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Send  Share  RSS  Twitter  02 Nov 2012

EXPORT: SA Exporters Could Bask in An Indian Summer


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The business climate in India offers encouragement for South African companies who want to take advantage of its thriving technology and services markets. This is according to a Coface corporate credit risk study for India, by Coface, the international credit insurer.

Coface Group surveyed 5 000 companies in December 2011 and received 988 validated responses, a response rate of 20%. Sectors covered included manufacturing, trading and wholesale, and services.

Coface’s annual survey of Indian companies revealed that the majority of the 988 respondents were optimistic about the prospects for the Indian economy. It also revealed an increasing number of companies had implemented credit management procedures which meant they were better equipped to offer realistic credit terms to trading partners and limit their exposure to bad debt.

Saijil Singh, lead analyst of Coface South Africa, said that while there has been a slowdown in India’s growth in recent years and sectors such as steel, minerals and textiles represent a higher risk, there are still lower risk areas such as the drinks industry, technology and services.

“To facilitate increased trade between South African and Indian companies, we hope that this report helps businesses focus on the most promising opportunities. From a South African perspective it is also good news that Indian businesses have strengthened their credit control procedures as all too often bad debt has a domino effect along the supply chain,” said Singh.

The Survey revealed:
• More than 80% of businesses interviewed believed India would avoid going into recession.
• 97% had implemented credit management procedures in the last four years, compared to 82% in 2008. Most relied on market information and site visits to research potential customers.
• The number of businesses willing to offer credit terms to domestic trading partners increased to 45% in 2011, from a low of 38% in 2010.
• 32% felt that late payments had declined. 51% reported that payments which were more than six months overdue represented less than 2% of their annual turnover and 17% claimed it was below 0,5% of annual turnover.
• Late payments of more than 60 days were most common in the transportation sector (48%) during 2011, followed by the electronic appliances’ sector (46%), although these figures represent a small improvement on the previous year.

Coface has given India a country assessment of A3 (a satisfactory average probability of default) and a business climate assessment of A4 (meaning that the business climate is acceptable but can be difficult). It concludes that India’s strengths are diverse growth drivers; high savings and investment rates; a competitive private sector and moderate foreign debt.

Weaknesses include a lack of infrastructure and deficient education system; a rise in skilled labour wages which threatens competitiveness; increasing private corporate debt; and weak public finances.

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