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Johannesburg - South African individuals and businesses are under far greater pressure than recent Statistics SA (SSA) insolvency data reflect, according to Rael Levitt, CEO of leading auction group Auction Alliance.
SSA figures showed that 2009's growth in insolvencies and liquidations was relatively low at 4.7% and 7.4% respectively. In January 2010, the uptick in insolvencies went up to 7.3%, while growth in forced liquidations rose to 9.1% in February.
However, Levitt said these figures did not show the full picture of corporate and individual financial stress. This is because official statistics only take into consideration the volumes and not the value of liquidated firms.
"Since January, the value of companies that have closed their doors increased by 190%," said Levitt.
The number of liquidations was increasing particularly in the property development sector, with 25 companies valued at more than R100m having been liquidated in the past two quarters, said Levitt.
"These statistics aren't reflected by SSA and create a false impression that the corporate sector is coping better with the recession than actually is the case."
Furthermore, the recreation property sector was under "great pressure", with several hotels as well as game reserves being brought under the hammer.
A new trend is luxury houses of up to R10m being sold under pressure at auctions. These are consumers who kept their heads above water in the recession, but now find themselves forced to sell.
In 2009 alone, Auction Alliance auctioned 5 000 individual properties of consumers in difficulties. Had the banks not introduced debt-relief programmes, the figure could have climbed to 12 000, said Levitt.
On the corporate side, banks had succeeded in quietly giving emergency assistance to several companies, including Seardel, Pinnacle Point and Super Group.
Levitt expected the low interest environment and an improvement in the economy to prevent the financial suffering of individuals and companies. Nonetheless, the consequences of the recession would linger for another 18 months, he said.
- Sake24.com
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