South Africa

Big increase in South African company liquidations

South Africa down

Company liquidations have surged at the end of 2022 because of load-shedding weighing heavily on small businesses.

The latest data from Stats SA revealed that company liquidations rose 18.3% month-on-month in South Africa, leaving them up 30.3% year on year.

Of the 159 liquidations in December 2022, 32 were in the trade, catering, and accommodation sectors, while 55 were in finance, insurance, real estate, and business services.

Absa attributed the increase to load-shedding, given all the media reports about how intensified load-shedding is weighing particularly heavily on small businesses.

The bank highlighted that company liquidations are a lagging indicator, which means things may worsen.

“This release should be monitored carefully going forward for evidence of how deeply the intensified load-shedding has hit the economy’s productive capacity,” it said.

Eric Levenstein, head of insolvency and business rescue at Werksmans Attorneys, said that further bankruptcies are inevitable.

He said rolling blackouts and the 18.65% Eskom tariff hikes from April this year would likely place additional stress on South African consumers and businesses.

“With the prospect of higher interest rates, low growth and high inflation, many companies could face corporate failures, particularly in the early part of 2023,” he said.

“Insolvency and business rescue practitioners will be kept busy as financial distress continues to have an impact on companies not being able to generate sustainable revenue.”

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