Statistics South Africa has published its latest report on liquidations and insolvencies, with the data showing an annual decrease in both categories.
However, the impact of the Coivd-19 pandemic and lockdowns was clearly felt for many businesses in the latter part of 2020, with a substantial increase in liquidations seen in Q4 2020.
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.
Overall, the number of liquidations decreased by 0.3% in 2020 compared with 2019. Liquidations of companies increased by 7.9% (from 1,079 to 1,164), while liquidations of close corporations decreased by 9,.% (from 963 to 871).
Despite the annual decrease, the total number of liquidations increased by 20.5% in the fourth quarter of 2020 compared with the fourth quarter of 2019. There was also a year-on-year increase of 14.2% in December 2020.
The below table highlights the business categories which reported the most liquidations in 2020:
A similar trend was reported by Stats SA when looking at the country’s insolvency data.
Insolvency refers to an individual or partnership which is unable to pay its debt and is placed under final sequestration.
The estimated number of insolvencies decreased by 31.1% in the three months ended November 2020 compared with the three months ended November 2019. In addition, there was a year-on-year decrease of 7.6% in November 2020.
However, seasonally adjusted insolvencies increased by 67.4% in November 2020 compared with October 2020. This followed month-on-month changes of -5.3% in October 2020 and 29.9% in September 2020.