Rates scenario remains gloomy

"At present, there is no reason to expect prime of 17.5%, but it cannot be ruled out," he says.

He notes that there are a few prognostications for prime to peak above 16% - meaning at least another 100 basis points in interest rate hikes.

Doig points to under-recoveries on petrol and diesel affecting costs and inflation outcomes.

"Further, reports of monthly car repossessions being 67% higher year-on-year and our current experience both in terms of payment terms being extended and in actual claims payments, leads us to expect that civil debt judgments will rise substantially in the months ahead and that corporate failures will inevitably spike," he adds.

"Resulting job losses will further impact the economy and so the spiral gathers momentum," he says.

Apart from formal company liquidations jumping 23.2% year-on-year in March, January/February personal sequestrations are 22.1% down on levels a year earlier, while the value of debt judgments against private persons and businesses in the first four months of this year were only 0.7% and 3.3% higher respectively.

"This contrasts strongly with our experience at Credit Guarantee," says Doig.

He points out that after actual claims, payments escalated 56% last year, they were a further 43% higher in the first four months of 2008.

"In fact, overdue advised accounts (longer than contractual terms) as indicated by our clients from their buyers, were a staggering 56% higher in January - April 2008, leading us to foresee even higher claims in the months ahead," he concludes.

SA's next rates decision is scheduled for June 12.

- I-Net Bridge