More than 600 businesses have closed this year, but the trend is not new. Here’s why.
Unemployed beneficiaries online to get their special Sassa Covid-19 grants at Thulamahashe shopping center.
- It is uncertain whether the number of liquidations in South Africa is a direct result of the lockdowns.
- The liquidation figures for the first quarter of the year are historically similar to those released for 2021 this week.
- The financial sector has the highest number of liquidations.
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More than 600 businesses were liquidated in the first quarter of 2021 – a sharp increase from the first quarter of 2020 – after the first year of the Covid-19 pandemic. But while that number may seem high, it’s not clear that the number can be attributed solely to the lockdown, or even the wider pandemic. It is not out of step with the liquidation trends observed over the past five years. In fact, the only evidence of the impact of the lockdown on liquidation figures can be seen in the second half of 2020, when liquidations increased.
The latest liquidation statistics were released by Statistics South Africa (StatsSA) this week.
With the exception of April 2020, when the Corporations and Intellectual Property Commission (CIPC), which deals with liquidations, was closed, liquidations do not appear to have increased or decreased dramatically despite the foreclosure.
In 2019, there were a total of 636 liquidations during the first quarter of the year, from January to April, both voluntary and compulsory. For the same period in 2021, there were 674 liquidations. In 2020, the number fell to 434 – but that includes April, where it was zero.
In the first quarter of 2018, there were 578 liquidations, while the number in 2017 was 575. In other words, the liquidations in the first quarter of the year have steadily increased over time, but not significantly. .
Each year, the finance, insurance, real estate and business services sectors recorded the most liquidations, followed by commerce, restaurants and accommodation. In 2016, StatsSA introduced a new category, “unclassified”. A large number of liquidations fall into this category each year.
Large employers like mining, manufacturing and construction don’t suffer from closures as much as commerce and finance historically. However, 12 manufacturing companies were put into voluntary liquidation in the first quarter of 2021. Seven construction companies were also liquidated.
Away from the broader trends, the impact of the foreclosure on businesses can be seen in some of the data: 2020 data shows a peak in liquidations between August and November 2020. This could indicate a delayed increase in business closures due to the start of hard lock. in March. This is also a trend not seen in previous years.