Despite a struggling economy, South Africa experiences an 8% year-over-year decline in company liquidations, revealing a complex landscape for businesses navigating financial challenges.
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Liquidations of companies in South Africa are steadily declining, with a drop in the number of entities that have gone bankrupt down 8% year-over-year as of March.
Statistics South Africa’s latest figures showed that less close corporations – or generally smaller entities- were liquidated than larger businesses. Liquidations of close corporations decreased by 21 cases, while liquidations of companies increased by 10 cases during this period.
This is despite a general lack of growth in South Africa’s economy, which only reached 0.6% last year. The latest forecast for gross domestic product is from the International Monetary Fund, which cut its 2025 growth forecast by 0.5 percentage points to 1% towards the end of last month.
The Fund’s amendment of its growth forecast came on the back of US President Donald Trump’s imposition of tariffs across the globe. Trump walked back his April 2 announcement for 90 days, allowing South Africa some breathing room before import duties for products into the US go from 10% to 30%.
Data provided by the statistical agency also indicated that there was generally a downward trend in companies that are closing their doors, with a steady albeit marginal decline between January 2015 and this year with a few spikes along the way.
The total number of liquidations decreased by 3.1% in the first quarter of 2025 compared with the first quarter of 2024.
During March, most of the total companies – at 53 – that were liquidated were in the financing, insurance, real estate, business services sector. Of these, 44 were voluntary, with the remainder being compulsory.
This industry was followed by trade, catering and accommodation when one discounts companies Statistics South Africa has captured as “unclassified”. Statistics South Africa gleans its information from the Companies and Intellectual Property Commission.
In 2008, changes to the Companies Act enabled businesses to enter Business Rescue instead of going bankrupt, as was the case with Tongaat Hullett.
Under this amendment, companies are rehabilitated, management taken over by business rescue practitioners, any monetary claims against companies are suspended, and a plan to turn the entity around is developed, according to an explanatory note on the process provided by Werksmans Attorneys.
Companies can apply for business rescue if they can’t pay their debts and it seems likely that they will close their doors in the next six months.
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