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08 minutes

Trade credit, tough love and the AI paradox

Abdul Vally, CEO of Coface South Africa, examines the fragile resilience of South African business and the disruptive impact of AI on trade credit insurance. He argues that data, disciplined underwriting, and adaptive leadership, not price or optimism, will determine relevance as credit risk, fraud, and uncertainty intensify.
Written by
Abdul Vally
Published on
February 4, 2026
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South Africans are an unusual mix of hopeful and hardened. We celebrate small wins quickly, and we tolerate dysfunction for far too long. That combination can be a strength, it keeps people investing emotionally and financially in the future, but it also dulls the urgency to fix what is broken.

In a recent conversation with Tony van Niekerk, I found myself coming back to that paradox repeatedly, because it explains a lot about where South African business is right now, and what the trade credit insurance industry needs to do next.

The hangover is real - Let me start with a story that is becoming too familiar. Last year we dealt with a claim where a debtor simply never recovered from the low-growth environment. They kept trading, kept trying, and kept borrowing time, but the improvement they needed never arrived. Eventually they built up unsustainable debt to suppliers, reached a point of no return, and entered business rescue in late November.

That situation is not an exception. It is a warning signal. Many companies have used up their buffers: Their cash reserves, their debt capacity, their patience, and in some cases their credibility with suppliers. Even with a more positive outlook for South Africa, we cannot pretend the next two to three years will be easy for businesses that are already under strain.

Yes, we do believe the year can be more constructive. Coming off a low base, even small progress feels like real movement. But that does not remove the risk of “speed bumps”, sudden disruptions that hit margins, cash flow and confidence when you least expect them.

Resilience isn’t the same as progress - I recently spent time in Morocco. The traffic is wild, horns everywhere, constant noise, constant urgency. Coming home, driving in Johannesburg traffic, it struck me how quiet it is. No hooting. No confrontation. Just people navigating the chaos with calm acceptance. That is South Africa in a nutshell. We have a high tolerance for difficulty. We adapt to load shedding. We adapt to water shortages. We adapt to collapsing roads. We find a way around potholes and keep going.

It is admirable, and it is dangerous. Because adaptation can become a substitute for reform. We survive the symptoms and avoid dealing with the root causes. We get hopeful when the rand strengthens or when the country exits a grey list, and those are real wins, but we also need to keep pressure on the fundamentals: infrastructure, governance, policy certainty, and delivery capacity. Business cannot thrive on hope alone. It needs functioning systems.

Where the opportunity sits - From a Coface perspective, and I believe this is true for the broader trade credit ecosystem, the biggest opportunity is clear: Data and AI. AI is no longer “the future”. It is the present. And it will increasingly reshape credit risk management in ways that are uncomfortable for any traditional provider.

Here is the reality: As more data becomes available, and as AI tools get more sophisticated, some clients will be able to assess risk themselves far more effectively than they could in the past. That changes the value equation for insurers. If we are not careful, it could make parts of the trade credit insurance industry less relevant, especially for large corporates with the scale and balance sheet to retain risk.

AI needs data to work. That is the engine. And this is why the Coface Group has invested heavily into business information capabilities over the last few years. The group has employed hundreds of people in the information space because we recognise that information is not a side offering, it is becoming central to how credit risk decisions will be made.

If you have the information, you can power the AI. If you don’t, you will struggle to stay relevant. And if you keep operating in five to ten years exactly as you do today, you will become irrelevant.

“AI may be 95% right, but it’s the 5%, the black swan, that can take down a business, and protecting cash flow against that remains one of the most valuable things insurance can do.”

Abdul Vally
CEO, Coface South Africa

Self-insure the predictable, transfer the catastrophic - I see a future where large corporates adopt a hybrid approach. They will use AI and richer internal data to manage day-to-day credit risk and to self-insure losses up to a certain threshold. Many will effectively create their own insurance fund for predictable losses, often with tax and cash-management benefits.

Then they will come to a trade credit insurer for cover above that threshold: Catastrophic losses, black swans, and the exposures you can’t exit quickly even when you sense trouble. This matters because the biggest losses are not always the ones you can avoid through good risk management. Sometimes you cannot reduce supply, because the customer is critical to your revenue. Sometimes you see the warning signs but cannot unwind fast enough. That is where credit insurance remains essential, as protection against concentration risk and tail risk.

Strengthening the ecosystem - If we want a stronger insurance ecosystem, from underwriting to broker to client, we must tackle a few structural weaknesses.

First: Information sharing. In personal lines you have industry bodies and data pools that help flag fraud patterns. In trade credit we do not have that same central visibility. And fraud is a real issue.

There are schemes where someone buys an established business with trading history, makes a few small cash purchases to build trust, and then suddenly floods suppliers with credit applications for fast-moving goods: cement, bricks, mealie meal, flour, rice, anything that is easy to sell quickly with a ready market. Then the business disappears overnight, leaving suppliers exposed.

Even if insured, clients still have skin in the game. Average indemnity is often around 85%. That remaining 15% can wipe out margins. If we had better shared intelligence, we could protect clients and reduce avoidable loss across the system.

Second: Brokers are already adapting. Trade credit is a specialist field, and we do not have huge broker numbers in South Africa. But many of the brokers in this space have already realised that trade credit insurance alone is not the future. They are building information offerings, providing collections support, and positioning themselves as credit risk partners, not just product intermediaries. That is good for the client, and it is good for the industry.

Third: We must market the value of trade credit insurance more effectively. Collectively, I estimate the industry enables the trade of hundreds of billions of rand in goods and services. Yet awareness is low. If you surveyed businesses from small to large, I suspect only three out of ten would clearly understand trade credit insurance, and many would assume it is expensive, when it often costs less than insuring physical assets, despite protecting something more fundamental: Cash flow.

More competitors in the market should be seen as a positive. It forces the industry to explain itself better. If a business understands the value of the product, they are unlikely to abandon the category, even if they switch providers.

Leadership lesson - One of the hardest leadership lessons in trade credit is learning not to compete on price in a way that destroys your own book. I have seen what happens when a new entrant arrives and competes aggressively on premium. The temptation is to defend market share by cutting price and stretching underwriting. The damage does not always show immediately, because you may issue a limit today and only see the claim 12 to 24 months later. Then the losses arrive, and you spend years remediating the book.

In my view, you cannot build a sustainable trade credit insurer on price. You build it on value: service, communication, knowledge sharing, and paying valid claims quickly and fairly. If clients believe they will not get a better overall experience elsewhere, they will not move easily, even in a cost-cutting environment. Uncertainty is no longer occasional. It is structural. We are dealing with claims and distress scenarios shaped by global shocks, policy shifts, tariffs, wars, supply chain disruptions, events that can change overnight.

When making decisions today, leaders must cast the net wider than they ever did before. You must consider scenarios that feel implausible, assign probabilities, and still build contingencies. The most conservative decision is often the most responsible one. That does not mean paralysis. It means discipline: Don’t bite off more than you can chew and assume volatility will continue.

Staying relevant when barriers can disappear - Could someone wake up tomorrow with an AI-driven app that claims to replace parts of what we do? Possibly, though I believe major disruption is less likely in South Africa simply because the market is relatively small compared to general insurance. But incremental disruption is certain.

Clients will become more empowered. Some will retain more risk. Some will leave insurers for parts of the value chain. Our response cannot be to deny the trend. It must be to evolve: Hybrid policies, smarter risk-sharing, more data-driven services, and a clearer story about why trade credit insurance remains essential.

Because AI may be 95% right and still fail you when you least expect it. It is the 5%, the black swan, that can take down a business. And protecting cash flow against that kind of event remains one of the most valuable things insurance can do. In 2026, relevance will not belong to the loudest player, or the cheapest.  

It will belong to the most adaptive, the one that uses data well, communicates clearly, partners with brokers intelligently, and keeps proving its value when conditions change. That is the work ahead.

A GLOBAL LEADING PLAYER IN TRADE CREDIT RISK MANAGEMENT

Coface leverages its unique expertise and cutting-edge technology for 100,000 clients across some 200 markets. For more than 80 years, we’ve been supporting the growth of companies, helping them navigate in an uncertain and volatile environment.

At Coface, we act for trade.

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