Business failures still on the rise,statistics show.

October 99 News & Events

"Johannesburg - The green shoots of an economic recovery might be breaking the surface, but the number of business failures was still at record levels," Luke Doig, a Senior Economist at Credit Guarantee, the leading South African credit insurer, said yesterday.

But Doig said that on the positive side, there were some indications the economy was bottoming out. "It is even showing tentative signs of a slight improvement, although we are bouncing along the bottom."

Doig has been studying data on civil debt judgments, an early warning indicator for insolvencies in general, which suggested that the rate of business failures was still climbing.

Judgments against businesses totalled R565 million in 1996, but rose to R912 million last year.

"For the first 5 months of this year, total judgments shot up 42% in value terms," Doig warned.

His projection for this year, based on data for the first 5 months, is that civil debt judgments against businesses will soar to R1,428 billion.

"We have the worst figures ever for voluntary and forced liquidations of businesses," Doig said.

"More and more small businesses are going under at the moment and many of the indicators about judgments, liquidations and insolvencies don't indicate that these are bottoming out. There may be a lag of 12 months or more before this happens.

"I feel we are in the bottom of a recession and we could still have ongoing levels until the early part of 2000."

Doig said some businesses had expected an economic miracle with the sharp cuts in interest rates and took decisions to prepare for a boom in sales.

"Lower interest rates have not brought an economic miracle."

Figures for civil debt judgments against individuals have also continued to climb. These have risen from R4,644 billion in 1997 to R5,475 billion last year and an estimated R6,297 billion for this year.

Doig also believed there were many businessmen who were leaving South Africa because they have had enough. "They tried to give it a go but because of new labour regulations and the state of the economy they are now giving up," he said.





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