The latest data from Statistics South Africa shows that close to 1,000 businesses have been liquidated in the first half of 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.
The group recorded 997 liquidations of companies and close corporations between January and June 2021, up from 763 businesses over the same period last year.
On a more positive note, Stats SA’s data shows a downward trend in the liquidation numbers – though they remain at elevated levels.
The total number of liquidations decreased by 1.5% year-on-year in June 2021, Stats SA noted, with the liquidations of companies decreasing by 12 cases, while liquidations of close corporations increased by 10 cases during this period.
However, the total number of liquidations increased by 46.2% in the second quarter of 2021 compared with the second quarter of 2020, and an increase of 30.7% was recorded in the first six months of 2021 compared with the first six months of 2020.
Over 2,000 liquidations were recorded by the end of 2020.
Across industries, the finance, insurance, real estate and business services sector was the hardest hit, accounting for 32% of all liquidations to date. This is the same for monthly data, with 44 liquidations in this sector recorded in June.
The second hardest hit is the trade, catering and accommodation sector, which has had a particularly difficult time – first with the almost complete shut down during much of 2020, and again during higher levels of Covid-19 lockdown in 2021.
Stats SA’s findings align with the messages coming out of business groups over the last month, which paint a picture of distress and urgency among small businesses and large companies alike.
This has been exacerbated by the recent four-week level 4 lockdown, which only eased this week.
The tighter lockdown conditions – implemented to slow down the spread of the extremely contagious delta variant of Covid-19 during the country’s third wave – hit the hospitality industry particularly hard, forcing many to close.
The Restaurant Association pointed to thousands of restaurants closing their doors permanently over the last year as a direct result of restrictions on alcohol sales and normal trade – while hotels, resorts and lodges have also had to repeatedly suspend trade in line with changing lockdown conditions.
Lockdown pressures were pushed even further in July by civil unrest, which saw riots, looting, and arson cause billions of rands’ in damage to businesses in KwaZulu- Natal and Gauteng. The impact of this will likely be tallied by Stats SA in the coming months.
President Cyril Ramaphosa announced on Sunday (25 July) that plans are in place to assist businesses caught up in the unrest, and those SMMEs that have been affected by the Covid-19 pandemic.
These include wage support via the UIF for employees who have not been able to draw an income due to the riots, as well as for SMMEs in industries impacted by lockdown.
Tax deferments of PAYE taxes for a period of three months are also on the cards, while the payment of excise taxes by the alcohol sector will also be deferred for a period of three months, to ease the burden on the sector as it recovers, the president said.