Liquidations start easing ahead of buoyant business outlook

It was a happier Christmas for SA businesses as liquidations of companies and CCs eased compared to the whopping numbers of collapses recorded at the beginning of last year, according to Luke Doig, senior economist at the Credit Guarantee Insurance Corporation (CGIC). In figures released to FTW, Doig indicated that liquidations of companies and CCs in December rose 10.1% year-on-year to 382 – taking the annual total up to 4 133. “This may be a concerning 25.2% up on 2008’s level,” he said. “But, while this outcome has meant hardship for many, it is a far cry from the 70% increases seen in the first quarter of 2009.” Meantime, according to the latest figures available, insolvencies of individuals and partnerships rose 12.6% year-on-year in November. “This,” Doig added, “means the total for the first eleven months is 5.4% below that of the same period in 2008, and there is some hope that this decline will continue when the December figure is released.” All this is taking place in an environment where credit extension figures are at all time lows. “And,” said Doig, “even though banks have relaxed some of their lending criteria, much more needs to be done to facilitate easier lending. The leading indicator has been rising for eight of the last nine months, with the November 2009 level being almost 12% above that of a year earlier.” Even with moribund retail sales data and the fact that payments due for purchases made late last year still have to be met, he reckoned it implied that matters could begin improving as we move into the second quarter of 2010. “While I have no doubt that there will likely still be a number of companies going to the wall, the faint beginnings of improved sentiment amongst SA businesses and citizenry in general may point to improved trading conditions in the months ahead.” Doig anticipated that this might very well be buoyed by the euphoria leading up to the Soccer World Cup. “During the event schools are going to be closing,” he said, “which will most likely translate into thousands of additional feet in retail outlets. “Secondly, the World Cup is not going to be over for very long before re-stocking begins in the third quarter in anticipation of 2010 Christmas shopping.”