Statistics South Africa has published its latest report on liquidations and insolvencies, with the data showing a steep annual increase in liquidations across the country.
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.
The total number of liquidations was 158 in April 2021, following zero liquidations in April 2020. There were no liquidations reported by the Companies and Intellectual Property Commission in April 2020 due to the Covid-19 lockdown.
However, the data shows an increase of 78.6% was recorded for the three months ended April 2021 compared with the three months ended April 2020.
In addition, the total number of liquidations increased by 55.3% in the first four months of 2021 compared with the first four months of 2020.
The below table highlights the business categories which reported the most liquidations in the first quarter of 2021.
Of all sectors, financing, insurance, real estate, business services (42 liquidations), trade, catering, and accommodation (42) and community services (11) were the hardest hit.
This aligns with recent data published by insurance company Liberty which shows that there has been a significant spike in retrenchment claims since the Covid-19 lockdown started.
Liberty said that the claims peaked between August and October in 2020 on the back of a lag effect from the start of lockdown.
During these three months, retrenchment claims peaked at over 60 per month, compared to just over 10 per month during January and February in the same year, showing the effects of the economic contraction at the start of the pandemic.
“This trend was expected given the harsh realities and subsequent impact on jobs because of the pandemic. The most impacted regions were, not surprisingly, the main economic hubs of Gauteng, the Western Cape and KZN,” said Kresantha Pillay, head of Liberty’s Lifestyle Protector solution.
Liberty’s client base largely reflects those in the middle- to upper-income bracket, with the retrenchment data proving that no income segment in South Africa was spared the ill effects of the Covid-19 pandemic and lockdown.