Over 1,200 businesses have shut their doors in South Africa this year

Stats SA data shows that 1,240 businesses have closed down since the start of the year – but this is a substantial decrease from 2022.

In September, 156 businesses closed down. 138 did so voluntarily, while the other 18 were closed down a compulsory basis.

However, this is an 8.2% decrease from the September 2022. In addition, the number of liquidations dropped by 11% from Q3 2022 to Q3 2023.

Over the first nine months of 2023, there was a 13.0% decrease in liquidations compared to the same period in 2022.

Looking per industry, the financing, insurance, real estate and business services sectors saw the most liquidations in the first nine months of the year, with 425.

This was followed by trade, catering and accommodation, which saw 235 liquidations.

The least affected industry this year has been electricity, gas and water, with only one closure throughout the entire year.

Warning signs

Despite the declining number of liquidations, there were several pieces of economic data that spelt bad news for South Africa.

For instance, the BankservAfrica Economic Transactions Index (BETI) dropped from 133.9 in August to 133.6 in September.

On a quarterly basis, the BETI dropped 2%, signalling the economy’s slowdown from the 0.6% increase in GDP in Q3.

“As a valuable early indicator of economic activity, the BETI data reflects the ongoing ‘muddle-along’ narrative playing out in the South African economy,” said Independent Economist Elize Kruger.

In addition, Headline Inflation increased from 4.8% in August to 5.4% in September.

Although it is within the South African Reserve Bank’s target range, the increase in inflation could lead to a further rate hike in South Africa.

Luigi Marinus, Portfolio Manager at PPS Investments, noted that two Monetary Policy Committee members went for a 25-basis point increase in the last meeting.

“This occurred when the latest inflation prints were 4.7% and 4.8%. The September print of 5.4% makes the likelihood of a rate increase even more likely, even though inflation is within the target band, as the inflation trajectory appears to be increasing,” Marinus said.

Read: Investors shift interest rate expectations for South Africa