The Experian Business Debt Index (BDI), which reflects the relative ability for business to pay their outstanding suppliers and creditors, reveals deteriorating business debt conditions in South Africa.
The Index, a reflection of the overall health of businesses in the economy, improved marginally in Q2 compared with Q1, to -0.388 from -0.419, but still reflects tough times for businesses: when historical revisions are included, the Q1 BDI reflects the weakest business debt conditions since the global financial recession in 2009.
Despite the small improvement in Q2 2019, these readings still reflect a significant worsening of the financial position of companies in South Africa in relation to conditions which had prevailed in recent years.
|Q2 2018||Q3 2018||Q4 2018||Q1 2019||Q2 2019|
|Index>0= Improving business conditions<0 = Deteriorating business conditions||-0.018*||0.228*||-0.099*||-0.419*||-0.388|
“The impact of poor domestic economic conditions on the financial state of companies has been further exacerbated by growing signs of a slowdown in the global economy as well,” said Thabo Hermanus, chief operating officer at Experian South Africa.
GDP lower than expected as a result of load-shedding
In the wake of the historical revisions, the BDI has fallen into significantly negative territory in Q1 and Q2 2019. The main deterioration of inputs relates to South African Q1 GDP. The Q1 GDP quarter-on-quarter annualised growth rate of -3.2% turned out to be considerably worse than all consensus forecasts. Expectations of stronger GDP growth in Q2 2019 (based on early high frequency data) contributed to an improved BDI in the latest release.
The relative improvement in the Q2 BDI was however slightly hampered by US GDP which fell back in Q2 to 2.1% on a quarter-on-quarter annualised basis from 3.1% in Q1. Additionally, the differential between the producer price index (PPI) and the consumer price index (CPI) inflation rates increased in Q2, suggesting a squeeze on corporate profit margins. Long-term interest rates also fell quite sharply relative to short-term interest rates, indicative of an increasingly gloomy view of longer-term economic growth conditions.
Debt age ratio
The outstanding debtors’ days in the 30:60 days ratio increased to 33.49% in Q2 from 29.03% in Q1. The deterioration in the 60:90 day ratio was less marked, rising to 11.76% in Q2 from 11.33% in Q1.
While the overall number of outstanding debtors’ days improved slightly from 56.7 to 54.6 in Q2 2019, the age profile of these debtors’ days worsened, with the ratio of outstanding debt owed of 30 to 60 days relative to that owed of less than 30 days increased further to 33.49% in Q2 from 29.03% in Q1.
Hermanus says, “It is apparent that the cumulative effect of weak economic activity extending over several years now, with economic growth less than 1.5% per annum in each of the past four years, has finally begun to compel businesses to hold back from meeting their debt commitments for as long as possible in order to survive.”
Agriculture improves, but construction, mining and transport deteriorates significantly
Analysis of the BDI by sector displays considerable variance from sector to sector. The most dramatic improvement was recorded in Q2 by the agriculture sector, in line with a normalisation of domestic agricultural conditions following the severe droughts in the north-eastern regions in 2015/16 and that of the Western Cape in 2017/18. The BDI for agriculture shot up from a heavily negative -0.456 in Q1, to a positive 0.236 in Q2.
On the other hand, severe deterioration in conditions was reported in the construction sector, where the BDI fell from an already significantly negative -0.381 in Q1, to -1.280 in Q2. There was also a significant further deterioration in business debt conditions in mining and transport, with both sectors affected negatively by industrial action.
Small Businesses are battling to survive
Whilst the overall debt situation amongst businesses might not have been favourable in the first half of 2019, that of SMEs posted a significant further deterioration. Whereas the total number of outstanding debtors’ days decreased slightly in Q2, to 54.6, from 56.7 in Q1, it worsened in the case of small businesses with SME outstanding debtors’ days rising to a record 66.4 in Q2, from 65.5 in Q1 and levels of below 60 a year ago.
“SMEs are struggling to sustain cash flows with which to survive in the face of tardiness on the part of their bigger counterparts to pay them for work done. It would seem that the brunt of the impact of the weakness of domestic economic conditions has been borne by small businesses, with many of these being forced to close down after struggling to remain in operation for as long as possible,” said Hermanus.
The slump in economic conditions in South Africa experienced since 2014 represents the longest sustained period of economic weakness in almost a century. Per capita GDP growth will have been negative on average for four consecutive years.
“Although the slump in economic growth has not taken the economy into a deep recession, it has been sufficient in its duration to impact the ability of businesses, especially smaller ones, to survive,” says Hermanus.
The PC is back!
… and 2020 will be its big year, writes CHRIS BUCHANAN, client solutions director at Dell Technologies
It turns out the PC’s death has been exaggerated. PC sales grew between 1.1% and 1.5% in the last few quarters of the year, according to Gartner. While those don’t sound like massive leaps, they represent a large market that has been declining for several years. Windows 10 is credited for this surge, especially as Windows 7 is leading towards its end of life (EOL).
But I don’t think that is the entire picture. Windows 10 upgrades have been taking place for several years, and the market has also gotten savvier about managing EOL. Other factors are driving the adoption of PCs.
A specific one is how much closer the PC now sits to smartphones. I recently watched some youngsters work with laptops that had touchscreens. They hardly ever touched the keyboard, instead tapping and swiping on the screen. Yet they were still working on a laptop, not a smartphone. Certain things are much easier to do on a PC than a phone, and users are realising this. They aren’t relinquishing the convenience of their smartphones but applications are now available on PC’s and often easier to use.
Convertible or 2-in-1 machines have closed the gap between the two device types. This is in contrast to tablets. If you observe how people sit with tablets, it’s the opposite of smartphones or laptops. With the latter, we sit forward, attentive and focused. But tablets often prompt people to recline. It’s just a casual observation, yet I believe that PCs and smartphones have much more overlap with each other than pure tablet devices. Additionally, the convertible laptop has become the new tablet.
Why does this bode well for PCs in 2020? 2-in-1 machines break down the barriers between the utility of a PC and collaborative culture of a smartphone. You can now flip a laptop into tent mode and use it as an interactive presentation screen on a boardroom table, or cradle it like a clipboard you jot on with a digital pen.
In the next year, we’ll see more of the market responding to this trend. Premium 2-in-1 devices have a stable and growing audience of users who are now going into their second, third and even fourth generations of devices. Mid-range and entry-level laptops are also starting to adopt touchscreens and flip displays.
2-in-1 devices are also pushing innovation, such as the emergence of dual-screen systems. Dell revealed two such concept devices at CES this year: Project Duet, a dual screen laptop, and Project Ori (for origami), a more compact approach to foldable devices. We also unveiled Project UFO, a prototype Alienware device that puts triple-A PC gaming into a handheld device. All of these reflect the desire for touch-enabled devices that are portable without sacrificing performance or excellence. They definitely point us to the future.
Convertible devices are not a new form factor. I can recall the first flip-over touchscreen designs appearing 15 years ago. Back then they were exotic and the standard laptop ruled the roost. But today, the habits and expectations of users are driving a change decisively towards convertible devices.
Desktop PCs are meanwhile becoming more specialised, yet also more widely appreciated for their versatility. Specialist non-Windows PCs, such as those used by designers, are being replaced by Windows PCs, often for lower costs. Integrated discrete graphics chips and other advancements add a lot of value to modern desktops. The smartphone overlap also appears here: many people use services such as Whatsapp Web on their PCs, and Dell customers use the Dell Mobile Connect app to show their smartphone screen on their PC display.
There is a new synergy between the PC and smartphone, created by users who find the two complement each other. Not everyone has realised this yet, but in 2020 that will be the resounding message. The PC is back and 2020 will be its year.
Jaguar designs ‘seat of the future’
Jaguar Land Rover is developing the seat of the future – a pioneering shape-shifting system designed to improve customer wellbeing by tackling the health risks of sitting down for too long.
The ‘morphable’ seat, being trialled by Jaguar Land Rover’s Body Interiors Research division, uses a series of actuators in the seat foam to create constant micro-adjustments that make your brain think you’re walking, and could be individually tailored to each driver and passenger.
More than a quarter of people worldwide – 1.4 billion – are living increasingly sedentary lifestyles, which can shorten muscles in the legs, hips and gluteals causing back pain. The weakened muscles also mean you are more likely to injure yourself from falls or strains.
By simulating the rhythm of walking, a movement known as pelvic oscillation, the technology can help mitigate against the health risks of sitting down for too long on extended journeys with some drivers doing hundreds of kilometres per week.
Dr Steve Iley, Jaguar Land Rover Chief Medical Officer, said: “The wellbeing of our customers and employees is at the heart of all our technological research projects. We are using our engineering expertise to develop the seat of the future using innovative technologies not seen before in the automotive industry to help tackle an issue that affects people across the globe.”
Jaguar and Land Rover vehicles already feature the latest in ergonomic seat design, with multi-directional adjustments, massage functions and climate control fitted across the range. Dr Iley has also issued advice on how to adjust your seat to ensure the perfect driving position, from removing bulky items in your pocket, to shoulder positioning and from ensuring your spine and pelvis are straight to supporting your thighs to reduce pressure points. View the video here.
The research is part of Jaguar Land Rover’s commitment to continually improving customer wellbeing through technological innovation. Previous projects have included research to reduce the effects of motion sickness and the implementation of ultraviolet light technology to stop the spread of colds and flu.
Together, these efforts are driving towards Destination Zero; Jaguar Land Rover’s ambition to make societies safer and healthier, and the environment cleaner – a responsible future for our workers, customers and communities around us. Through relentless innovation, Jaguar Land Rover is adapting product and services to meet the rapidly-changing world.