South Africa kisses another 100 businesses goodbye

 ·26 Feb 2024

South Africa has seen 109 businesses close down in the first month of 2024, showing a massive 35% increase from the same time last year.

According to Stats SA’s latest data on liquidations in the country, the total number of liquidations increased by 34.6% in January 2024 compared to January 2023.

Liquidations of companies increased by 28 cases, while liquidations of closed corporations remained unchanged during this period, it said.

However, while this represents a sharp rise in liquidations year-on-year, the total number of liquidations decreased by 3.9% in the three months ended January 2024 (November 2023 to January 2024) compared with the three months ended January 2023.

The majority of liquidations were on a voluntary basis, but 11 were compulsory.

Looking at the liquidations by industry, the biggest portion of closures were unclassified, but of those that could be classified, most were in the financing, insurance, real estate and business services sectors.

This was followed by the trade, catering and accommodation sector.

Businesses under pressure

Businesses in South Africa have had a rough start to the year – but it is a continuation of the tough business environment that has persisted for much of 2023.

The BankservAfrica Economic Transactions Index (BETI) for January showed that economic activity was stagnant in the opening month of the new year.

The index for January remained unchanged at 133.3 and improved by only 0.4% on a year-on-year basis.

Despite the reprieve in load shedding and a fuel price cut in January, the economy could not gain momentum during the first month of the year, and with elevated interest rates, high food price inflation, a lacklustre job market, low wage growth and slumped confidence levels, the economic narrative remained underwhelming.

Other nowcast indicators also highlighted the stagnant nature of economic activity, such as the S&P Global South Africa Purchasing Managers’ Index (PMI) – an indicator of the operating environment for private businesses – increasing slightly from 49.0 in December to 49.2.

S&P Global said that businesses were hit by the Durban port crisis, which impacted delivery times and output capacity.

The Absa PMI also dropped to an index level of 43.6, last seen during the Covid-19 pandemic, highlighting that the manufacturing sector is still on the back foot.

Total vehicle sales also disappointed, with only 41,636 units sold in January – the sixth month of consecutive sales declines. Naamsa attributed this to the cost-of-living crisis, load shedding and the nation’s logistics challenges.

Amid the flurry of bad news for the economy in January, there has also been an uptick in cases of impending job losses in the mining sector – where strained companies are preparing to bleed thousands of workers.

Read: Positive turn for petrol prices in South Africa – but the pressure is on

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