Business failures seem to be on decline amid tough economic times
The rate of business failure appears to have slowed amid the current tough economic times. Stats SA’s liquidations and insolvency data shows that the number of liquidations decreased by 32.5% in January 2023 compared to January 2022.
Liquidation is the process of ending an insolvent business to redistribute its assets to creditors.
The data shows that fewer companies are being liquidated despite many being in financial distress. Liquidations of companies fell by 42 cases, while liquidations of closed corporations increased by 3 % during this period.
The hardest hit industries were finance, insurance and real estate. This was followed by the trade, catering and accommodation industries. Many of these companies have to deal with unfavorable trading conditions.
“At the moment a lot of SMEs are faced with head wings such as load shedding and the costs of running generators are huge, we have high interest rates and inflation,” says the CEO of Weaver investment, Owen Khumalo.
Of the 81 companies liquidated, 74 were voluntary liquidations. Economists have cautioned that it’s early days in the year and that many companies will continue to face huge economic challenges.
Analysts warned that if the current intensity of rolling blackouts continues along with high interest rates, the rate of liquidations might increase during the course of the year.