The protracted impact of the Covid-19 pandemic could result in more businesses filing for liquidation and insolvency as activity flounders a year after the country went into lockdown. Photo: File
The protracted impact of the Covid-19 pandemic could result in more businesses filing for liquidation and insolvency as activity flounders a year after the country went into lockdown. Photo: File

More liquidations could be on the cards for businesses hit by Covid-19

By Siphelele Dludla Time of article published Mar 25, 2021

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JOHANNESBURG - THE PROTRACTED impact of the Covid-19 pandemic could result in more businesses filing for liquidation and insolvency as activity flounders a year after the country went into lockdown.

Data from Statistics South Africa (StatsSA) on Tuesday showed that the total number of liquidations increased by 8.5 percent in February compared with the same month a year ago.

StatsSA said liquidations of companies increased by 10 cases and liquidations of close corporations increased by four cases. In the three months to the end of February, liquidations increased by 7.1 percent compared with the same period last year.

The largest number of liquidations in the period from December 2020 to February 2021 occurred in the finance sector, with 146 cases, followed by the trade sector, with 86 cases.

StatsSA said the estimated number of insolvencies, which relate to individuals and partnerships, fell by 6.7 percent in the three months to the end of January compared with the three months to the end of January last year. There was a year-on-year decrease of 40.2 percent to 113 cases in January.

However, a comparison with levels in 2019, prior to the spread of the Covid-19 pandemic, showed that insolvencies were up 4.7 percent year-on-year for the three-month rolling period.

Investec's economist, Kamilla Kaplan, said liquidations and insolvencies were at risk of rising this year on the lingering negative effects on turnover and profitability of the slump in 2020. Investec forecasts a 3 percent year-on-year increase in economic growth this year, but much of this will be a rebound from the low base in 2020.

“Recovery in turnover and profitability will take some time, as economic momentum is expected to be relatively weak,” Kaplan said.

“Moreover, with deteriorated fiscal imbalances and debt sustainability concerns, the fiscal room to manoeuvre to provide further direct support measures to businesses is limited.”

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