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Recovery seen in drop in insolvencies

25 May 2011

Commenting on the most recent Statistics SA release of the liquidations and insolvencies numbers, which showed a drop of 25.5% (April 2010 - April 2011) in liquidations and a 30.6% drop in year-on-year March 2011 insolvency statistics, Adam Harris, a director in the insolvency and restructuring department of corporate law firm Bowman Gilfillan, says this could be an indication of the buoyancy of the nation's economic recovery.

"The Stats SA trend-lines for liquidations and insolvencies have clearly entered long-term downward trends, with the figures for insolvencies, which relate to individuals, especially steep," he says.

Highlighting the statistics for the three months to April 2011, he maintained that the 7.3% decline relative to the three months to April 2010 (from 1096 to 1016) was of a magnitude sufficient to indicate that the economy had entered a recovery phase.

Statistics SA noted that the decline in the number of liquidations for the three months to April 2011 had been driven by lower voluntary liquidation figures (from 1037 to 962) and compulsory liquidations (from 610 to 597).

For the first four months of the year, to end April 2011, the number of liquidations increased by 2.1% compared with the same period last year. According to Statistics South Africa, although there was a decrease of some 2% in company liquidations (from 610 to 597) during this period, an increase of 5.8% was recorded in close corporation liquidations (from 692 to 732).