South African Businesses in Flux: A Glimpse of Hope amidst Liquidation Surge

South Africa has seen a growing wave of company liquidations in 2023, with 802 businesses shuttering since the year’s inception, including 128 in June alone, as per recent data from Statistics South Africa (Stats SA). Interestingly, of these, 116 decided to cease operations voluntarily, while 12 were compulsorily liquidated.

A Comparative Analysis

Despite the sobering reality of the rising business closures, it’s crucial to note that these figures represent a decline compared to the tumultuous year of 2022. Specifically, Stats SA indicates an 11.7% drop in liquidations from June 2022 to June 2023. Furthermore, Q2 2023 saw a substantial 17% decrease in liquidations compared to the same period in 2022, and the first half of 2023 experienced a 14% reduction compared to 2022’s first half.

Sectorial Impact

Breaking down the data, it appears that certain sectors have borne the brunt of these liquidations. The financing, insurance, real estate, and business services sector reported 41 liquidations in June, the highest of any sector. The unclassified sector followed with 40, while the trade, catering and accommodation sector saw 20 businesses fold. Interestingly, the electricity, gas and water industry managed to evade any liquidations in 2023 so far.

The Tide Might Be Turning

Despite the economic difficulties plaguing South Africa, recent economic reports give a sliver of hope. June witnessed a reduction in load shedding, owing to reduced demand, enhanced maintenance, and improved performance of our coal fleet. This allowed Eskom to maintain uninterrupted power more consistently.

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Other positive signs included the cooling of Consumer Price Inflation from 6.3% in May to 5.4% in June, leading to the South African Reserve Bank maintaining rates after a streak of ten consecutive hikes.

Encouraging Economic Indicators

BankservAfrica’s Economic Transactions Index (BETI) – a comprehensive barometer of all economic transactions in South Africa – advanced from 132.2 in May to 133.6 in June, a record high since July 2022. Though BETI remained negative year-on-year in June, it demonstrated considerable progress compared to prior months. A decline of 7.4% in May contracted to just a 2% drop in June.

BankservAfrica suggests this improvement indicates a positive Q2 2023 growth rate, with the March to June BETI improving by 2.6%. Independent Economist Elize Kruger highlighted, “With many economic challenges remaining, and as the possibility of elevated load shedding levels for winter remains, the improvement in the BETI is not necessarily the start of a sustained synchronised economic recovery, but it indeed signals that the economy has probably fared better in Q2 than initially expected.

Despite the ongoing hardships, the upward trajectory of these indicators may offer businesses a beacon of hope in these challenging times.