According to the fourth edition of the Collection Complexity Score and Rating study released by trade credit insurance company Allianz Trade, South Africa has become the most difficult country in Africa to collect debt.
The Southern African country leads the continent in terms of collection difficulty with an index score of 67 out of 100, where 100 is the worst possible result.
This indicates serious structural and institutional problems with its legal and credit systems.
According to the report, companies in South Africa frequently wait up to 90 days to obtain payment for invoices.
This is much longer than the normal 30- or 60-day payment terms used in many sectors worldwide.
Additionally, the country’s court system, which Allianz Trade describes as beset by poor procedures, administrative backlogs, and overall institutional lethargy, plays a significant role in this difficulty.
Clerical delays and procedural inefficiencies frequently convert what should be a simple legal procedure into a lengthy agony for creditors and their legal representatives.
In many circumstances, debtors use these loopholes, purposefully prolonging proceedings to delay or avoid repayment altogether.
According to the TransUnion Industry Insights Report released in 2025, for the second quarter of the year, lenders in South Africa reduced credit limits, approving fewer large loans, and became increasingly cautious about whom they lend to.
At the time, the number of active credit cards climbed to 7.4 million, with balances rising by 7.5% year-on-year to about $9.8 billion.
On average, each cardholder owed $1,320.
Yet, new cardholders got smaller limits, down 19.5% to around $1,195, as banks “balance growth with risk mitigation.”
At the heart of South Africa’s debt problem is insolvency.
Per Allianz’s report, the Master of the High Court administers all bankrupt estates in South Africa, and liquidation procedures are commonly viewed as time-consuming and bureaucratic.
While the direct costs of liquidation may be low if attorneys are not involved early on, the process rarely produces considerable benefits for creditors.
As a result, when a debtor declares official insolvency, firms frequently receive little or no recovery.
“At the global level, the key factor of complexity in international debt collection is by far local insolvency proceedings, with no outstanding differences by region. On average, they contribute to half of the collection complexity of countries,” the report states.
“Yet, in absolute terms, insolvency-related complexity is more of a challenge in the Middle East, notably in Saudi Arabia and the UAE, and Africa, in particular in South Africa.”
South Africa’s government claims that spending has outpaced receipts every year since 2008, resulting in continually rising state debt and debt-service costs.
Rising debt-service obligations have crowded out spending on key public services and pushed lending rates higher across the economy, thus hurting circumstances for both firms and consumers.
The government expects revenues to exceed budget predictions by R19.3 billion this year, while debt-service costs would be R4.8 billion lower than previously expected, per its official website.
Debt-service expenses are expected to climb at a 3.8 percent annual rate over the Medium-Term Expenditure Framework (MTEF), a significant drop from the 7.4 percent growth foreseen in the 2025 Budget.
South Africa is also aiming for a primary budget surplus of R68.5 billion, or 0.9% of GDP, this year, with ambitions to increase that surplus to R224 billion by 2028/29.
Over the same period, the overall budget deficit is forecast to fall from 4.5 percent of GDP in 2025/26 to 2.7 percent in 2028/29.
If realised, these improvements could progressively alleviate financial pressures, but fundamental institutional reforms will still be required to significantly enhance debt collection performance.
Source: businessinsider.com
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