These local companies have gone into business rescue

In an EWN article last week, South African Revenue Service (SARS) commissioner Edward Kieswetter said that the number of businesses that would undergo business rescue this year would rise due to the devastating impact of the Covid-19 lockdown.

“Forty-two percent of businesses feel that they cannot operate throughout the COVID-19 pandemic, 54% of businesses feel that they will not survive between one and three months, and 46.4% of businesses have temporarily closed their doors.”

The following companies have filed for voluntary business rescue in recent times:

  • Phumelela Gaming and Leisure – on 8 May the financially distressed Phumelela entered voluntary business rescue, as the business came under severe pressure from the suspension of horse races since the implementation of the Covid-19 lockdown.
  • Afarak Mogale and Afarak South Africa – on 8 May, the alloy producer Afarak Group announced that its South African operation would be going into business rescue, citing stagnation in the economic activities, which has permeated the world economy. Afarak voluntarily filed Afarak Mogale and Afarak South Africa for a business rescue process.
  • SAA –  although the national airline was placed in voluntary business rescue in December and government announced that it would avail R4-billion to the airline to deal with its short-term liquidity problems until 31 January 2020, the Covid-19 pandemic further cemented the airline’s demise. Airlines around the world ground to a halt and the South African government denied a further funding request.
  • SA Express – on 6 February 2020, South Africa Express Airways, a state-owned airline, was placed into business rescue. In March, business rescue practitioners at SA Express said that the airline could not be saved, and moved to liquidate it.
  • Edcon – before SA moved into lockdown at the end of March, the Johannesburg-based company was already under significant strain from a series of structural changes in the retail market as well as an economy that has failed to break through the 2% growth mark for the past five years. On 29 April the 90-year-old retailer went into voluntary business rescue.
  • Comair – the airline announced on 5 May that it is unable to operate given the current coronavirus restrictions in place, and its board decided the best option to ensure the long-term survival of the company is to implement a business rescue plan. The business rescue move is designed to make the airline more “efficient, agile and customer-centric”. It reported a half-year loss of R564-million. The 19-year-old Kulula was South Africa’s first low-cost carrier.

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