Liquidations in South Africa are down, but businesses in South Africa still face a tough operating environment.
The total number of liquidations dropped by 17.9% year-on-year in March 2024 to 138 – in line with February’s numbers.
Of the 138 businesses, 125 did so on a voluntary basis, while 13 did so on a compulsory basis.
Liquidations of close corporations decreased by 17 cases year-on-year, while liquidations of companies decreased by 13 cases.
The total number of liquidations in the first quarter of 2024 (385) was down 6.3% from the first quarter of 2023.
In terms of industry, financing, insurance, real estate, and business services saw the most liquidations at 46, followed by the unclassified (35) and trade, catering and accommodation (33) industries.
According to the latest Deloitte Africa Restructuring Survey, respondents said the local economy could take up to three years to reach pre-pandemic levels.
That said, the survey showed that ‘pessimism’ amongst respondents had fallen from 81% in 2023 to 75% in 2024.
Nevertheless, Jo Mitchell-Marais, Africa Turnaround & Restructuring Leader for Deloitte Africa, said that the new rating does not necessarily mean that respondents feel optimistic but that they have accepted the current economic climate and are demonstrating resilience.
The “new normal,” in which businesses find themselves, is characterised by elevated load sending, 15-year high interest rates, ineffective ports and political uncertainty linked to the national election in May.
“Companies are trying to operate in spite of these challenges, but we are far from being ‘optimistic’ given the Fitch Ratings forecast of real GDP growth only increasing by 0,9% in 2024 and 1.3% in 2025,” said Mitchell-Marais.
South African organisations are expected to face real challenges in the “new normal”, and further business distress should be expected.
The survey revealed that informal operational restructuring will be the main priority, with business rescue seen as a last resort.
Respondents’ main internal factor triggering distress was weak board governance, with a lack of cash management and weak financial controls coming in second and third, respectively.
“The development of skilled and qualified directors will go a long way in assisting to improve the board’s ability to both identify early warning signs of distress and take appropriate, timely, and corrective action,” said Mitchell-Marais.
“It is crucial that they have their finger on the pulse of the business and broader socio-political and economic activity.”
