Liquidations in Construction reach highest level in 2 years

Liquidations in the construction sector during the month of November reached the highest level in the last 2 years, as the sector remains constrained by the lack of private sector confidence and public sector financial vulnerabilities, aggravated by sustained COVID-19 regulations.  According to Stats SA, 14 construction businesses were liquidated in November, of which close to 80 percent were compulsory liquidations – a clear shift from the usual trend where the majority of liquidations take place on a voluntary basis. There was a 50/50 split between companies and CC’s, with all of the companies going into compulsory liquidations and 57 percent of the CC’s. Construction liquidations increased by 27 percent y-y during the month of November and was up by 14 percent y-y during the first eleven months of 2020 compared to the same period in 2019. Compulsory liquidations more than doubled during this period (up by 130 percent y-y, supported mainly the compulsory liquidations of larger businesses), while voluntary liquidations fell by 3 percent.

Overall the economy is showing signs of augmented strain as total liquidations (across all economic sectors) also increased notably in November – totaling 272, the highest level since May 2013 (7 years ago).  However, the majority (70 percent) were on a voluntary basis. The construction sector represented 4.8 percent of total liquidations between January and November 2020, compared to 4.2 percent during the same period in the previous year. For the month of November the construction sector contributed 5.1 percent to national liquidations, which is higher than average as the sector is clearly hard hit by the current economic environment.