact that the value of judgments against private persons rose 24.9% in January 2009 (R398.3m from R318.9m) and by 16.8% in the quarter ended January 2009
compared to the three months ended January 2008 (R1.186bn from R1.016bn)," says Doig.
"Given that judgments against individuals fell 6.1% last year, this indicates that the trend has turned of late and decisively for the worse."
Doig says the governor of the Reserve Bank recently cited rising insolvencies as cause for concern.
"For businesses, the corresponding figures are a year-on-year 4.1% rise for January 2009 (R71.2m to R74.2m) and 6.3% for the quarter ended January 2009 (R219.3m to R233m). On top of the fact that judgments against firms rose 22.3% to R1.097bn last year from R896.5m in 2007, we find little comfort in these figures."
Doig is on record as predicting a 50% rise in payment defaults by companies in 2009, with 25% more business concerns possibly closing their doors this year.
"The peak in judgments granted was recorded in 2001 - R7.72bn for individuals and R1.437bn for businesses. Indeed, the corporate record is seriously in risk of being surpassed in 2009 in our opinion. We have previously intimated that potential job losses this year could touch 600 000," he says.
"Together with our experience of actual corporate defaults and advised overdue accounts having escalated sharply over the past two months and with rising delinquencies across the board, we see that no more justification is required to cut interest rates by 200 basis points next week.
"There is no need to do two cuts of 100 basis points one month apart. There is positively no point in waiting until the end of April when little new information will be available - and after the country's output will have been seriously impacted by a plethora of holidays," concludes Doig.
- I-Net Bridge