Liquidations on the rise a year since lockdown
THE hospitality industry warns that official liquidation figures of the economic impact of Covid-19 and lockdown were just the tip of the iceberg.
The numbers look bleak for the food, catering and accommodation sector as figures show that this sector has been hard hit as demonstrated by the number of businesses that went into liquidation. Statistics SA (Stats SA) recently released its Statistics of Liquidations and Insolvencies report for February 2021. The figures show that the number of liquidations increased by 7.1% in the three months ending February 2021 compared with the same period last year.
A total of 56 companies in the trade, catering and accommodation sector were liquidated in January and February this year. The numbers are worrying and are a clear indication that companies struggled during the lockdown period and started liquidation proceedings before January and February 2021 tallies were confirmed.
In a statement the Federated Hospitality Association of SA (Fedhasa) said the numbers confirm the “economic damage” of the last few months. “Adding further context, Stats SA’s Accommodation and Food & Beverage key findings reports for January 2021 showed a significant decline in total income for tourist accommodation (-72.9%) compared with January 2020. The Food and Beverage sector did not fare much better, with a decline of -36.1% in total income generated in the same period.”
Fedhasa chairperson Rosemary Anderson added: “The figure of 56 companies going into liquidation does not reflect the many more hospitality businesses that have closed down, but did not formally followed the liquidation process, so the pictures are likely much worse than these numbers indicate. The hospitality industry was left in tatters by the first and second waves, and many businesses are now so financially compromised that they are unable to hang on any longer, especially in light of a predicted third wave and resultant lockdown measures. Some hotels, which are wholly reliant on business and international tourism, have been closed for a full year now.”
Guest lecturer at the University of Stellenbosch Business School and director at First River Capital, Jason Hamilton, believed that business shutdowns and liquidations would become even more common this year.
He said the Stats SA figures could just be the tip of the iceberg. “Because its official stats it means that it captures official process, and as we know in South Africa and the SME (smallto-medium enterprise) market, and the informal sector specifically, has a lot of trading taking place adding significant value to our GDP which isn’t necessarily captured through the formal system. The question then has to be asked that if we’ve seen an uptick in liquidations in the formal sector, what is happening in the informal sector where we don’t really have our finger on the pulse.”