By: Maria Teixeira, Aon South Africa

Navigating Change in an Uncertain Economic Landscape

Navigating the current volatile geopolitical and macroeconomic landscape is crucial for businesses to ensure uninterrupted trade and finance access. Global economic resilience is being tested by escalating geopolitical tensions and trade relations. At the same time, artificial intelligence (AI) is reshaping the global workforce, with up to 60% of jobs in advanced economies potentially affected. Meanwhile, insolvencies are projected to rise significantly, with a 10% year-on-year increase expected in 2025.

As a result, credit risk management and liquidity planning have become top priorities for finance leaders.

Aon’s latest Credit Solutions Market Insights Report, highlights the following growth outlook for businesses and the critical considerations for financial leaders as they strategically plan and manage risk:

• A politically charged global environment continues to strain economic resilience. While global growth reached its lowest point in early 2024, manufacturing remains in surplus and demand.
• Global growth is expected to remain stable, albeit lacklustre at 3.3 percent in both 2025 and 2026^[i], while PwC South Africa forecasts GDP growth between 0.5% (downside scenario) and 1.3% (upside scenario) in 2025.^[ii]
• Sector performance varies, with industries falling into three key categories:
  • Weak demand and lower pricing power – Pulp & paper, chemicals, agrifood, retail, textiles and household equipment.
  • Supply chain and geopolitical challenges – Transportation, energy and transport equipment.
  • Stable or improving outlook – Pharmaceuticals, automotive, computers and IT services.

Inflation: Declining at Different Paces

Global inflation is on a downward trajectory, with headline inflation expected to fall from 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025.^[iii] South Africa’s consumer price inflation is projected to average 4.5% in 2025, aligning with global trends. However, the pace of decline varies across economies.

The factors driving this decline are different from those seen in 2023. While the drop in inflation during 2023 was largely due to lower fuel and food prices, the decrease in 2024 was driven by a broad-based reduction in core inflation, reflecting a more sustainable shift in economic conditions.

AI: A Double-Edged Sword for Businesses

Artificial intelligence is reshaping the global workforce, with breakthroughs in large language models and generative AI transforming industries at an unprecedented pace. These advancements have significantly enhanced the ability of machines to perform cognitive tasks, leading to both opportunities and challenges for businesses. Over time, AI is expected to boost worker productivity, raise incomes and contribute to economic growth. However, it also brings risks of job displacement and widening income inequality.

Advanced economies are expected to feel the effects of AI first, given their reliance on cognitive-intensive jobs. Estimates suggest that 60% of jobs in these regions could be impacted, with roughly half of the workers benefiting from increased productivity and wages, while the other half face declining labour demand. In contrast, AI’s effect on emerging and low-income economies will be less immediate, affecting 40% and 26% of jobs, respectively. This suggests a slower rate of transformation in these labour markets, offering both challenges and a potential buffer against widespread disruption.

Rising Insolvencies: A Global Concern

After a period of historically low business insolvencies following the COVID-19 crisis, corporate failures are now returning to pre-pandemic levels. According to the latest Allianz Trade Global Insolvency Index, 2024 showed a sharp rise in global business insolvencies (+11%) with a further +2% increase expected in 2025 before stabilising at high levels in 2026.^[iv] Bankruptcies in South Africa averaged 222 companies from 1980 until 2024, reaching an all-time high of 511 Companies in August of 2000 and a record low of 0 Companies in April of 2020.^[v]

“It is important to note that when a company is placed under business rescue, payments to suppliers and creditors are put on hold, usually for months until a plan is approved by all stakeholders. When this is coupled with a lack of payment or delayed payments from any other debtors, it creates a serious cash flow problem for any organisation navigating a volatile business landscape,” warns Maria Teixeira, Trade Credit Specialist at Aon South Africa.

The Value of Trade Credit Insurance

“Comprehensive and consistent credit management of an organisation’s debtors’ book is a critical building block in its success and sustainability. Perhaps the single most important asset of a company is its debtors’ book,” says Maria. Trade credit insurance, offers:

• Protection Against Business Rescue and Liquidations - With business rescues and liquidations on the rise across all sectors, unpaid debts pose a major risk. Even large, established companies can falter, leading to delayed or lost payments. Trade credit insurance ensures that if a debtor enters business rescue or liquidation, you receive expert support in recovery proceedings. Legal fees and collection efforts are shared with the insurer, minimising costs and allowing you to focus on running your business. If payment is not forthcoming, your policy will indemnify the loss.
• Managing Trading Pressure - In a buyer’s market, businesses face increasing pressure to offer credit quickly—often without proper vetting. Granting credit to unverified clients can lead to costly defaults. Trade credit insurance provides credit assessments, debt collection services and financial insights to help you make informed decisions. Insurers have access to extensive debtor information, enabling quick and reliable credit approvals, especially when potential clients demand urgent terms.
• Navigating Cross-Border Trade Risks - Expanding into African markets presents significant opportunities but also challenges due to economic, political and regulatory uncertainties. A trade credit insurer helps mitigate these risks by vetting foreign buyers, setting appropriate credit limits and handling debt collection. This ensures smoother transactions and minimises financial exposure when operating in unfamiliar territories.
• Affordable Protection for Small Businesses - Trade credit insurance isn’t just for large corporations—it’s accessible to small businesses too. Policies can cover either a single debtor or a percentage of your entire debtor book, offering flexibility to match your risk appetite. Small businesses are vulnerable to major debtor defaults, and protecting against these risks can mean the difference between survival and financial distress.
• Mitigating the Risk of Fraud - Fraud is on the rise, and businesses desperate for orders may rush to approve credit without thorough checks. While trade credit insurance does not cover fraud, it adds a layer of protection by assessing a debtor’s creditworthiness before approving coverage. However, businesses must remain vigilant—verifying client details, confirming orders, and securing signed credit applications with sureties can help prevent fraudulent transactions.

“Every business has unique financial exposures, and there is no one-size-fits-all solution for managing liquidity. Consulting with a professional broker ensures you get tailored insights and strategies to protect your bottom line from bad debt and unexpected defaults. With expert guidance, smarter risk management and the right trade credit insurance, you can trade with confidence, unlock capital and secure your receivables,” Maria concludes.

Sources

^[i] https://www.imf.org/-/media/Files/Publications/WEO/2025/update/january/english/text.ashx#:~:text=Global%20Growth:%20Divergent%20and%20Uncertain,-Global%20growth%20is&text=The%20forecast%20for%202025%20is,stronger%20multilateral%20rules%20and%20cooperation.

^[ii] https://www.strategyand.pwc.com/a1/en/press-release/south-africa-economic-outlook-january-2025.html#:~:text=PwC%20South%20Africa%20forecasts%20economic,the%20labour%20force%20this%20year.

^[iii] https://www.imf.org/en/Publications/WEO#:~:text=Global%20inflation%20is%20forecast%20to,impact%20of%20policy%20rate%20hikes.

^[iv] https://www.allianz-trade.com/en_global/news-insights/news/insolvency-report-2024.html#:~:text=Allianz%20Trade%20confirms%20a%20sharp,in%20business%20insolvencies%20in%202024.

^[v] https://tradingeconomics.com/south-africa/bankruptcies

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