Liquidations, insolvencies increase

2008-01-29 00:00

Johannesburg — Liquidations of companies and close corporations and insolvencies of individuals and partnerships show South Africans were still bearing up well under the strain of higher interest rates last year.

Statistics SA said the total number of liquidations recorded for the year 2007 increased by 4,1% compared with 2006. This was the first increase reported since 2003.

Economists warned against reading too much into the increase. For the month of December, the percentage change in the number of liquidations year on year was a decline of 22,6%.

The increase of 4,1% in the total number of liquidations in 2007 was due to an increase of 6,6% in voluntary liquidations. In contrast, the number of compulsory liquidations decreased by 13,1%.

Vunani Securities economist Johan Rossouw said it’s important to note that the number of companies is still small. He cautioned that the base number of companies in 2006 from which the 2007 increase is worked out is very small.

"This could create distortions in interpreting the data as being overly negative. That said, looking ahead I believe we will see more companies and individuals taking strain and it will show up in the numbers. The fact that there was an increase, albeit off a low base, is a harbinger of things to come."

Standard Bank economist Danelee van Dyk said it was beginning to become evident that smaller companies and start-ups were under pressure. She said small operations were particularly vulnerable to the effect of the inflation rate on labour costs, as they were labour intensive. Though the Stats SA figures were still good, they were probably the bottom of the cycle.

On insolvencies of individuals and partnerships, Stats SA said the percentage change for the first 11 months of last year was a decline of 4,4%. The year-on-year percentage change between November 2006 and the same month in 2007 was 18%. Van Dyk said although there was a decline, the figures had been revised upwards for 2006 and 2007, so more individuals were affected than previously thought.

Rossouw said the insolvency numbers should turn around. A sign of things to come was the fact that overdue mortgages had risen year on year by 75,6% in the third quarter of last year.

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