South Africa kisses 1,550 businesses goodbye

Over 1,550 businesses shut their doors in South Africa in 2024 through voluntary and compulsory liquidations.

While the figure remains shocking for those who have had to weather the past four years of hardship, the number still reflects a more positive and optimistic trend.

According to Stats SA’s data on liquidations, the country had 1,551 business liquidations in 2024, 6.4% lower than in 2023.

The figure is 19% lower than in 2022 and 24% lower than in 2020, the year the COVID-19 pandemic and resultant lockdowns tore through South Africa’s economy.

Business liquidations in 2024 were at their lowest point in seven years, with 1,868 liquidations in 2017. Closures have declined each year, except in 2019.

According to Craig Blumenthal, director of business rescue, dispute resolution and insolvency at Fluxmans’s Attorneys, the seemingly more positive data should be cautiously approached.

He told BusinessTech that the devil is in the details, and trends like the timing of data releases are key to interpreting the country’s business landscape.

Although liquidations were down approximately 6.4% from 2023 in general, looking at the trends, total liquidations of both companies and close corporations combined were:

• Up significantly in January at 109 in January 2024 vs 81 in January 2023,
• Up slightly in April at 128 in April 2024 vs 112 in April 2023,
• Peaking “alarmingly” in October at 196 in October 2024 vs 136 in October 2023 (approximately 44.1%).

Blumenthal said these points tell the story of businesses in 2024.

The first months of 2024 saw massive year-on-year increases in liquidations—upwards of 30%—owing largely to the stagnating economy and severe load shedding in 2023.

Around April 2024, there was another peak, as anxiety around the 2024 national elections hit a fever pitch.

The subsequent boost in market conditions following the formation of the Government of National Unity (GNU) after the elections should have told a better story, but instead, liquidations peaked in October.

Blumenthal said that significant issues in the Master’s Office in the middle of the year delayed related matters, such as liquidations.

“(Liquidations) were either severely delayed or impossible for stretches of time. The courts being overburdened, creating significant delays, is also a factor to consider,” he said.

Blumenthal said that the data contains more information, and the types of liquidations (compulsory vs. voluntary) and the industries impacted also tell different stories.

Improved compulsory liquidations—which were down in 2024 vs 2023—could mean that there were fewer insolvent businesses.

However, there may also have been fewer liquidations in 2024 simply because there were fewer businesses to liquidate.

Voluntary liquidations can occur for various business and investment reasons and may not necessarily reflect anything “bad” like insolvency.

Blumenthal said that lower voluntary liquidations could point to a stagnant or declining business landscape in certain contexts.

However, these types of liquidations would be most prevalent in business services and finance—with catering and accommodation being hardest hit by liquidations in 2024, this may point to trouble in tourism.

South Africa under pressure

Blumenthal said that the landscape for businesses in 2025 is likely to be a wild ride.

South Africa faces real growth issues, and the country’s laws, policies and red tape make driving investment and opening businesses a challenge.

The current geopolitical landscape—with United States President Donald Trump pushing a global trade war and taking aim at South Africa specifically—is adding to the entrenched woes the country faces.

The country is grappling with high unemployment and a strained job market, and growth prospects remain slim to stagnant.

While improved, economic growth is still projected to linger at its low base and far from the 3% needed to make a marked shift in the trajectory.

Current projections for growth in 2025 are pinned at around 1.5%, with President Cyril Ramaphosa aiming for the loftier 3% mark, citing government reforms and public-private partnerships.

However, given the country’s track record with reforms, institutions like the International Monetary Fund (IMF) and World Bank are not as optimistic that this high target will be hit.

“2025 will prove to be interesting and, in my view, unpredictable,” Blumenthal said.

“On the one hand, there is the positive business sentiment in South Africa attributable to the GNU and its pro-business constituents.

“Unfortunately, South Africa now faces great challenges in the form of American President Donald Trump announcing a halt in aid and trade with South Africa,” he said.

The knock-on effect to the economy and American businesses trading in South Africa may be dire, the expert noted.

“On the other hand, this does open up a number of trading opportunities with South Africa’s BRICS partners, particularly China, to step in.”

However, with the year already off to a turbulent start, only time will tell how things will eventually end up.