Company liquidations on the decline

A total of 128 companies permanently shut their doors in South Africa in June, representing an 11.7% decline in company liquidations compared to the same month in 2022.

According to data released by Statistics SA on Monday, the country has seen 802 liquidations so far this year, 14% less than in the same six-month period last year.

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Most were voluntary (90.6%), with over half initiated by companies and 45.31% by close corporations.

The financing, insurance, real estate and business services industry led with the most liquidations in June, accounting for 32% of business closures, followed by businesses in unclassified industries (31.25%) and the trade, catering and accommodation industry (16.62%).

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The electricity, gas and water; agriculture, hunting, forestry and fishing; mining and quarrying; and transport, storage and communication industries reported negligible liquidations, with these four sectors accounting for five liquidations.

Dead wood, new shoots

Independent economist Dawie Roodt says the latest figures indicate that the country’s economy is working as it should – and that despite the significant number of companies reportedly liquidated, what matters most is the economy’s ability to create new companies.

“A healthy economy is an economy that keeps on destroying and keeps on creating new companies and that’s a sign of a vibrant economy,” Roodt explains.

“The fact that we’ve liquidated a number of companies – I am not too concerned about that. That could simply be a sign that the economy is getting rid of some dead wood and restructuring itself, but of course we want new companies to be created at the same time as well.”

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