- More than 3,000 South African business have been placed in business rescue since 2011. Only a third are still in business.
- Theoretically, government now loses all say over SAA.
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In the early morning hours of Thursday, minister of public enterprises Pravin Gordhan confirmed that SAA will be placed into business rescue immediately.
“This is the optimal mechanism to restore confidence in SAA and to safeguard the good assets of SAA and help to restructure and reposition the entity into one that is stronger, more sustainable and able to grow and attract an equity partner.”
Business rescue is aimed at “rehabilitating” a company that is in severe distress. A business rescue practitioner is appointed who has to run and restructure the business. In theory, government won’t be able to intervene at all: all the power is with the practitioner. The aim is to put the company on a sustainable footing and save jobs, or if the company can’t be saved: ensure better returns for creditors.
Importantly, during a business rescue, SAA wil get protection against legal claims by creditors. It offers a company a bit of a breather while the practitioner sorts out its business.
According to the law firm Werksmans, once the business practitioners are appointed, they have to investigate the company’s affairs, and decide whether there is any reasonable prospect of rescuing the business. (If there isn’t, the company may be liquidated.) Within ten days, the practitioner must share his or her findings with all the creditors and employees. A business rescue plan must be published within twenty-five days. Once the majority of creditors have approved the plan, it is put in place.
Since May 2011, when business rescue was first introduced in South Africa, more than 3,200 local companies have been placed in business rescue, according to a recent report by the Companies and Intellectual Property Commission.
Of these companies, more than a third are still in business rescue. Some 400 companies ended up directly in liquidation, while 570 companies saw their business rescue plans "substantially implemented".
With the rest, their business rescue processes were either terminated or the courts stopped proceedings.
A number of other South African companies have been placed in business rescue in recent years:
The construction company Group Five went into business rescue this year after large losses. The business rescue practitioners couldn’t secure funding to get it back on its feet, and the company is currently selling assets.
Another large construction group, Basil Read, was placed into business rescue last year. It has ended various loss-making projects, and is also selling assets.
Several Gupta companies are currently under business rescue, including Optimum Coal Mine, Koornfontein, Tegeta Exploration and Resources, Islandsite Investments 180, Confident Concepts, Shiva Uranium, and Oakbay Investments. The companies are currently being sold off.
The retailer Stuttafords was placed in business rescue in 2017, but it has since closed its doors.
Evraz Steel & Vanadium
Formerly SA’s second biggest steel manufacture Evraz Steel & Vanadium went into voluntary business rescue in 2015, after steel prices tanked and local demand cooled. Since then, all of its steel-making and vanadium operations have been decommissioned, and its site has been turned into an industrial business park, with 55 tenants. The company is closing down.
In 2016, the hardboard and softboard manufacturer Masonite Africa started business rescue proceedings. It was acquired by another company.
Last year, the building company Esor Construction applied for business rescue after it owed creditors about R130m.
Retailer Ellerine Furnishers was placed into business rescue in 2014 after its owner African Bank ran into trouble. Its various assets were bought by a range of companies, with Lewis buying a number of Ellerines and Beares stores.
Recently the 74-year old Simonsvlei wine company, situated on the R101 near Paarl, applied for business rescue after financial losses due to drought and weak harvests.
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