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1,000 businesses shut in 6 months: 'Lack of new businesses even more worrying'

28 July 2021 8:39 PM
Tags:
The Money Show
Stats SA
Bruce Whitfield
Saul Levin
tips
liquidation
Lockdown
COVID-19
ters
relief package
Covid-19 relief package
relief measures
business closures

The Money Show talks to Saul Levin (Trade & Industrial Policy Strategies) about the latest stats for business closures.

The latest figures from Statistics South Africa show that almost 1,000 businesses shut their doors just in the first half of 2021.

That's on top of a spike in closures in 2020 as well, as a direct result of Covid-19 notes Bruce Whitfield.

© peshkov/123rf.com

Stats SA says there were 997 liquidations of companies and close corporations between January and June this year.

The figure for the same period last year is 763.

In 2020, over 2,000 liquidations were recorded by the end of the year.

Whitfield discusses the dire effects of the pandemic with Saul Levin, Executive Director at research institution Trade & Industrial Policy Strategies (Tips).

We can see that for many businesses that were hanging in there in the early parts of Covid with all the different support measures... their markets are not returning.

Saul Levin, Executive Director - Trade & Industrial Policy Strategies

Does the almost R39 billion temporary relief package announced by Government on Wednesday go any way in relieving some of the burden?

These measures are critical says Levin, because they put money in the pockets of consumers.

"They will hopefully mean that we see less closures in the second half of the year."

RELATED: Mboweni explains why govt won't need to borrow to provide R39bn relief package

People are taking their R350 and other support measures that come into play and using that to stimulate economic growth.

Saul Levin, Executive Director - Trade & Industrial Policy Strategies

I think it's underplayed how important those measures to give people their grants are, not only for those people who can now have meals... but also for the businesses that they're buying these things from.

Saul Levin, Executive Director - Trade & Industrial Policy Strategies

Levin says his biggest concern is that these failed businesses are not being replaced by new ones.

What we have seen is an uptick but it's really the new businesses that are not being started that worries me more than the business closures.

Saul Levin, Executive Director - Trade & Industrial Policy Strategies

When we look at the data going back a few years we can see every year there are between 1,800 and 2,000 businesses closing per year. It is going to be more this year based on what's been happening in the economy but what worries me is that we're not seeing new businesses created.

Saul Levin, Executive Director - Trade & Industrial Policy Strategies

Would you be brave enough to start a business in this time? I know people who are doing it but it's high-risk...

Saul Levin, Executive Director - Trade & Industrial Policy Strategies

What should Government be doing further to stimulate business creation? Whitfield asks.

Levin emphasizes the importance of having a proper credit guarantee in place.

[This is] where the loans that new businesses take out are given support, either from a Government fund or through an insurance scheme... so that they can get access to that finance.

Saul Levin, Executive Director - Trade & Industrial Policy Strategies

Initially when the Covid support came out there was a guarantee scheme but it was too early and mistimed, and not quite targeted at new enterprises. The uptake was poor as a result.

Saul Levin, Executive Director - Trade & Industrial Policy Strategies

Localising some supply chains is another idea Levin says, because they have broken down globally.

Trying to get some of our local businesses to supply some of these products represents a huge opportunity but it has to be done competitively...

Saul Levin, Executive Director - Trade & Industrial Policy Strategies

Listen to the conversation on The Money Show:




28 July 2021 8:39 PM
Tags:
The Money Show
Stats SA
Bruce Whitfield
Saul Levin
tips
liquidation
Lockdown
COVID-19
ters
relief package
Covid-19 relief package
relief measures
business closures

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