New data has revealed a sharp and concerning acceleration in the number of South African businesses being forced to close their doors, with economists warning the official figures may only be part of a broader picture of corporate distress.
Statistics South Africa reported that 145 businesses were liquidated in September alone, bringing the total number of formal business closures for the first nine months of the year to 1,180. This represents a significant 23.9% increase compared to the same period last year. The key drivers cited are a toxic combination of unpaid debt, fragile cash flows, and relentlessly rising operational costs.
The sectors bearing the brunt of this wave include finance, insurance, real estate, trade, and construction, indicating widespread strain across critical pillars of the economy.
In an interview, Aroni Chaudhuri, an economist for credit insurer Coface Africa, provided analysis of the troubling trend. While acknowledging that cumulative insolvencies have been “rather stable” in a year-on-year comparison, Chaudhuri noted this stability is itself unusual and potentially misleading.
“It’s actually quite surprising to see that liquidations are still relatively low,” Chaudhuri stated, contrasting South Africa with global trends where business insolvencies have been rising as pandemic-era support fades. He pointed to a domestic environment of low demand, high interest rates, and significant wage pressure as reasons why one would expect more, not fewer, failures.
This paradox, he argued, suggests “there is a hidden part to the picture.” Chaudhuri identified several factors that may be suppressing the official liquidation numbers, including South Africa’s substantial informal economy, which is not captured in the data, and a particularly restrictive regulatory environment.
“The regulatory environment in South Africa is quite restrictive… for firm creation but also for firm exit,” he explained. This burden can lead to a scenario where “companies actually go out of activity but do not liquidate,” meaning their distress is not reflected in the official statistics.
Abdul Vali, CEO of Coface South Africa, who also spoke on the matter, expanded on this view. He cautioned that low liquidation numbers could be a sign of economic stagnation, not health. “Since you have less companies being created, you also have less companies being liquidated,” Vali said, describing it as a signal of the country’s low-growth regime.
Both experts emphasized that an increase in liquidations could paradoxically signal an economic improvement if it coincided with a vibrant environment for new business creation—a dynamic currently absent.
On potential solutions, Vali pointed to the state’s role, particularly in supporting small businesses that are vital for job creation. He suggested the current reform agenda needs to focus on “easing the regulatory burden,” simplifying public procurement for smaller companies, and even making it easier for entrepreneurs to liquidate failing ventures in order to reinvest and start anew.
“Reforms that go into the way of stimulating the smaller size entities… would go a long way into actually making an economic environment that is more conducive to firm growth,” Vali concluded.
The latest figures have underscored the profound pressures facing South African businesses, with analysts urging a look beyond the headline numbers to understand the full scale of the challenge. The stability in liquidations, they warn, may be a façade masking deeper vulnerabilities within the corporate sector.