Over 130 South African Businesses Liquidated in October As Economic Hardships Prevail

In the relentlessly challenging economic landscape of South Africa, a significant number of businesses have succumbed to pressure, leading to an increase in liquidations. Statistics SA's latest figures have shed light on the daunting reality: 136 businesses were liquidated in October 2023. This figure, while alarming, marks a 13.4% decrease compared to October 2022, suggesting a nuanced picture of the ongoing financial challenges.

The cumulative data paints a broader landscape, showing a 10.3% decline in liquidations for the three months ending October 2023 compared to the same period the previous year. Furthermore, considering the period from January to October 2023, the total number of liquidations is down by 13% when juxtaposed with data from the first ten months of 2022. Despite these year-on-year improvements, the absolute number of liquidations stands at a stark 1,376 since the year’s start, as per BusinessTech's report.

Delving into the implications of these statistics, Satori News Agency turned to Dr. Eric Levenstein, a distinguished expert and Head of Insolvency and Business Rescue at Werksmans Attorneys. Dr. Levenstein emphasizes that despite the year-on-year downturns, the figures remain concerning, shedding light on the increasing difficulty of keeping businesses operational within the South African context. The escalating costs, surging inflation, and operational challenges such as the high diesel price and the reliance on generators due to unreliable electricity supply, have all dealt a heavy blow, particularly affecting small to medium-sized enterprises as well as larger corporations.

One significant problem Dr. Levenstein identifies is the neglect of early warning signals of business distress. He suggests that by the time management and company directors recognize the severity of the situation, it is often too late, leaving liquidation as the sole course of action.

However, there are alternatives, and these include restructuring and formal business rescue interventions. Dr. Levenstein highlights that many banks support restructuring initiatives, which involves bringing on board experts to address financial difficulties proactively. If a company acts swiftly upon recognizing signs of distress, chances of recovery increase, potentially steering clear of the road to liquidation.

Dr. Levenstein points to business rescue, a mechanism introduced into South African law 11 years ago, as a viable solution for companies in dire straits. High-profile successes such as Edcon, Zimbali, and even South African Airways (SAA) showcase the potential for revival through timely business rescue endeavors.

The conversation with Dr. Levenstein is an urgent call to South African businesses to heed the early distress signals, engage with restructuring options, and seek business rescue if necessary, to avoid the fate of liquidation.

To listen to the detailed conversation with Dr. Eric Levenstein, readers can scroll up for an insightful analysis of the current business environment in South Africa and explore the potential avenues for companies to navigate these trying times.