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ECONOMY: Significant Declines In Liquidations

 



Recent Western Cape Business News

South Africa’s liquidations and insolvency numbers declined dramatically in February, figures released yesterday by Statistics South Africa indicate.

Given that trends in insolvencies and liquidations are one of the nation’s more reliable economic barometers, yesterday’s figures are suggestive of a positive near-term outlook for the economy,” observes Adam Harris, a director in the Insolvency and Restructuring group of corporate law firm Bowman Gilfillan.

The number of liquidations for the three months to February 2012 showed a 30,3% decrease compared to the three  months to February 2011. Liquidations for the year to February 2012 registered a huge 49,9% decline.

Statistics SA says that the 49,9% reduction stems largely from a 53,6% drop in the number of voluntary liquidations. Company liquidations were 62,3% down while close corporations declined by 37,5% over this period.

Industries primarily responsible for the largest year-on-year decreases were:

  • Financing, insurance, real estate and business services (78 fewer liquidations);

  • Wholesale and retail trade, catering and accommodation (68 fewer); and

  • Community, social and personal services (25 fewer).

Harris considers the broad decline in the number of liquidations as “particularly significant”.

I have no doubt that the decrease is in part to be ascribed to the new business rescue process, which is gaining recognition as an appropriate mechanism for corporate restructuring. This seems to be supported by the fact that the number of voluntary liquidations has decreased by a substantial 53,6%.”

The number of insolvencies (personal bankruptcies) for the three months to January 2012 fell by 15,5% versus the three months to January 2011. Statistics SA estimates a year-on-year decrease of 6,5%.

Harris interprets these figures, too, as part of “a significantly positive trend”.


 
 
 
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