Demise of 83 000 SA firms in 10 years

By Dineo Faku Time of article published Apr 9, 2019

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JOHANNESBURG - A think tank for enterprise research has blamed regulatory burdens and the global financial crisis of the past decade for the loss of 83000 firms in South Africa in the last 10 years.

Enterprise Observatory of SA said the developments saw the closure of insurance firms and brokers.

The group’s Johannes Wessels said other sectors that recorded declines were retail, agencies, wholesale trade, as well as transport and storage. Sectors that have experienced growth included construction, social and community services, personal and household services, catering and hospitality.

Wessels said financial crisis dramatically reduced profits with a 79.6percent decrease in the taxable turnover from 2008 to 2010.

“Low profitability, depleted cash reserves and a struggle to procure loans triggered both the collapse of firmsas well as substantial consolidation,” Wessels said.

Sars Company Income Tax (CIT) data showed companies in the financial and business services sector that submitted tax returns had shrunk by 37percent to 139664 in 2016 from 222532 companies in 2007.

Wessels said in his latest blog that the biggest fall was recorded in the long-term insurers sector, which contracted by 78percent to 69 in 2016 from 312 in 2007.

“Where the 312 had taxable income of R19.9billion in 2007, 69 in 2016 jointly registered losses of R6.6bn,” Wessels said. “The fact that CIT from this sector nevertheless amounted to R12bn is indicative of some large companies that record substantial profit.”

He said small and medium enterprises were also under stress, with the poor economic climate coupled with high regulatory requirements and the outflow of high-earning professionals because of political and security reasons.

Wessels also said a dramatic increase in the administrative and regulatory burdens, with compliance for small firms constituting time and cost burdens, and undermining their sustainability.

“Top fund managers often complain about the 16-hour training that they should attend, but the remaining team members can continue to handle queries of investors and react to sudden market movements. The owner-manager of a small advisory firm simply loses in similar circumstances two productive days, having no access to high level support personnel,” he said.

Wessels also said more people were in search of prosperity and security outside South Africa.

“Not only have more than 400000 high-income professionals emigrated since 1994, but millions of remaining individuals utilise the easing of forex controls to let their money emigrate,” he said.


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