Logistics sector fares well in liquidation stakes

Against a background of the general downward trend in the the economy, the transport and logistics sector is currently faring better than all the other sectoral players in terms of liquidations, according to Luke Doig, senior economist at the Credit Guarantee Insurance Corporation (CGIC). That’s based on the latest liquidations statistics, although he expressed doubt about them by stating that they “did not ref lect reality in our opinion”. “The reported 7.1% fall in liquidations in the first half of 2013 – to 1 364 from 1 468 a year earlier – quite simply belies the true operating environment for business. Debt judgments against business have fallen 20.8% in number to 14 874 in the first five months of this year compared to 18 770 recorded in the same period last year. However, the value of these judgments has risen from R400.7 million in the first five months of 2012 to R523.8 million this year – a 30.7% rise.” Supporting this, Doig revealed that this had been echoed by Credit Guarantee’s claims experience – where average values of claims paid have soared 60.8% in the first half of the year. “Credit Guarantee has, to date, paid R30.5 million as a consequence of the liquidation of Cosira (contractor on the Kusile project), while the recent demise of First Tech group will dwarf this many times over.” What many industries have to contend with, according to Doig, are crippling price increases, embattled labour relations and fragile confidence. “And Credit Guarantee sees no respite on this front emerging at present. Unfortunately, this implies that additional liquidations are likely, adding more anguish to the ever-rising trend in unemployment.” Turning to the logistics sector (classified as transport, storage and communication in the national accounts), liquidations here accounted for 5.3% of total failures in 2011 and 5.9% last year when logistics closures fell 14.8% as compared to the headline fall of 23.7%. “But this is then followed by an astounding 31.9% fall in logistics liquidations in the first half of this year compared to the first half of 2012, despite a slowing economy and exponentially rising input costs,” said Doig. “As reported by the Council for Scientific and Industrial Research (CSIR) recently, the 9th State of Logistics Survey revealed that logistics costs as a percentage of gross domestic product (GDP) reached 12.8% in 2012. Also that transport costs accounted for 61% of total logistics costs, the highest in nine years and far above the global average.” However, Doig felt that he had to question whether the veracity of the liquidation trends outlined above accurately ref lected prevailing business conditions in the logistics – and many other – sectors. “Judgments against businesses have risen 30.7% in value in the first five months of 2013, with average values per judgment rising 65%,” he said.