Business environment deterioration

Official liquidation figures from Statistics SA reveal that formal company closures declined 8.5% in March (to 285 from 312 in March 2012), putting the year-to-date total 12.5% above the levels for the 1st Quarter of 2012.

It is, however, important to note that March 2012’s figure rose a surprising 56% from a month earlier, once again highlighting that these figures are being distorted by the business rescue provision of the new Companies Act. There can be no doubt that the business environment has deteriorated of late and any recovery is still some time off. Our claims experience reveals 8.9% higher claims in the 1st Quarter of 2013 than a year earlier, with values some 12% higher. Our threatening loss indicator has points towards payment defaults rising in the months ahead. To the extent that business rescue plans are successful, this will be a welcome development given the high and escalating levels of unemployment.

The 3.9% year-on-year fall in February personal insolvencies and year-to-date decline of 10.2% do, however, mask the difficult circumstances in which many households find themselves. Financial stresses are evident and together with the picture outlined above, indicate an economy that is struggling to break free of the 2-3% growth trajectory.