Over 1,300 businesses liquidated in South Africa in 2024

South Africa has seen over 1,300 liquidations since the start of 2024, with October 2024 being a tough month for businesses.

Stats SA’s latest data showed that the total number of liquidations increased by 44.1% from 136 to 196 in October 2024 compared with October 2023.

Voluntary liquidations jumped by 52 cases, and compulsory liquidations increased by 8 cases over the period.

A voluntary liquidation occurs when a company or closed corporation resolves to wind up its affairs by its own choice, while a compulsory liquidation occurs when the affairs of a company or closed corporation are wound up by order of the court.

The total number of liquidations increased by 1.6% from 434 to 441 in the three months ended October 2024 compared with the three months ended October 2023.

There was, however, a decrease of 3.1% in the number of liquidations recorded in the first 10 months of 2024 to 1,333 from the first 10 months of 2023’s 1,376.

Looking at a longer-term view of the trend, liquidations in South Africa have declined significantly from the peak in 2020, after the Covid-19 pandemic had set in and the lockdown crushed the economy.

One should note that the declining trend may also reflect a lower number of businesses in operation and not necessarily a turnaround in operating conditions.

On an industry-specific level, financing, insurance, real estate and business services saw the most liquidations in October at 71. The unclassified industry still recorded the most for the year at 433, slightly above the 398 financial services businesses that have closed their doors.

On the other end of the scale, electricity, gas and water have seen only two liquidations this year, recording no liquidations in October.

The challenging economic environment in South Africa has not been kind to several companies, with many having to shut up shop.

Electronics manufacturer Ellies, once a prominent Johannesburg Stock Exchange (JSE) company, entered liquidation after its business rescue process failed earlier this year. Despite the rise of solar energy in 2023, the company was unable to benefit and had to shut down.

It was not the only solar casualty, with Hohm Energy entering voluntary liquidation earlier this year amid cash flow issues and mounting debt.

Hohm Energy offered financing options for rooftop solar installations through partnerships with banks such as Investec and Nedbank. However, with load shedding now at bay for over 200 days, the company struggled with the drop in demand.

When it comes to retail, South African sneaker brand Drip Footwear was forced to liquidate by the Gauteng court. It has struggled to pay a R20 million advertising bill, leading to its liquidation.

Another footwear retailer Frame Leisure Trading, the operator of The Cross Trainer, also entered liquidation proceedings after an unsuccessful business rescue attempt.

The group struggling with cash flow issues following the COVID-19 pandemic, July 2021 unrest and the poor economic environment in the country.

However, other companies, such as West Pack Lifestyle and Autozone, have escaped business rescue after being bought during their business rescue proceedings.

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