SA Liquidations and Insolvencies February 2011

The total number of liquidations recorded for the three months ended February 2011 increased by 13.2% (from 916 to 1 037) compared with the three months ended February 2010, Statistics SA reported yesterday. The increase was due to a rise in the number of compulsory liquidations, which recorded 82 more liquidations, and voluntary liquidations, which recorded 39 more liquidations in the three months ended February 2011.

Statistics SA said that during the period, close corporation liquidations went up by 19.8% from 167 to 200, while company liquidations rose 23.6% from 161 to 199.

In contrast, the total number of insolvencies for the three months ended January 2011 decreased by 31.0% (from 1 086 to 749) compared with the same period in 2010. For January 2011, a year-on-year decrease in the number of insolvencies was estimated at 30.5% (from 177 to 123).

The data indicates an ongoing improvement for consumers, attributable to low interest rates and the improving financial position of indebted households. However, in contrast businesses are not faring that well; especially small and medium size business. Whilst businesses benefitted from the same low interest rates, many small and medium size ones used up valuable resources during the recession, and although the economy has entered an expansion phase, the pace of recovery is not sufficient to save many troubled businesses. There is also the added restraint of limited re-financing options available to these companies.