South Africa kisses over 500 businesses goodbye

Businesses in South Africa are continuing to shut their doors, with April being a particularly tough month for many.

According to Stats SA, the total number of liquidations jumped by 14.3% in April 2024 compared to April 2023.

Compulsory liquidations increased by 12 cases to 25, and voluntary liquidations increased by 4 cases to 103 over the period.

That said, the number of liquidations for the three months ended April 2024 was 8.6% less than in the corresponding period in 2023.

There was also a year-to-date decrease of 1.9% from the same period in 2023.

Overall, 513 businesses have been liquidated in 2024 so far.

On an industry-specific level, the financing, insurance, real estate and business services; and unclassified industries saw the most closures.

The electricity, gas and water industry is yet to see a liquidation in 2024.

The recent Deloitte Africa Restructuring Survey showed that respondents believed that the local economy could take up to three years to reach pre-pandemic levels.

Nevertheless, the survey showed that ‘pessimism’ had fallen from 81% in 2023 to 75% in 2024.

Jo Mitchell-Marais, Africa Turnaround & Restructuring Leader for Deloitte Africa, said that the new rating doesn’t necessarily mean that respondents feel optimistic but that they have instead accepted the current economic situation and expressed resilience.

The “new normal” is characterised by elevated load shedding, soaring interest rates, ineffective ports, and ongoing political uncertainty due to the upcoming election.

“Companies are trying to operate in spite of these challenges, but we are far from being ‘optimistic’ given the Fitch Ratings forecast of real GDP growth only increasing by 0,9% in 2024 and 1.3% in 2025,” said Mitchell-Marais.

The new normal is expected to create new challenges for the organisation, with further business distress expected.

According to respondents, weak board governance was the primary internal factor triggering distress, followed by a lack of cash management and weak financial controls.

“The development of skilled and qualified directors will go a long way in assisting to improve the board’s ability to both identify early warning signs of distress and take appropriate, timely, and corrective action.”

“It is crucial that they have their finger on the pulse of the business and broader socio-political and economic activity.”

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