Over 1 500 businesses close shop this year

The closure of over 1 500 South African businesses this year can be attributed to the failure of the government in retaining the economy, according to an analyst.

Statistics South Africa recently revealed that the number of liquidations decreased by 13% in the first 11 months of 2023, compared to the first 11 months of 2022, but 144 businesses closed their doors in November this year, pushing the total to over 1 500.

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Stats SA showed 131 businesses had closed down voluntarily, while 13 did so on a compulsory basis, which meant 1 520 businesses had been liquidated since the start of the year.

The finance, insurance, real estate and business services industries had the most liquidations, with 44 last month. Political analyst Goodenough Mashego said every business was an investment and created job opportunities and government as an executive was failing many businesses.

“It is a failure of government, because some businesses shut down due to load shedding. Tthey could not operate optimally. The failure to provide sustainable electricity on the part of government is a political failure.”

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Mashego said when people became unemployed, it meant the tax brackets became smaller. “Which means government cannot collect the kind of revenue that is needed to run government, that is needed to alleviate poverty and as a result of that, government has had to borrow money to fill some of the gaps, and when government borrows money, it’s a debt,” he said.

“It will have to be paid by those that are going to come after us, because whatever loan you get, be it from the International Monetary Fund or WesBank, it has to be paid with huge interest.

“So, the closure of even one business is the failure of government.” Mashego added it was important that government worked on decentralising the business support function from national level to municipalities.

“Even what we call the township economy must be boosted through protectionist measures, because you are not going to have a township economy anywhere in South Africa if you allow the big supermarkets to sell on their shelves whatever it is that people are selling in the townships,” he said.

“The moment we allow the big chain stores that are opening malls all over the townships to sell things in the communities, we are going to decimate what remains of those small businesses that are in the townships.

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“Government now must decentralise the job creation function and the business support function to municipalities so that they can pass by-laws that forbid those supermarkets and malls from selling things that are there in the community.

“It is a way of making sure that township small businesses create employment, even if it’s not on a large scale.

“The small employment that the big businesses are unable to sustain because they operate on huge bottomline and on huge investment” is important, he said.

The number of liquidations decreased by 13.3% in November this year, compared with November last year. The number of liquidations decreased by 11.6% in the three months ended November, compared with the same period last year.

SA is not alone

• The high number of business closures in SA is worrying, but not necessarily unique to this country, says independent economist Bonke Dumisa.
• Globally, more than 20% of new businesses barely survive their first year.
• “The reason we had less business closures in 2023, compared to 2022, is simply because there were more business closures during the Covid pandemic because of obvious reasons – 2022 marked the end of restrictive measures,” he said.
• “This year is totally Covid pandemic free, hence more business operations, despite the Eskom load shedding problems.”