Source: BusinessTech
In July 2024, South Africa witnessed the closure of 133 more businesses, bringing the total number of liquidated companies and close corporations for the year to 892, according to the latest data from Stats SA. The majority of these liquidations were concentrated in the financing, insurance, real estate, and business services sectors, continuing a trend that has persisted throughout the year.
Similarly, the trade, catering, and accommodation sector has also been significantly impacted, ranking as the second hardest-hit industry. Alongside the ‘unclassified’ category, these two sectors were the only ones to experience double-digit liquidations in July and triple-digit liquidations so far this year.
However, despite the ongoing business closures, the data reveals a silver lining when comparing 2024 to 2023. Year-on-year, liquidations in July 2024 were down by 5% compared to July 2023. Additionally, the rolling three-month period from May to July showed a 9.5% decrease in liquidations. The overall liquidations for the first seven months of 2024 also reflected a 5.3% drop compared to the same period in 2023.
This indicates that the overall number of liquidations in 2024 has been lower than in 2023, with five months of data still pending. For a broader perspective, 1,657 businesses were liquidated in 2023, which was 13% fewer than the 1,907 liquidations recorded in 2022. If the current trends continue, 2024 could see the lowest number of liquidations in over five years.
Despite the apparent improvements in the business climate, 2024 has still seen a notable number of high-profile companies and brands entering business rescue. Business rescue is a legal mechanism that allows companies to avoid liquidation, but if the appointed business rescue practitioners cannot devise a viable recovery plan, liquidation remains a likely outcome.
In August 2024, another prominent South African brand, the sports store Cross Trainer, entered business rescue, following in the footsteps of major companies such as AutoZone, West Pack Lifestyle, and Hohm Energy. Earlier in the year, electronics group Ellies faced a similar fate, ultimately entering final liquidation at the end of July.
The struggles of South African businesses are also reflected in the country’s job market. Stats SA’s latest Quarterly Labour Force Survey revealed that South Africa’s unemployment rate increased by 0.6 percentage points, from 32.9% in Q1 2024 to 33.5% in Q2 2024. Even more concerning, the expanded unemployment rate, which includes discouraged job seekers, rose by 0.7 percentage points to 42.6% in Q2 2024.
The survey also reported a decline in employment, with 92,000 fewer employed persons, bringing the total to 16.7 million in Q2 2024. Conversely, the number of unemployed individuals increased by 158,000, reaching 8.4 million compared to Q1 2024.
Reflecting the liquidation data, South Africa’s employment figures show significant job losses in the trade sector, which saw 111,000 jobs lost, and in the finance sector, which lost 9,000 jobs. Other industries experiencing declines in employment during the quarter included agriculture (45,000 jobs lost), private households (18,000 jobs lost), and construction (11,000 jobs lost). However, some sectors did see employment gains, notably manufacturing (49,000 jobs gained), community and social services (36,000 jobs gained), and utilities (9,000 jobs gained).
