Steep declines in insolvencies, liquidations bode well for SA economic outlook

Yesterday’s release of statistics that are widely viewed as key economic barometers indicates that South Africa enters 2012 with relatively prosperous portents.

Assessing the liquidation and insolvency numbers published by Statistics South Africa, Adam Harris, a director in the Insolvency and Restructuring group of corporate law firm Bowman Gilfillan, highlighted the following:

• The number of liquidations for December 2011 reflected a decrease of 0,6% (from 325 to 323) on December 2010;
• The number of liquidations for 2011 declined year-on-year by 10,8% (from 3 992 to 3 559);
• Of the total, year-on-year voluntary liquidations were 14,3% down, company liquidations dropped by 17,2% and close corporation liquidations fell by 4,9%;
• The number of insolvencies for the first 11 months of 2011 decreased by a substantial 30,2% (from 3 703 to 2 584) versus the same period in 2010; and
• A year-on-year decline of 17,3% in insolvencies was estimated for November 2011.

“Self evidently,” said Harris, “trends are far more instructive than single-month statistics. As things stand at present, the long-term trends for both liquidations and insolvencies are fairly flat.

“Be that as it may, one cannot ignore the huge year-on-year declines, the extent of which suggests that other economic indicators are likely to turn bullish. Some, among them vehicle sales, already have.”