Tag: liquidations

The businesses hardest hit by liquidations

Statistics South Africa has published its latest report on liquidations and insolvencies, showing how South African businesses fared in 2021.

Liquidation refers to the winding-up of the affairs of a company or close corporation when liabilities exceed assets and it can be resolved by voluntary action or by an order of the court.

According to Business Tech, the data shows the following:

  • From January to December 2021, there were a total of 1 932 reported liquidations in South Africa
  • Total liquidations decreased by 29.2% in the fourth quarter of 2021 compared with the fourth quarter of 2020
  • There were a total of 2 035 liquidations in 2020
  • There was a year-on-year decrease of 20.3% in December 2021
  • Financing, insurance, real estate, business services suffered 625 liquidations
  • Trade, catering and accommodation suffered 414 liquidations
  • Community services suffered 157 liquidations
  • Gauteng and KwaZulu-Natal lost a combined 323 000 jobs during Q3 2021
  • A total loss of 660 000 employment opportunities occurred in the third quarter of 2021
  • South Africa lost 2.24 million jobs during 2020 Q2
  • South Africa lost a net 742 000 jobs during the first three quarters of 2021

 

Over 600 companies have closed this year

By Sarah Evans for Business Insider SA

Over 600 companies were liquidated in the first quarter of 2021 – a sharp increase from the first quarter of 2020 – following the first year of the Covid-19 pandemic. But while that number may seem steep, it’s not clear that the number can be attributed to lockdown, or even the broader pandemic, alone. It is not out of sync with liquidation trends seen over the last five years. In fact, the only evidence of the impact of lockdown in the liquidation numbers can be seen in the latter half of 2020, where liquidations increased.

The latest liquidation statistics were released by Statistics South Africa (StatsSA) this week.

With the exception of the month of April 2020, when the Companies and Intellectual Properties Commission (CIPC), which processes liquidations, was closed, liquidations appear not to have increased or decreased dramatically despite the lockdown.

In 2019, there were a total of 636 liquidations in the first quarter of the year, January to April, both voluntary and compulsory. For the same period in 2021, there were 674 liquidations. In 2020, the number dropped to 434 – but this includes the month of April, where it was zero.

In the first quarter of 2018, there were 578 liquidations, while the number in 2017 was 575. In other words, liquidations in the first quarter of the year have steadily increased over time, though not significantly.

Every year, the finance, insurance, real estate, and business services sectors had the most liquidations, followed by trade, catering, and accommodation. In 2016, StatsSA introduced a new category, “unclassified”. A high number of liquidations fall into this category every year.

Large employers like mining, manufacturing, and construction do not suffer as many closures as trade and finance, historically. However, 12 manufacturing firms went into voluntary liquidation in the first quarter of 2021. Seven construction firms were also liquidated.

Away from the broader trends, the impact of lockdown on businesses can be seen in some of the data: the 2020 data shows a spike in liquidations between August and November 2020. This could indicate a delayed increase in business closures due to the hard lockdown starting in March. It is also a trend not seen in the years prior.

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