South Africa ranks as one of the most difficult countries for debt collection in the Allianz Trade’s Collection Complexity Score and Rating report with a score of 67 – which has remained unchanged for the past four years.
The score represents a severe level of collection complexity. Due to financial constraints and the slow-moving economy, most companies pay up to 90 days compared with the average 30- and 60-day terms and conditions which are industry-driven. In some cases, small to medium enterprises are taking as long as 120 to 180 days to settle debts.
On the other hand, South African companies encounter debt collection challenges across all international markets. Among their top 20 export destinations, the most difficult countries for recovering outstanding payments are Saudi Arabia, the UAE, and China – South Africa’s largest trading partner.
Global complexity eases slightly
The Allianz Trade Collection Complexity score is a measure of the level of complexity relating to international debt collection procedures within each given country from 0 (least complex) to 100 (most complex). The score combines expert judgment by Allianz Trade’s collection specialists worldwide (340), and over 40 objective indicators.
The Collection Complexity score has four grades: ‘Notable’ (score below 40), ‘High’ (between 40 and 50), ‘Very High’ (50 to 60) and ‘Severe’ (above 60). The global average is marginally lower than in the 2022 edition (49/100) and reflects a narrower distribution of risk: a smaller share of countries now fall under ‘Severe’ (15% versus 16% in 2022) and ‘Very High’ (21% versus 29%) categories, while the share of ‘High’ (29% versus 24%) and ‘Notable’ (35% versus 31%) categories has increased.
Yet, with business insolvencies remaining elevated worldwide and global fragmentation deepening amid shifting trade patterns, volatile
protectionism, geopolitical tensions and growing digital risks, debt collection is set to become increasingly complex for corporates, particularly for exporters.
“We estimate that 48% of international trade receivables are in countries at ‘Very High’ (22%) or ‘Severe’ (26%) collection complexity,” states Fabrice Desnos, member of Allianz Trade’s board of management, in charge of credit intelligence, reinsurance and surety.
“Compared to 2022, this represents a limited increase (+1pp), but a significant rise in absolute value to $1,1trillion due to expanding global trade.
“Insolvency proceedings still account for the bulk of collection complexity in all regions. Local payment practices in particular stand out as the main driver of collection complexity in the Middle East, while court-related complexities are less frequent within Western Europe than in the Middle East, Africa and Latin America.
“These structural factors explain why international debt collection remains a difficult process worldwide.”
Saudi Arabia, Mexico and the UAE the most complex
Considering local payment practices, court proceedings and insolvency frameworks, Allianz Trade finds that Germany, the Netherlands and Portugal are the three easiest countries to recover international debt, while Saudi Arabia, Mexico and the UAE remain the most challenging.
“International debt collection is almost three times more complex in Saudi Arabia than in Germany … but the latter is not without complexities in terms of international collection,” explains Pascal Personne, head of group claims and collections at Allianz Trade. “In that context, the gap between advanced economies and emerging markets has been gradually reducing over time, notably in Asia, but it remains in place.
“Most advanced economies have a ‘notable’ level of collection complexity. On average, Middle East and Africa are the top two most complex regions.”
Next Generation Trade Hubs demand selectivity
Amid the structural shifts of the global trading system, new trade hubs are emerging, becoming links in new trading routes, as well as emerging new manufacturing hubs.
However, despite their appeal, recovering debt remains a challenge for exporters to those markets, adding to existing country risks.
“In a world divided by geopolitics, protectionism and the effects of climate change, global trade is forging new paths,” says Maxime Lemerle, lead analyst for insolvency research at Allianz Trade. “But emerging ‘Next Generation Trade Hubs’, including the UAE, Vietnam, and Malaysia, display a ‘Severe’ level of collection complexity, with an average score of 62.
“While these markets are increasingly critical in the current context, this calls for selectivity and close credit management when considering doing more business there.”