Economic comments by Luke Doig - CGIC

In line with poor trading conditions and our expectation of rising corporate failures, March 2008 liquidations grew 23.2% year-on-year (297 from 241), with total liquidations for the first quarter of 2008 being 12.8% above the levels in the corresponding period of 2007. The worst-affected segment of the economy was that of the wholesale and retail trade, catering and accommodation sector where closures soared 64% in March 2008 from a year earlier. After increasing for the first time this decade in 2007, personal insolvencies in February 2008 were bizarrely 23.7% lower year-on-year, again casting some doubt on the integrity of the data although the plethora of public holidays may have been a factor.

However, the number of company failures is echoed in the experience of Credit Guarantee, South Africa’s largest insurer of corporate debtors. We have seen a marked upward tick in the number and value of delinquent debtors being advised to us of late, which unfortunately, will translate into future liquidations, as interest rates bite deeper and the economic downturn starts taking effect.