Liquidations on the rise in South Africa

South Africa recorded 183 business liquidations in July 2019, representing a 24.5% rise from 147 liquidations recorded a year ago, according to StatsSA.

The stats body said that 1,198 liquidations were recorded so far this year (January to July), higher than the 1,054 recorded in the same period last year.

The report found that the financing, insurance, real estate, business services sectors saw the most closures, followed by the trade, catering and accommodation sector.

Those in the financing, insurance, real estate and business services were most likely to file for insolvency in South Africa while those working in electricity, gas and water were the least likely to go insolvent.

The total number of liquidations increased by 13.7% during the first seven months of 2019 compared with the first seven months of 2018, StatsSA said.

The estimated number of insolvencies increased by 4.2% in the second quarter of 2019 compared with the second quarter of 2018.

Business closures come at a time when the local economy contracted the most in a decade in the first quarter, while unemployment jumped to a 16-year high of 29% in the second quarter, and skilled labour remains problematic.

Bloomberg cited deputy finance minister, David Masondo as saying that all aspects of South Africa’s fiscal policy “are not looking good”.

Rebuilding the South African economy will require more than fiscal policy, Masondo said at a presentation in Johannesburg on Monday, adding that the country’s high debt-service costs are crowding out social spending.

Last week, National Treasury moved to cut government budgets to try and contain debt after the state promised billions of rand to rescue its power utility amid a weak economy that has dampened tax collection.

Analyst Ralph Mathekga recently told Bloomberg that President Cyril Ramaphosa is contending with “denial politics regarding the seriousness of the financial fundamentals” among some members of his party, and must instil a sense of urgency in delivering reforms.

Read: South African unemployment jumps to a 16-year high of 29%

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Liquidations on the rise in South Africa