What changed in 2024? Company registrations are down by 67%

Introduction

South Africa's economy is at a critical juncture due to several factors that influence corporate growth, sector performance, and the country's overall economic health.

Data from commercial and governmental sectors is pivotal for navigating this evolving landscape. Understanding these data points is extremely important for investors, entrepreneurs, and politicians to be able to make informed decisions and pinpoint possible opportunities in South Africa’s economy.

By using data from three primary sources, this article zooms in on economic trends and sector dynamics in 2023 and 2024.

Company Partners, a major provider of compliance and registration services to South African enterprises since 2006, provides unique insights into private business trends such as company registrations, VAT, and COIDA registrations.

Meanwhile, public sector data from the Companies and Intellectual Property Commission (CIPC) and Statistics South Africa (Stats SA) provide a clearer picture of South Africa's employment trends, inflation, and other macroeconomic indicators.

We hope that by analysing and comparing these data sets, you will have a better understanding of the current business climate, the challenges that South African companies currently experience, and potential opportunities for growth.

Section 1: Understanding data from key sources

Company partners data

Company Partners, a critical resource for South African SMEs and startups, has helped thousands of entrepreneurs simplify the often-complex landscape of business registration and compliance since they opened doors in 2006. The company has established itself as a trusted resource for entrepreneurs who want to formalise their business operations by offering specific services that streamline regulatory procedures. The company’s service offerings include new company registrations, VAT (value-added tax) registrations, COIDA (Compensation for Occupational Injuries and Diseases Act) registrations, and more than 120 sector-specific compliance services.

The data provided by Company Partners gives a clear perspective into the needs of new and growing businesses in South Africa. For example, their company registration data for 2023 and 2024 reveals trends in business formation, demonstrating where new companies are focusing their efforts and where compliance requirements are greatest.

Similarly, VAT registration data provides information on the number of enterprises that achieve the VAT threshold, which is indicative of revenue growth across industries. Finally, COIDA registration data reveals not only firms' dedication to worker safety and compliance with employment regulations but also the number of businesses that employ workers.

Together, these measures provide a practical view of South Africa's business landscape, particularly capturing the pulse of SMEs as they negotiate regulatory, financial, and operational issues. This information enables Company Partners to lend data-driven help to South African entrepreneurs, tailoring its services to the changing demands of the business community.

CIPC and Statistics South Africa data

The Companies and Intellectual Property Commission (CIPC) is South Africa's leading authority on business registration and regulatory compliance. As a public agency, the CIPC keeps a massive registry of firms, ranging from the smallest businesses to vast multinationals, providing insights into the general expansion of the formal business sector. The CIPC's data reflects public trends in company registrations, giving context for the volume and types of enterprises entering the market, as well as highlighting changes in the entrepreneurial scene over time. These numbers, especially when compared year after year, provide insight into company confidence and economic health.

Statistics South Africa (Stats SA) is in charge of collecting broader economic data which is used to inform policy choices and analysis. Stats SA data sets highlight crucial trends influencing the South African economy, including GDP (Gross Domestic Product) reports, inflation rates, industry performance measures, and labour market information.

The quarterly and annual reports, as well as monthly indicators, zoom in on how various sectors perform, where obstacles arise, and how factors like inflation and employment affect business growth. For example, Stats SA's inflation and consumer price index figures reflect South Africans' purchasing power, which drives corporate revenue and demand across industries.

Stats SA's regular reporting reflects the macroeconomic landscape, allowing businesses, governments, and investors to assess sector-specific performance and larger economic trends. This data is critical for understanding economic cycles, the impact of global trends, and the resilience of key industries.

Purpose of the comparison

The combination of private data from Company Partners with public data from the CIPC and Stats SA provides a formidable lens through which to analyse South Africa's economy. While Stats SA and CIPC provide a high-level, government-oriented view of the economy's performance and regulatory environment, Company Partners provides detailed insights into the day-to-day operations of South African firms, particularly SMEs. By comparing multiple data sources, it’s possible to detect trends that a single data collection may miss.

This comparison research will provide a more complete picture of South Africa's economic activity, ranging from macroeconomic trends to specific challenges and growth signals in the SME sector. It enables us to investigate how factors like as GDP growth, industry-specific performance, and inflation influence the business registration and compliance patterns observed at Company Partners. This article seeks to provide you with an informed awareness of the difficulties and opportunities presented by South Africa's changing business environment.

Section 2: Company registration trends (2023 vs 2024)

Private sector findings

Company Partners' company registration data from 2023 and 2024 offers a unique insight into demand and growth patterns in South Africa's private sector, particularly among SMEs. By using this data, it’s possible to analyse changes in entrepreneurial activity year after year by looking at data like conversion rates and order volumes from various registration services.

Analysis of key data points

A drop in new registrations in 2024 could be attributed to larger economic factors or regulatory changes that affect the ease of starting a business in South Africa. This fall is consistent with CIPC figures, which show a (although minor) decrease in company registrations over the same periods of roughly 0.4%.

The reduction in overall registrations between 2023 and 2024 may indicate economic issues or diminished company confidence, which could be connected to economic situations such as inflation or swings in market demand.

Trends in new business formations

That being said, data from Company Partners suggests a 7% increase in company registration packages from 2023 to 2024, which include extra services such as share certificates.

This demonstrates that entrepreneurs are attempting to stretch their money by acquiring a package of services rather than just one. As a result of the bundled discount, they can save on costs.

Another notable trend is that the quantity of company registration orders has declined. The conversion rate rose from 30% to 33%. This could be due to factors including better customer service, simpler operations, or more successful marketing methods that appeal to South Africans.

Public sector data (CIPC)

The Companies and Intellectual Property Commission (CIPC) distributes public data on business registrations, providing a broader context for the private sector registration patterns seen by Company Partners.

According to recent CIPC numbers, company registrations have declined by 0.4%, to date in 2024 from 404, 095 to 402, 559. The data from the public sector, while largely similar to that of Company Partners (of different sizes), suggests a nationwide pattern of limited company development in response to economic restrictions.

Interestingly, company name reservations increased by almost 13% (467, 823 versus 531, 810). A spike in name reservations frequently signals a growing desire to launch new businesses. This could indicate a comeback in entrepreneurial activity, possibly fuelled by improved economic conditions, new market opportunities, or government initiatives to help small and medium-sized businesses (SMEs). For example, the CIPC reduced the average number of days it takes to create a business or cooperative in 2022/23, which could contribute to increasing entrepreneurial activity.

The comparison of Company Partners' data to CIPC's stated figures demonstrates both alignment and divergence in trends. For example, while both data sets show a slowing down in new business registrations in 2024, the decline is more significant in the Company Partners figures.

This disparity may indicate that SMEs and micro-enterprises, which are often registered through Company Partners, are more vulnerable to economic downturns than larger firms, which may still register with the CIPC.

The CIPC provides company registration services at a greatly reduced cost; nevertheless, the CIPC does not provide specialised consulting and assistance to business owners. Neither can they provide bundled packages.

Perspectives on economic conditions

The fluctuation in company registration volumes and conversion rates reported by both Company Partners and CIPC reflect broader trends in business confidence in South Africa. A fall in registrations is often associated with economic challenges, which may include:

• Changes in government policy: Changes in company rules, tax breaks, or registration fees can all have an impact on the cost and attraction of starting a new business.

• Economic Pressures: Inflation, fluctuations in consumer demand, and other economic limitations all have a direct impact on SMEs' willingness to formalise their activities.

• Access to Capital: Entrepreneurs frequently demand funds to establish a business, and any restrictions on financing options or lending criteria might affect new business formation rates.

For more information, take a look at the article where we shared some insights on the Funding Gap which threatens the GDP earlier this year.

Implications of registration trends for economic expansion

High company registration rates typically reflect optimistic business sentiment and the possibility for economic expansion, whereas low registration rates may imply economic distress. The fall in 2024 registrations, particularly among smaller enterprises, implies that entrepreneurs should exercise prudence.

However, the resilience shown in services such as VAT registrations and COIDA compliance may indicate areas of steady or increasing demand in the economy.

Section 3: VAT and COIDA registrations as indicators of business activity

VAT registration trends

The trends in VAT (value-added tax) registrations are a reliable measure of business turnover and growth. VAT registrations are not processed by the CIPC, but they are included in this article to present a more comprehensive picture of economic activity in South Africa.

Businesses that are above a specific annual revenue threshold in South Africa are required to register for VAT, therefore these numbers can be used to track economic activity and growth.

Learn more about VAT and the top ten misconceptions for South African businesses.

A detailed comparison of VAT registration data (2023 vs 2024)

In 2023, Company Partners handled 2,044 VAT registration orders. In contrast, VAT registration orders fell by 23% in 2024, totalling 1,582. This decrease is likely due to economic restrictions since fewer companies met the revenue threshold required for VAT registration.

A closer look at the data indicates disparities between voluntary and mandatory VAT registrations. Mandatory VAT registrations, driven by increased turnover, indicate income growth in established enterprises.

Voluntary VAT registrations, on the other hand, are generally made by startups or firms that plan to expand quickly.

Both categories are expected to drop by approximately 20% in 2024, indicating that businesses are cautious about future expansion in light of economic uncertainty.

COIDA registration and return of earnings

Analysis of COIDA registration trends

COIDA (Compensation for Occupational Injuries and Diseases Act) registrations are required for companies to remain compliant and protect their employees. It is a requirement for any company who employs any staff, thus we believe a good indicator of economic activity. In 2023, Company Partners handled 8,086 COIDA-related orders.

COIDA-related orders decreased to 7,250 by 2024. Despite an overall decline of about 11%, COIDA compliance remains a top issue for companies devoted to worker safety and regulatory alignment. COIDA registration remains an important part of tender compliance.

COIDA registration declined by 13% in 2024 compared to 2023. However, the conversion rate climbed by 2% in 2024, in spite of fewer South Africans receiving help.

Return of earnings (ROE) submissions, a crucial COIDA compliance metric, decreased by 10% from 4515 to 4085 in 2024. Return of earnings shows a company's financial activity as it requires submission of all the employee remuneration data and making payment to renew their COIDA compliance.

Company Partners observed a 25% rise in arranging instalment arrangements with the Department of Employment and Labour for COIDA. Business owners were more likely to negotiate payment arrangements to mitigate the impact on cash flow than paying their assessment or annual fees in one payment to the department would have. This is an indication of the need to preserve financial flow, even if it means reapplying for a Letter of Good Standing on a monthly basis.

The 25% increase in instalment agreements for COIDA payments indicates that businesses are experiencing cash flow issues. As underlined by the CIPC Annual Report 2024, the trend correlates with reports of negative business sentiment due to factors such as high operational costs and rising loan rates, which can strain a company's financial resources.

Economic and policy implications

VAT and COIDA registration: Indicators of a formalised economy

According to data from Company Partners, the CIPC, and Stats SA, VAT, and COIDA registrations are key markers of a structured economy. This classification is based on various aspects, including their regulatory nature, relevance to company operations, and economic ramifications.

VAT registration:

VAT registration in South Africa is necessary for enterprises that exceed the set revenue threshold (at the time of writing Mandatory VAT registration is required for any business with a turnover of more than R1m). This legislative requirement immediately shifts a major chunk of the economy into the official sector. Businesses that operate informally are unlikely to exceed this criterion and may prefer to stay unregistered to avoid tax liabilities.

Link to official financial systems:

VAT registration demands engagement with the South African Revenue Service (SARS), which helps companies enter the official financial system. This integration entails following specific tax regulations, keeping proper records, and being financially transparent, all of which are normally associated with formal business activity. It also comes at a price, as this normally requires the services of a professional accountant.

Indicator of economic activity:

VAT registration is required for enterprises engaged in specific economic activities, primarily those involving the provision of goods and services. The number of VAT registrations can indicate the degree of economic activity in the formal sector.

COIDA registration:

When it comes to workplace safety and legal compliance, COIDA registration is required for the majority of South African enterprises, to protect employees from work-related injuries or diseases. As stated above it is an indicator due to applying to businesses that have employees. Compliance with COIDA demonstrates a dedication to worker safety and adherence to labour standards, indicating the formalisation of employment practices.

COIDA registration is often required for organisations to participate in government tenders or contracts. As it showcases their compliance. This need encourages companies to function more officially to take advantage of these opportunities. According to the sources, even during economic downturns, companies prioritise COIDA compliance to remain eligible for tenders.

COIDA registration numbers can provide information about the extent of formal employment in the economy. And helps to formalise labour relations by protecting workers and regulating employer obligations.

Section 4: Statistics SA's macroeconomic indicators and their impact on business growth

GDP growth and industrial performance

An overview of GDP growth in 2023 and 2024

According to Stats SA's most recent data, South Africa's GDP growth has varied by industry, with considerable expansion in financial services, commerce, and manufacturing.

GDP growth in the second quarter of 2024 was led by an increase in business services, strong trade activity, and a temporary boost in the power, gas, and water sectors due to reduced load shedding. In contrast, industries such as mining, agriculture, and transportation performed poorly, due to constraints such as supply chain interruptions and strike action.

Sector-specific performance and its impact on business growth

According to Stats SA data, sectors like as financial services and manufacturing are growing, which may have led to an increase in business registrations and VAT compliance.

This is consistent with Company Partners' data, which shows continuous demand for company registration and VAT services in 2023 and 2024. Sectors with rising GDP contributions commonly experience an influx of SMEs and startups, especially in trade and industry, where VAT levels are more frequently fulfilled due to increased turnover.

Despite this, South Africa's economic environment faces several problems, including:

• Slow economic growth,

• Energy crisis,

• High operational costs,

• Increased lending rates,

• Transportation concerns, and

• Policy uncertainties:

Labour market trends

Review of employment and unemployment data

The most recent labour market statistics from Stats SA show a mixed employment environment, with job creation primarily in sectors such as personal services and government, while areas such as mining and agriculture saw job losses.

Overall, employment growth appears to be favourable, however, some industries remain vulnerable to job uncertainty due to economic pressures. Unemployment rates continue to be a major concern for company confidence, particularly among small and medium-sized firms (SMEs) that rely on stable consumer markets.

Impact on SME activity and compliance (COIDA and ROE submissions)

Employment stability has been related to COIDA registrations and Return of Earnings (ROE) submissions, as these compliance requirements are determined by workforce size and industry-specific hazards.

COIDA data from Company Partners for 2023 and 2024 shows that demand for COIDA-related services remains stable even amidst economic turmoil.

Section 5: Significant findings and trends in the South African economy

Business resilience and adaptability

Key findings on business adaptability

According to statistics from Company Partners, South African firms have demonstrated a noteworthy level of resilience and flexibility despite continued economic constraints. According to registration data, while overall new company formations decreased between 2023 and 2024, demand for compliance services such as VAT and COIDA registrations remained rather stable. This shows that many established businesses are prioritising compliance and formalisation as part of their strategy for navigating unpredictable economic times.

Responses to economic challenges

Inflation, load shedding, and unpredictable consumer demand have prompted enterprises to adapt their strategy. For example, the reduction of load shedding in early 2024 brought a much-needed boost to industries like electricity, gas, and water, as seen by both Company Partners' service statistics and Stats SA measurements.

Small and medium-sized enterprises (SMEs), who are frequently more sensitive to economic shocks, appear to be reacting by pursuing cost-effective registration and compliance solutions, as seen by the ongoing demand for simplified VAT registration and bundled services.

However, the decline in new company registrations indicates a cautious stance by potential entrepreneurs, who may be delaying business formation in response to economic turbulence.

Conclusion: Economic outlook and recommendations for business

Economic outlook: 2025 and beyond

South Africa's economic prognosis for 2025, based on both Company Partners' statistics and public sector insights from Stats SA and the CIPC, is a mix of cautious optimism and strategic opportunity. While difficulties such as inflation, load shedding, and global economic uncertainty continue to have an impact on business sentiment, industries such as financial services, green energy, technology, and tourism offer promise for growth.

Anticipated trends

According to current data, demand for business registration and compliance services will most likely shift towards more bundle packages, with a sustained interest in VAT and COIDA registrations as businesses formalise their activities for tender opportunities.

As the government invests in infrastructure and sustainability measures, companies related to these goals – such as construction, green technology, and tourism – are likely to expand.

However, SMEs may need to react proactively to deal with potential regulatory changes and market swings.

Actionable insights for entrepreneurs and business owners

Practical recommendations for managing economic challenges

• Embrace strategic planning and financial forecasting: Given the economy's constant upheavals, SMEs should prioritise rigorous financial planning to maintain resilience. This includes budgeting for possible cost increases, monitoring financial flow, and keeping a reserve for unexpected needs.

• Maintain compliance to strengthen business viability: Consistent compliance with VAT and COIDA rules improves a company's credibility and operational stability. Leveraging compliance services, such as those provided by Company Partners, can help to streamline this process and free up business owners to focus on growth.

• Investigate partnerships and networking opportunities: Collaborating with service providers and industry peers can create a competitive advantage. Company Partners, for example, provides a range of services specialised to the needs of small and medium-sized enterprises, which can assist organisations decrease administrative hassles and increase regulatory compliance.

• Invest in digital transformation: In areas such as technology and finance, adopting digital solutions will be critical to remaining competitive. As customer behaviour changes, establishing a digital presence and providing online services can broaden market reach and improve operational efficiency.

Encouragement of ongoing adaptation and resilience

In today's changing economic environment, adaptation and innovation are critical for corporate survival. The South African market, while challenging, offers numerous opportunities for those prepared to adapt.

Entrepreneurs are urged to constantly evaluate industry developments, use data-driven insights, and adjust their tactics accordingly.

Invitation for professional guidance

Navigating the complexity of South Africa's business landscape can be difficult, particularly for new and small businesses. Engaging in professional compliance and registration services, such as those offered by Company Partners, provides a significant advantage. By simplifying regulatory chores and offering data-driven insights, Company Partners helps companies stay competitive and compliant, allowing them to focus on development and innovation.

Visit Company Partners today for a free consultation with one of our Compliance Experts.

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