Swazi Observer

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COMPANY LIQUIDATIONS SPILL OVER EFFECTS COSTLY

By Nomfanelo Maziya | 2025-01-10

The number of companies liquidating is showing signs of increase as 26 have closed to date.
With the government financial year ending in February the number could still increase.

This follows a concerning trend with liquidations steadily increasing from 11 in 2020 to 28 in 2023, according to data from the Master's Office

According to previous media reports, liquidation cases include Swazi Spa Holdings (2021), which operated the popular SwaziSpa Hotel and Casino.

The High Court ordered its liquidation.
The sale of assets partially satisfied employee claims, with former staff receiving E14 million, representing 41 per cent of their initial dues.

Davinscot Clothing Swaziland (Pty) Limited (2024), a textile company, succumbed to a serious downturn, leading to its final liquidation in November.

Zwetho Investments, the operator of Ocean Basket restaurants in Eswatini, filed for liquidation due to debts amounting to E9.2 million.

This closure resulted in job losses for approximately 50 employees.
An economist shed light on the potential causes behind these closures.

While specific reasons vary for each liquidation, the economist highlighted common contributing factors such as economic downturns that can stifle business growth and profitability, leading to financial strain and ultimately, closure.

The economist offered a unique perspective, suggesting a ‘push-and-pull’ effect from the economy.

He explain that events from previous years could take two to three years to manifest, potentially explaining why a significant rise in liquidations is not directly correlated with the COVID-19 pandemic itself.

These closures, the economist argued, might be the delayed consequences of the pandemic's economic disruptions.

Furthermore, the economist suggested a domino effect, where companies that remained operational during the pandemic but relied on suppliers or customers who closed down recently are now facing the repercussions. These ‘spillover effects’ disrupt production lines and contribute to further closures.

Challenges
Despite the current challenges, the economist offers a glimmer of hope.
He predicts a potential recovery next year, but acknowledge the lingering effects of the past few years.

According to the ministry of commerce, industry and trade second quarter performance report 2024/25, the office of the registrar registered a total of 696 companies, comprising 681 private companies, nine public companies, 37 non-profit associations, and six foreign/offshore entities.

Since the beginning of 2024, over 2 000 new businesses were registered. From January to August, a total of 2 176 companies were registered, compared to 1 984 during the same period in 2023. A total of 1 997 private companies were registered, compared to 1 833 in the same period of the previous year.

Furthermore, 23 public companies were registered, a significant increase from 10 in the same period of the previous year. Nine foreign companies were registered, compared to three in the same period of the previous year.

Finally, 147 non-profit associations were registered, reflecting an increase from 141 in the same period of the previous year.

While the number of new registrations is encouraging, the department also de-registered 105 companies during this period, compared to 101 in the same period of the previous year.

Factors contributing to company de-registrations included economic hardships stemming from the COVID-19 pandemic and the 2021 civil unrest significantly impacted businesses, leading to closures and de-registrations.

The challenging business environment in Eswatini, including high operating costs, also hindered business growth and lead to closures.

The department also attributed some de-registrations to the mere fact that some businesses may register without a genuine intention to operate, leading to subsequent de-registrations.

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