These businesses are being hit hard by closures in South Africa

Statistics South Africa has published its February 2021 report on liquidations and insolvencies, with the data showing a slight recovery for businesses after a bleak lockdown period.

These businesses are being hit hard by closures in South Africa

Statistics South Africa has published its February 2021 report on liquidations and insolvencies, with the data showing some recovery for businesses after a bleak lockdown period.

Liquidation refers to the winding-up of the affairs of a company or close corporation when liabilities exceed assets and it can be resolved by voluntary action or by an order of the court.

Overall the total number of liquidations increased by 8.5% in February 2021 compared with February 2020. Liquidations of companies increased by 10 cases and liquidations of close corporations increased by four cases during this period.

The total number of liquidations increased by 7.1% in the three months ended February 2021 compared with the three months ended February 2020.

The below table highlights the business categories which reported the most liquidations in 2021, with financing, insurance, real estate, and other business services hardest hit.

Trade, catering, accommodation, and the manufacturing sectors were also among the industries impacted.

While the number of liquidations paints a bleak picture, improvements have been seen in the insolvency category.

Insolvency refers to an individual or partnership which is unable to pay its debt and is placed under final sequestration.

The estimated number of insolvencies decreased by 6.7% in the three months ended January 2021 compared with the three months ended January 2020. There was a year-on-year decrease of 40.2% in January 2021.

Seasonally adjusted insolvencies decreased by 40% in January 2021 compared with December 2020. This followed month-on-month changes of 10% in December 2020 and 67.4% in November 2020.

Decline 

While this issue has been exacerbated by the pandemic, sales data shows that some industries have been on a downward trend for a number of years.

Economist Mike Schussler published a graph this weekend showing that consumer-heavy sectors such as fuel, retail, and food have all seen major declines.

While businesses are seeing some recovery, statistical data and economists have warned of an irreversible loss of jobs in the country.

February data from Statistics South Africa shows that the 2.1 million jobs recovered were not all people who were previously employed or returning to work.

Stats SA’s researchers found that these workers only made up around half of the figure, with the rest comprising a mix of people previously unemployed before the pandemic, and new entrants into the market.

This means that approximately 1.8 million previously employed people who lost their jobs over lockdown have still not recovered.

Labour absorption rates remain more than 4 percentage points below 2019 levels, said economists at BNP Paribas.