Insolvency, liquidation statistics point to favourable near-term SA economic outlook

Insolvencies and liquidations continued trending downward in June and July, according to figures released yesterday (Monday) by Statistics South Africa.

“If one regards such numbers as economic barometers – as they have tended to be in years past – then the outlook for the remainder of the year is fairly favourable,” says Adam Harris, a Director in the Insolvency and Restructuring Department of corporate law firm Bowman Gilfillan.

He considers the sharp 50,8% decline, to 514, in the number of liquidations for the three months to July 2011, versus the three months to July 2010, as especially instructive.

The 50,8% drop was occasioned by 493 fewer voluntary liquidations and 37 fewer compulsory liquidations.

The total number of insolvencies for the second quarter of 2011 was 36,4% lower, at 682, than the second quarter of 2010.

“Of considerable significance,” Harris observes, “is that the number of liquidations have been falling steadily ever since November 2009, while insolvencies have been on a declining trend since August 2009.

“Hence, to a degree, the liquidation and insolvency statistics anticipated the revival in the economy following the 2008/09 recession, accepting that this is by no means the only barometer of the pressure upon the economy.”