Rise in firms going bankrupt

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The total number of companies liquidated in the first quarter of this year increased by 46,7percent compared with the first quarter of last year, Statistics South Africa said yesterday.

This increased the total number of liquidations recorded for March by 16,8percent, from 297 to 347 compared with the same period last year.

Insolvencies increased by 25,5percent for the two months ended in February.

This means the total number of insolvencies recorded for February increased by 20,8percent year on year - from 260 to 314.

According to Stats SA, the 46,7percent rise in the number of liquidations for the first quarter was due to the 52,5percent increase in voluntary liquidations amounting to 918, and 5,9percent in compulsory liquidations amounting to 90.

Elna Moolman, BJM economist said the numbers were not unexpected considering the pressure that the firms and consumers find themselves in.

"We should expect the situation to continue deteriorating by recording a rise in liquidations. Consumers are still feeling the effects of the interest rate hikes from last year, even though there have been rate cuts."

She said the high level of unemployment and retrenchments also contributed negatively to the situation.

"Firms are also suffering because of the uncertainty with regard to when the global economy will improve and what the impacts of the improvements will be."

Moolman expects things to improve in the last quarter of this year.