Liquidations in freight industry slow down

The freight industry has
financially fared rather
favourably this year, with
liquidations falling by
over 19% in the year up to
October compared to the
same period last year.
In a special study for
FTW of the recent financial
history of the transport,
storage and communications
sector, Luke Doig, senior
economist at Credit
Guarantee Insurance
Corporation (CGIC), said:
“The logistics sector felt the
impact of the financial crisis
early. It saw a sharp 65.8%
jump in corporate failures in
2008, but this plunged back
to only an 8.7% increase in
2009. However, in that year,
the country as a whole bore
the brunt to a greater extent
– with liquidations spiking
at an increase of 25.2% as
the economy contracted by
1.5%.”
But in the years after
2009, the overall economy
recovered and total
liquidations declined –
dropping by 3.4% in 2010
and by 10.8% in 2011.
It was a different
statistical history for the
logistics sector, however.
Failures escalated by 18.2%
in 2010, and only began to
ease back again to 16.7% in
2011.
So this year’s 19.2%
decline in liquidations, from
172 in January-October, 2011
to 139 in the same period
this year, is heartening news
for the freight industry.
But the old adage –
“Statistics can tell a lie”
– seems to have come into
play.
“It must be noted that
the advent of the new
Companies Act on 1 May
2011 and the business rescue
provision (Chapter 6) did
distort the 2011 and 2012
figures,” said Doig.
The figures show that
total liquidations for the
year-to-October have
declined by 18% and those
for logistics firms by some
19.2%.
But it must also be taken
into account that Companies
and Intellectual Property
Commission (CIPC) figures
indicate that 713 cases of
business rescue have been
registered to date, or almost
40 a month, according to
Doig.
“A sample audit by CIPC
reveals a 55% success rate
for companies that have
concluded their business
rescue operations,” he told
FTW, “with 38% being
liquidated and 7% still under
business rescue.
“A rough guess would
indicate that this provision
may have, in fact, saved
some 20 logistics firms this
year that may otherwise
have been liquidated.
“Nonetheless the slowing
economy will present
challenges aplenty, not least
for logistics firms who
will face ultra-competitive
conditions both at home and
abroad.”