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Latest stats show that insolvencies are on the rise, but this shouldn't be happening

by , 27 March 2014
South Africans are feeling the effects of the tough economic times. New stats by FNB show that insolvencies have risen 14% from this time last year. Continue reading to find out why one expert believes this shouldn't be the case

Stats show that insolvencies have increased

Fin 24 reports that insolvencies data for January 2014 shows a return to a year-on-year increase in the number of insolvencies to the tune of 14%.

In the report, John Loos, household and property sector strategist at FNB say since late in 2009, the level of insolvencies has had two broad periods of year-on-year decline.

The first one took place from late in 2009 to early in 2011. Then, after a brief stalling in 2011, the second declining trend started in May 2012 and continued unabated until December 2013, says Loos.

According to Loos, 'the return to an increase in insolvencies has long been anticipated, after previously having observed a diminishing rate of decline through most of 2012, as well as having witnessed slowing disposable income growth in line with a multi-year slowdown in economic growth.

But one expert believes insolvencies should no longer happen in this day in age…


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Eric Levenstein of Werksmans Attorneys says insolvencies shouldn't be happening considering that there's now business rescue

In an HR Pulse article, Levenstein responds to the stats by FNB by saying that while personal insolvency may still be rising, business insolvency shouldn't follow suit. After all, business rescue legislation has been in place for almost three years now – giving business owners every opportunity to save or rescue their companies if these are financially distressed.

Levenstein adds that business rescue legislation allows the majority of employees to keep their jobs according to the same terms and conditions as were in place before business rescue proceedings began.

'It provides a company with a breathing space, an opportunity to consider the reasonable prospect of the company continuing to trade into the future and with the least possible disruption to the company's workforce.'

Since the stats suggest insolvencies may continue to rise, it may be a good idea to consider the idea of business rescue if you think your company is financially distressed. Check out this article if you want to know more about business rescue.

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