Goodbye to 1,130 businesses in South Africa
South Africa has seen over 1,130 businesses shut their doors in the first three quarters of the year—but the latest liquidation statistics from Stats SA at least point to a declining trend.
According to Stats SA, 1,137 businesses were liquidated in the nine months through September 2024, with the majority (1,012) being voluntary.
A voluntary liquidation occurs when a company or close corporation resolves to wind up its affairs by its own choice.
This is in contrast to compulsory liquidation, which takes place when the affairs of a company or close corporation are wound up by order of the court.
Between August and September, another 117 businesses in the country were liquidated. However, this figure was down substantially year-on-year, with liquidations declining 25%.
The data is also more positive when looking at longer-term trends.
The three-month period between July and September 2024 showed liquidations down 13.7% compared to the same period in 2023, and the year-to-date numbers (January to September) were down 8.3% relative to 2023.
Taking an even longer-term view of the trend, liquidations in South Africa have been declining since mid-2022, and are down significantly from the peak in 2020, after the Covid-19 pandemic had set in and lockdown crushed the economy.
However, it should be noted that a declining trend may also reflect a lower number of businesses in operation, not necessarily a turnaround in operating conditions.
According to Stats SA’s data, the finance, insurance, real estate and other business services sector continues to be the hardest-hit segment, followed by trade, catering and accommodation.
This has been a consistent trend over the years, with these businesses hardest hit by the stagnating economy, power crisis, infrastructure crisis and high-interest-rate environment.
The community, social and personal services industry has also been hard-hit – while manufacturing and construction have not been able to escape the effects, either.
There are have been several notable liquidations taking place in the country this year, with many popular and well-known brands shutting up shop. These include the likes of electronics group, Ellies; the Cross Trainer; Hohm Energy; and Drip Footware.
However, liquidation is not the only signifier of difficult business operations—other businesses are also choosing to close their operations and exit the South African market.
This includes online retailers and big banks.
The liquidation data and reported troubles at these businesses reflect the economic storms many have had to face in the country over the last few years – but the slowdown does point to some hope.
The load shedding crisis has all but completely abated, with national outages suspended for over seven months now, and there has been a distinct turn in market sentiment since the formation of the Government of National Unity.
While the latter is yet to deliver fundamental changes for the economy, the former—a more stable electricity supply—is already yielding economic gains. South Africa’s economy is expected to grow a little faster than previously anticipated, with the IMF pegging 1.1% GDP growth in 2024, rising even higher in 2025.
In terms of interest rates, further relief is also expected here.
A 25 basis point cut in September (not yet reflected in the data) is expected to be followed with another 25bp cut in November, with more to come in 2025.
The rate cutting cycle should stimulate consumer spending, boosting businesses, while also bringing some much needed relief to indebted businesses and owners.
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