COVID-19, poor corporate governance are reasons behind companies failures in SA’

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The impact of COVID-19 and poor corporate governance are among the reasons behind companies failures in South Africa.

Figures released by Statistics SA show that the total number of company liquidations increased by 37.5% in the first five months of this year compared with the first five months of 2020.

According to Stats SA, close to 191 companies closed shop compared to 158 previously.

Financing, insurance and the real estate sector saw the biggest number of company closures.

Associate professor of Law at Wits University, Clement Marumoagae says, “Some companies in the private sector as well, there is a lot of corruption. You find that a company that its assets are being depleted and because of lack of good management you find that these companies fail and are unable to perform the function for which they were established. These reasons might lead to the company being insolvent or subjected to liquidation procedures.”

Meanwhile, on Monday, the FNB BER (Bureau for Economic Research) consumer confidence index reflected very depressed consumer confidence levels.

The consumer confidence index dropped to minus 13 in the second quarter of 2021.

The decline points to a lower willingness to spend among consumers and will likely translate into slower growth.

FNB BER index reflects depressed consumer confidence levels