In South Africa, the price of electricity, water, fuel and money is regulated. In recent tlllles, the price of money, in the form of Interest rates,has been set relatively low by the SA Reserve Bank. This, In turn, has resulted In lower lending rates from commercial banks.

While the recent Increase of the prime rate to 9.75 percent surprised many, it is worth noting that between 1985 and 2005 the rate varied between 11 percent and 25 percent. Businesses that have expanded on the back of low Interest rates, either directly through access to credit for expansion or indirectly through a credit-reliant customer base, now face the prospect of a period of Increased Interest rates.

The consequences have already been felt by many who have experienced a "tougher market'' In 2015. For some, It has already been too much and there has been a noticeable Increase in the number of business rescue cases and liquidations. lf this Is the case, many businesses might need to adopt a more cautious approach to the granting of credit and a more assertive approach to the collection of debts In 2016.

Matters that should be given attention include the proper identlflcatlon of customers with reference to the National Credit Act and the Consumer Protection Act, the review of sureties, guarantees and other forms of secturity. checking the terms of credit insurance, streamlining letters of demand for late payments and ensuring that, where necessary, legal proceedings are attended to timeous!y and effectively. Interest rates are often an Important consideration In legal proceedings. The Importance ls ampllfled when taking Into account the time it can take to flnallse actions through the legal system.

It is not rare for litigation to take more than flve years. in this time frame, for example, a Rl million claim with a simple Interest rate of 9 percent a year would Include an additional R450 000 claim In Interest. Claims can be matetially compromised if the maximum permissible interest ls not properly sought.

The Presctibed Rate of Interest Act applies to outstanding debts for which there ls no agreement on the rate of Interest to be paid and where no other legislation resu·lcts the Interest rates that are applicable to the underlylng transaction. The Interest begins to run on the debt from the date fixed In the applicable contract or upon formal demand for payment. With effect from July last year the prescribed rate of interest was reduced from 15.5 percent to 9 percent a year.

The previous prescribed rate of 15.5 percent had been In place for over 20 years. The current prescribed rate ls now below the prime rate. This means there is not as much Incentive to pay debts for which no Interest rates have been agreed. It adds to the Importance of ensuring agreements are drafted properly and legal affairs are in order.