ECONOMY: Economy Battles Headwinds
Recent Gauteng Business News
Sectorally, the primary sector experienced exactly the same number of liquidations in July as a year earlier namely 5; the secondary sector saw failures shrink from 26 to 12; and the tertiary sector accounted for 196 bankruptcies versus the 163 seen in July 2013.
The advent of business rescue in May 2011 has seen some 1,500 cases enter into such proceedings, of which Credit Guarantee has been involved in almost a third.
Minister Davies recently lauded the fact that only 73 of such cases had resulted in liquidation. While we welcome the saving of any business, the issue is: what defines a success? A range of industry sources put success rates at closer to 10-20% at best. And with the skills and number of business rescue practitioners, together with post commence finance remaining challenges, the question is whether creditors have been well served by the process.
We would also caution against reading too much into the June personal insolvency data of an 8.2% fall in the month from a year earlier or the 4.2% fall in the first half of the year. Massmart’s trading update last week was a stark indicator of the dire straits of consumer health and while fuel prices are set to fall in September, a rising interest rate environment bodes ill.
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