Small black businesses bear the brunt of rising liquidations
Red tape makes financial aid difficult to access
Nearly 1 000 businesses went under in South Africa in the first six months of this year as Covid-19 continues to batter small businesses, data from Statistics SA show.
Companies in the hospitality, construction, finance and manufacturing sectors took the biggest blow as the economy struggles to power along.
“The total number of liquidations increased by 46.2% in the second quarter of 2021 compared with the second quarter of 2020. An increase of 30.7% was recorded in the first six months of 2021 compared with the first six months of 2020,” said statistician-general Risenga Maluleke.
A total of 997 businesses closed their doors between January and June, 902 of these entities opted for voluntary liquidation while 95 were compulsory.
Many floundering businesses have been forced to sell off their inventory, equipment and other assets, often in bankruptcy.
The purpose of liquidation is to wind up the company’s affairs by selling its assets either by way of private treaty or public auction to pay the costs of its winding up, as well as its creditors. Any residue thereafter is divided among the company’s former shareholders in line with their rights and interests in the company.
The private sector, including some of South Africa’s longest-standing industry leaders, is holding its breath.
Being in the throes of a third Covid-19 wave and the recent destruction to businesses following the civil unrest does not bode well for the country’s overall economic wellbeing and employment rates.
President Cyril Ramaphosa on Sunday said his administration will reprioritise funding for small, medium and micro enterprises affected by the pandemic through a once-off business survival funding mechanism.
Refilwe Monageng from the National African Federated Chamber of Commerce and Industry said the recent “insurrection” had dealt a further
blow to South Africa’s economic prospects, noting that it was clear the coutry would require a once-in-a-generation relief effort by the public and private sectors to secure the nation’s future.
“It’s also important to recognise that many black businesses have been excluded from applying for government or private sector support through the pandemic because they do not have the resources to supply the basic paperwork required for the applications,” said Monageng.
“The reality is that many black entrepreneurs were already living from hand to mouth and are in no position even to produce the basic tax clearance, or the other compliance paperwork frequently required to access the limited relief available.
“The livelihoods of potentially millions of South Africans are at stake – we cannot fail our people.”
Lings Naidoo, the co-founder of Beyondcovid, said: “It is not that more companies suddenly found themselves in trouble. Many of the businesses that have folded in March this year, in all likelihood mostly smaller and medium-sized businesses, struggled for many months before having to close, if not longer.”
René Botha from Business Partners said: “SMES face significant risks related to not planning effectively for succession. These smaller businesses can lose valuable knowledge and experience when they lose key employees. Added to this, there is the negative emotional impact on staff, customers and suppliers that needs to be mitigated.”