Investors are faced with a dilemma here. Do they invest in South African equities which appear to be attractively priced for a re-rating on the back of an economic turnaround? If real economic growth were to suddenly accelerate, could this serve as a catalyst for a firmer Rand and the moderation of monetary policy? Or do they continue to commit money offshore and take advantage of both a currency hedge and the diversification benefits of more liquid growth markets? If investors – retail or professional – get this call wrong, their realised investment returns can be materially impacted. How do we try and work out the real state of the South African economy? Among the millions of data points that we as Prescient Investment Management (PIM) analyse is the corporate liquidations data which reflects compulsory and voluntary liquidations for businesses and Close Corporations. Statistics SA has released this on a quarterly basis since 2000.

For example, the most recently released data at the end of April 2024 indicated the following:

“The total number of liquidations increased by 14.3% in April 2024 (128) compared with April 2023 (112). Compulsory liquidations increased by 12 cases and voluntary increased by 4 cases during this period.”


Sources: Prescient, Bloomberg, StatsSA (as at 30 April 2024)


So what is this data currently telling us? 

An increase in liquidations and insolvencies intuitively suggests a weaker economic environment with the potential for adverse downstream effects linked to higher unemployment, lower household incomes and weaker consumption and corporate earnings. Despite the increase in the latest print - compared to a year ago - the number remains below the long-term average with a downward trend.  

This data can be further aggregated into industries and sectors to better understand where growth opportunities lie, or challenges may be felt. This gives us insight into the current state of the economy and expected investment performance.  

We of course cannot utilise this data in isolation, so we look at this data through our consolidated dashboard which rolls up into four core factors: Valuations, Economics, Financial Conditions and Sentiment.

Using this data, we are moderately positive on South African equities but perhaps not as bullish as some of our peers.

There are thousands of data points which influence investment decisions and stock market performance. Very few asset managers adopt a data-driven approach which is constantly and systematically assessing this information. At PIM we have actively invested in our data and analysis teams to provide our clients with the tools to better assess changing market conditions and position portfolios accordingly.

Corporate liquidations cannot be viewed in isolation, but this data is constantly being fed into our models and allows us to make informed decisions.

In the near-term there may be some disconnect between the stock market and the real economy, but in the long run a lot of investment returns are explained by understanding the bigger macro factors than calls on individuals shares.



Prescient Investment Management (Pty) Ltd is an authorised Financial Services Provider (FSP 612).

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