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A struggle to survive

By unknown | Aug 01, 2008 | COMMENTS [ 0 ]

Kea' Modimoeng

Kea' Modimoeng

The current bleak economic situation is the main contributing factor to high company liquidations.

According to figures from Statistics SA yesterday, the total number of liquidations recorded for June increased by 28,7percent - from 181 to 233 - when compared with June last year.

The biggest liquidations in the period from January to June were in the financing, insurance, real estate and business services with 500 voluntary closures and 42 compulsory liquidations.

The wholesale and retail trade and catering and accommodation sectors came in a close second with 444 voluntary liquidations and 55 compulsory liquidations.

Bill Lacey, an economist from the South African Chamber of Commerce and Industry, said: "The business community is going through a tough time economically, and this is as a result of many issues such as the limited access to credit and the challenge businesses have in meeting demand.

"We are all feeling the whip because most companies will find it difficult to satisfy consumers' needs as a result of escalating prices."

The increase of 10,2percent in the number of liquidations for the six months ended in June was due to increases of 61,3percent in compulsory liquidations and 6,3percent in voluntary liquidations.

"Given the current negative economic climate of high interest rates, escalating fuel and food prices as well as the impact of electricity costs on businesses, this high rate of company liquidations can't be avoided," said Cas Covadia, managing director of the Banking Association.

There are also issues that create problems in particular sectors: "This is unfortunate for the real estate sector because of the decreasing housing market value experienced in recent months," Covadia said.

Stanlib economist Kevin Lings said the future did not look good for many local businesses: "In this economic situation, smaller companies stand a higher risk of getting out of business and I think things will get worse in the next 12 months."

One would estimate that among the 40000 job losses this country might incur in the next year, 10percent will be as a result of companies going out of business, said Lings.


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