Liquidations hit freight industry hard

Just as we forecast in FTW
a month ago, liquidations in
SA rocketed by almost 69% in
January – hitting a total of 270
compared with 160 in the same
month last year.
According to our crystal
ball gazer, Luke Doig, senior
economist at Credit Guarantee
Insurance Corporation (CGIC),
this was broadly in line with his
company’s own experience on
overdue advised accounts and
claims paid.
The freight industry was a
big sufferer in January, Doig
told FTW, with a substantial
(125%) increase in the official
liquidation of transport, storage
and communication enterprises –
with nine such concerns closing
their doors compared with four
the previous month and four in
January 2008.
“Of these nine,” he said, “two
were companies while seven
were close corporations (CCs).”
For the whole of 2008, there
were 126 total failures in logistics
– 36 (28.5%) being companies
and 90 (71.5%) being CCs.
For a comparison on the
January stats for business
demises, 14 construction firms
were liquidated in January,
up from five a year earlier
(a +180% increase).
“This sector may suffer further
in the months ahead as the
deepening slowdown may induce
project cancellations and delays,”
said Doig. “Delayed payments
by the public sector for services
rendered is another serious blight
for the industry.”
And, in the wholesale
and retail trade, catering and accommodation, there were
75% more closures in January
2009 (91 from 52 a year ago).
This, according to Doig, as
consumer spending crimped in
the face of a range of pressures,
perpetuating the trend seen
last year when 68% more
failures occurred.
Meantime, liquidation of
financing, insurance, real estate
and business services concerns
also escalated strongly by 82% to
113 from 62 in January 2008.
Doig says: “As a lagging
indicator, liquidations can be
expected to continue rising as
2009 progresses, despite interest
rate relief.
“Quite simply, the current
payment extensions and ultimate
defaults were to be expected and
very little relief can be expected
in the months ahead.
“The problem for companies
now is the dire necessity to
continue selling, but to ensure
that payment is received for their
goods in order to maintain a
positive cash flow.”
Doig stressed that the logistics
(transport) sector is set for
another moribund year after 68%
more closures in calendar 2008
compared with 2007.
“Our experience leads us to
expect at least a very difficult
start to the year.”