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The post-COVID-19 world has brought some challenges that are even beyond Dr Fucci and his vaccines. 2023 is a nasty, volatile, and often murky place.

Maddening inflation figures, rising interest rates, and global markets trudging through their worst times on record have been especially hard for those brave (or foolish) enough to run a business. But just as every fire on Table Mountain led to an explosion of fynbos in its wake, SA businesses seem to be growing more resilient as 2023 grinds on.

One of the indicators for this seemingly crazy claim is that company liquidations have been declining in the last year. A total of 128 companies permanently shut their doors in South Africa in June, representing an 11.7% decline in company liquidations compared to the same month in 2022.

According to data released by Statistics SA on Monday, the country has seen 802 liquidations so far this year, 14% less than in the same six-month period last year. Most were voluntary (90.6%), with over half initiated by companies and 45.31% by closed corporations.

But how are companies closing down not negative? Well, according to the people who read the financials the way we read GQ, not all liquidations are because people are going broke.

Independent economist Dawie Roodt says the latest figures indicate that the country’s economy is working as it should – and that despite the significant number of companies reportedly liquidated, what matters most is the economy’s ability to create new companies.

“The fact that we’ve liquidated a number of companies – I am not too concerned about that. That could simply be a sign that the economy is getting rid of some dead wood and restructuring itself, but of course we want new companies to be created at the same time as well.”

Roodt believes that “a healthy economy is an economy that keeps on destroying and keeps on creating new companies and that’s a sign of a vibrant economy.”

South Africa is definitely vibrant.

According to Stats SA’s statistician general Risenga Maluleke, the downward trend of liquidations reported across most industries in the local economy this year could represent a ‘rebalancing of trends’ following a volatile COVID-19 pandemic period which saw significant peaks in business liquidations.

So we’re not out of the woods yet, but the sun is starting to shine on the new trees growing in the shade of fallen oaks. Building wealth is after all not a get-rich-quick endeavour, so we sometimes need to look beyond the immediate horror stories.

We’re lucky to have great wealth management services like Consequence Private Wealth in South Africa. These guys know how to play the long game and not overreact to every news piece that shouts doom and gloom.

Building generational wealth takes time (it’s even in the name).

As they say, today’s little green sprouts become tomorrow’s trees.

[source:moneyweb]