SA exporters warned: Overseas payments harder to recover than expected

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JEREMY MAGGS: Getting paid on time, I read, is becoming harder almost everywhere. But here in South Africa, well, the country ranks among the most difficult countries in the world for debt collection. There’s new data out from Allianz Trade that shows long payment delays, high insolvency risk and severe complexity for exporters.

Let’s pull all of that together. What does it mean and why? I’m in conversation with Luke Morawitz, who is credit director for South Africa at Allianz Trade. Luke, a very warm welcome to you. The obvious one, why is South Africa so consistently difficult when it comes to debt collection? What’s the problem here?

LUKE MORAWITZ: Thanks, Jeremy. Maybe just to give a quick overview of exactly what the report is, just so that we’ve got a baseline for everyone to understand where we’re coming from. Essentially, the collection complexity score is a score that’s compiled, based on 40 indicators, which we gather from 340 collection specialists across the globe.

So essentially in combination, those particular indicators will produce a score, which we then obviously put on a chart or a table which ranks from zero to 100. In terms of the score for South Africa, this has been compiled, and it’s come out at 67.

So out of the five bands which we monitor, easy and then all the way up to severe, South Africa falls in a severe band. One of the worst payers, as you obviously mentioned earlier.

Specifically in terms of how that was determined, that was based primarily around the issues that we seem to have in terms of the court system. That’s obviously plagued by inadequate IT infrastructure, there’s consistent backlogs, there’s a general inertia with regards to clerks that serve within it. We have a very tedious and frustrating process for creditors and the attorneys when they actually have to go to that route.

In many instances, we have something in the region of three to five years, depending on the jurisdiction of the courts, specifically with applications taking anything up to six months to be put through.

I think in terms of the legal proceedings and how those are handled and the time involved, it’s incredibly difficult. If we do have a defaults, and there is some form of action needed, three to five years in many instances can mean the difference between a company collecting their money and staying afloat, or ultimately having cash flow issues and being able to survive.

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JEREMY MAGGS: Luke, recovery of money owed is one thing, but I’d also suggest to you that for so many businesses, and particularly smaller ones, isn’t it all underpinned by cash flow?

LUKE MORAWITZ: It absolutely is and I think that’s one of the points that we obviously try and make as Allianz Trade, and trade credit insurance is obviously there to underpin that and protect that, should that be impacted by a default of not even necessarily a key client.

I think in many instances, even small disruptions to cash flow can have detrimental effects to companies in South Africa …

It’s clearly obvious to anyone who’s been paying any attention to the economy over the last 10 to 15 years that there’s been very sluggish, if any, growth in real terms. We have noticed that post-Covid, the figures with regard to, as we call them in the reports, insolvencies, but liquidations, have remained relatively stable for South Africa. So that at least is not something that we are overly concerned about.

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But in many other countries, that figure has been rising steadily. There were many substantial state subsidies which obviously kept a lot of companies afloat, and as those were withdrawn, a lot of those companies overseas have faced similar issues in terms of cash flow difficulties.

Especially I think if you have a South African company that’s exporting, this is where we found that most of the issues seem to arise, especially in the Middle East and the likes of China, where we’ve also noted particularly poor scores on the latest report.

JEREMY MAGGS: The problem here is very little protection, I would assume, for those exporters to countries or hubs like that.

LUKE MORAWITZ: Yeah, so again, I think that’s obviously where something like a trade credit insurance policy would come into effect. What was quite interesting about the report is it ran through the 20 largest trade partners for South Africa.

I think we can speak from the experience that we’ve obviously had looking after our policyholders and the credit limits that they have with their clients overseas.

There are particular difficulties in the likes of Saudi Arabia, the United Arab Emirates and our largest trading partner, China, which actually has a score of 66, one point below South Africa.

In many respects it’s similar issues, complex legal structures, courts that don’t necessarily function efficiently or independently. In some respects, whilst South Africa’s legal system can maybe be criticised for not being as efficient as it could potentially be, the legal frameworks are very advanced. In many of our trading partners overseas, they don’t have that same level of detail or protection.

So yeah, it’s an added element that I think people have to obviously navigate if they do look for alternative markets. That’s something that’s been raised quite a bit, especially with the tariffs that were introduced in 2025.

A lot of our clients were asking us where they could potentially shift exports to if the US is closed off to South Africa, where can they pivot to. I think one of the important things they need to take into consideration, obviously these trading agreements are not established overnight, but specific elements like if you do sell to someone overseas, are you going to get your money? And if you don’t get your money, how difficult will it be to collect on what is owed to you?

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JEREMY MAGGS: So it’s not an unfair question to ask whether doing business in these trade hubs that you mentioned is actually worth the collection risk.

LUKE MORAWITZ: It is based, I think, extensively on relationships. It’s always very interesting to speak to clients who have maybe entered into new markets and have had difficulty in getting payments from clients overseas. Where there is a very well-established, very long, well-established relationship, it’s generally easier to get some form of payment out of them.

I think we are generally quite open to negotiating and obviously facilitating the situation, so it’s resolved amicably. But where we’ve seen clients enter into new trade agreements, new trade relationships which have never been tested before, in the event of non-payment, yeah, sometimes the risk generally outweighs the reward or the potential return.

JEREMY MAGGS: Appreciate your time. That’s Luke Morawitz, who is credit director for South Africa at Allianz Trade. Thank you.

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