South Africa waves goodbye to 247 businesses at the start of 2024 – with more in danger

 ·25 Mar 2024

More businesses closed their doors at the start of 2024 than last year, and there are warning signs that more could follow suit this year.

According to Stats SA, the total number of liquidations dropped by 14.8% year-on-year in February 2024.

Of the 138 businesses that closed their doors in February, 124 did so voluntarily, while the other 14 did so on a compulsory basis.

Moreover, the total number of liquidations decreased by 4.5% in the three months ended February 2024 compared with the three months of February 2023.

However, it should be noted that the 247 liquidations in the first two months of 2024 was an increase of 1.6% compared to the first two months of 2023.

On an industry level, unclassified (52) saw the most liquidations, followed by financing, insurance, real estate, and business services (34) and trade, catering, and accommodation (26).

Warning signs

Speaking at a recent roundtable, Deloitte’s Jo Mitchel-Marias warned that many businesses are in a “zombie zone,” where they can only pay operating expenses and service their debt.

Without capital expenditure, many businesses are simply hanging on instead of expanding their operations.

Mitchel-Marias said that one push could send these businesses over the edge.

This was recently the case with electronics manufacturer and distributor Ellie’s, which announced that it is going into business rescue after failing to get debt funding from its bankers to buy Magetz Electrical Proprietary Limited and Power on Wheels Proprietary Limited (Bundu Power).

Mitchel-Marias said that 2024 is set to be a turbulent year for South Africa, with the national elections, ongoing load shedding, and the challenges facing Transnet, which could force further businesses into liquidation.

The Bureau for Economic Research (BER)’s latest retailer confidence index recently said that the perceived risks surrounding the upcoming national election are weighing on sentiment, with many fearing an increase in social unrest.

Although lower levels of load shedding, moderating food inflation and interest rate cuts could lead to a possible recovery in retail trade from the third quarter of 2024 onwards, the political and economic risks around the upcoming election still loom large.

Read: Interest rates in South Africa this week – the best you can hope for

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