Report lays bare the damage Covid-19 caused to businesses
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Johannesburg - The latest data from Statistics SA (Stats SA) has laid bare the trend of liquidations during the Covid-19 pandemic and lockdown after more than 200 companies were liquidated in March.
Stats SA released the report Statistics of Liquidations and insolvencies which depicts the total number of liquidations recorded in March this year compared with March last year.
The report, released on Monday, revealed that the total number of liquidations recorded increased by 49% in March compared with March 2020. The total number of liquidations that were recorded in March was 216, an increase of 71 from March 2020.
According to the report, voluntary liquidations increased by 61 cases in March from 137 voluntary liquidations in March 2020 to 198 in March 2021. Compulsory liquidations also followed and showed an upward trend after 18 were recorded in March 2021, increasing by 10 cases in March 2020.
“The total number of liquidations increased by 18.9% in the first quarter of 2021 compared with the first quarter of 2020,” the report said.
The total number of liquidations in the first quarter of 2021 is 516 and the total from the same period last year was 434.
Since the beginning of 2021, there were 466 voluntary liquidations and 50 compulsory liquidations recorded by Stats SA.
The statistical report further broke down the total number of liquidations according to industry. Of all sectors, financing, insurance, real estate, business services with 77 liquidations, trade, catering, and accommodation with 47 liquidations, and manufacturing with 10 liquidations are the hardest hit industries.
Meanwhile, the estimated number of insolvencies decreased by 60.2% in February compared with February 2020, according to Stats SA.
“A 26.9% decrease was estimated in the three months ended February 2021 compared with the three months ended February 2020,” the report said.
Business consultants said the hardship was a direct result of the past year under the coronavirus global crisis and affects smaller companies the most.
“It is not that more companies suddenly found themselves in trouble. Many of the businesses that folded in March, in all likelihood mostly smaller and medium-sized businesses, have struggled for many months before having to close, if not longer,” said Lings Naidoo, the co-founder of BeyondCOVID.
The BeyondCOVID Business Survey was launched last year during hard lockdown with the aim to to evaluate the impact of the pandemic on small, medium and micro enterprises (SMMEs) in particular.
“Our research has shown that smaller, micro and medium-sized businesses, in general, are 26 times more likely to close their doors in times of economic upheaval than their corporate counterparts,” Naidoo said.
He added that 26% of the SMMEs that participated in the survey, conducted by specialist management consultancy Redflank, had to close during the lockdown temporarily or permanently. “In addition, 54% of respondents said they were working below their usual capacity, and a third said they needed funding to continue to trade,” BeyondCOVID said.
Naidoo added that there was safety in numbers for businesses during this time.
“Being part of a bigger organisation that has the means individual smaller companies lack, creates more stability. This is exactly what businesses and South Africa need in uncertain times. Covid-19 will be here to stay for a while. We need to work with, not fight, this reality,” he said.