Statistics South Africa has released its latest report on liquidations and bankruptcies, with data showing a sharp annual increase in liquidations across the country.
216 companies were liquidated in March 2021, up from 178 the month before – a jump of 21%. Voluntary liquidations increased by 61 cases and forced liquidations by 10 cases.
This is 49% more than the total liquidations recorded in March 2020. The report also shows that the total number of liquidations increased by 18.9% in the first quarter of 2021 compared to the first quarter of 2020.
Liquidation refers to the winding-up of the affairs of a corporation or private company when liabilities exceed assets and it can be resolved by voluntary action or by court order.
The table below highlights the categories of companies that reported the most liquidations in the first quarter of 2021.
Of all sectors, finance, insurance, real estate, business services (77 liquidations), trade, catering and accommodation (47) and industry (10) are the hardest hit.
Commenting on the data, Lings Naidoo, co-founder of BeyondCOVID, said it’s not that more and more companies suddenly find themselves in trouble, but that many companies closed in March of this year and that ‘Small and medium-sized businesses are likely to struggle for several months before they have to shut down, if not longer.
Launched last year during the harsh national lockdown, the BeyondCOVID Business Survey, conducted by management consulting firm Redflank, aims to assess the impact of the pandemic on SMEs.
“Our research has shown that small, micro and medium enterprises, in general, are 26 times more likely to close their doors during times of economic upheaval than their corporate counterparts,” Naidoo said.
26% of SMEs that took part in the survey had to close during the lockdown, temporarily or permanently, shows the BeyondCOVID survey.
In addition, 54% of respondents say they work below their usual capacity and a third said they need financing to continue the business.
Read: The average net salary in South Africa right now