Categories: Business NewsNews
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2023-11-28 9:24 AM

South Africa’s Economy Suffers: Over 1,300 Businesses Shut Doors

  • Economic Strain: South Africa witnesses over 1,300 business closures in 2023, with 136 shutting down in October alone. Despite a year-on-year decline in liquidations, various economic indicators point to a challenging business environment.
  • Industry Impact: Industries such as unclassified, financing, insurance, real estate, and business services experience the highest closures, affecting sectors like trade, catering, accommodation, and community services, reflecting the breadth of the economic downturn.
  • Challenges Ahead: Factors such as declining new vehicle sales, subdued business confidence, elevated prices of essentials, and restrictive borrowing costs are contributing to a challenging economic landscape, potentially impacting South Africa's GDP growth and signaling a difficult road to recovery.
By Miriam Matoma

In a concerning trend for South Africa’s economic landscape, recent data from Stats SA has revealed the closure of over 1,300 businesses in 2023. The figures for October alone indicate the shutdown of 136 businesses, painting a grim picture of the country’s commercial sector.

Stats SA’s report delineated that out of the 136 closures in October, 120 businesses ceased operations voluntarily, while the remaining 16 were compelled to shut down. This cumulative count of closures since the year’s commencement stands at a staggering 1,376 businesses facing liquidation.

However, a silver lining amidst this somber scenario emerged as the statistics showed a 13.4% reduction in liquidations for October 2023 in comparison to the same period in 2022. Additionally, the decline in liquidations amounted to 10.3% for the three months leading up to October 2023, compared to the corresponding timeframe in 2022. Impressively, the overall decrease in liquidations for the first ten months of 2023 marked a 13.0% decline when measured against the analogous period in 2022.

The breakdown of liquidations across industries portrays a complex narrative. The unclassified sector took the hardest hit, witnessing 44 closures in October. Following closely behind was the financing, insurance, real estate, and business services industry, totaling 38 closures in the same month and accumulating a yearly tally of 463 closures, the highest among all industries. Trailing behind were the trade, catering, accommodation (26 closures), and community, social, and personal services (38 closures) sectors.

Despite the optimistic decline in liquidations year-on-year, multiple economic indicators depicted a challenging landscape in October. The Absa Purchasing Managers’ Index (PMI) declined from an adjusted 46.21 in September to 45.4 in October. The Bureau for Economic Research (BER) expressed concern, citing the unexpected weak performance in the activity index, especially considering the alleviation in load shedding frequency and intensity during the same period. The transport issues on the N3 corridor in July 2023 led to a temporary input shortage, contributing to diminished manufacturing output.

Moreover, the Naamsa’s New Vehicle Sales data recorded a 2% year-on-year decrease, sliding from 46,350 units in October 2022 to 45,445 in October 2023, marking the third consecutive monthly decline in the new vehicle market. Business confidence in South Africa remained subdued, with the RMB/BER Business Confidence Index dipping by two points to 31 in Q4 2023. This index signifies that less than a third of respondents expressed satisfaction with prevailing business conditions.

The pervasive low confidence among businesses foretells a challenging road ahead for South Africa’s real GDP. Expectations for the GDP to decelerate in Q3 imply a lack of momentum likely to persist into Q4.

The economic challenges are compounded by factors such as elevated prices of essential commodities, including food and fuel, coupled with restrictive borrowing costs. These issues are stifling the demand for locally manufactured goods, creating a challenging environment for businesses to thrive.

The closure of businesses not only impacts the economy but also poses employment concerns and affects the overall economic stability of the nation. South Africa faces an arduous task in revitalizing its economic prospects amidst these challenging times.

As the year progresses, stakeholders across various sectors are closely monitoring these economic indicators, hoping for a shift in the trajectory toward more favorable conditions. However, the road to recovery appears to be prolonged and demanding, necessitating concerted efforts and strategic interventions to rejuvenate South Africa’s economic landscape.

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Miriam Matoma

Miriam is a freelance writer, she covers economics and government news for Rateweb. You can contact her on: Email: Twitter: @MatomaMiriam