First published in the Daily Maverick 168 weekly newspaper

Survival was the preoccupation of businesses in 2020 as they tried to stay afloat through the economic storm brought on by Covid-19. Even before today’s crisis, the operating environment for businesses in SA was difficult: the economy and consumer spending were troubled, and burdensome regulations made it difficult for businesses to remain in business. 

Then came the Covid-19 pandemic and resultant lockdown, which made an already fraught situation worse. In this environment, some businesses didn’t survive the lockdown while others looked to business rescue for a fighting chance. Business rescue is an essential mechanism for financially distressed businesses to rehabilitate their affairs. The objective is to enable a business to continue operating while being restructured, cutting costs and saving some jobs in the process. 

Business Maverick was able to confirm that 223 companies applied for business rescue from April 2020, the beginning of SA’s first phase of the lockdown, to October, according to figures from the Companies & Intellectual Property Commission (CIPC). October is as far as CIPC records go.  There were high-profile companies that fell over but also small ones that usually don’t grab headlines. There are two categories of companies that submitted for business rescue: those that were in trouble pre-Covid-19 and those that became casualties of the pandemic. These include:

Comair 

The aviation group, which operates Kulula and British Airways flights in southern Africa, wasn’t a prime candidate for business rescue. Comair’s assets exceed its liabilities by nearly R2-billion, rendering it solvent. Comair’s decision to file for business rescue in May was tactful; its planes were grounded due to the lockdown and the company couldn’t generate revenue. And because Comair filed for business rescue, outstanding payments to creditors were suspended until the conclusion of its rescue proceedings. 

Comair’s business rescue process has largely been successful; it attracted new private investors who pumped R500-million in the business and R600-million in operational costs were cut. Comair resumed domestic flights on 1 December and expects to add regional flights in February or March 2021. 

SAA

It has been more than a year since SAA, a state-owned airline, was placed under business rescue. Before the lockdown, SAA had perennial problems; it last turned a profit in 2011 and was looted during the State Capture years. Although the business rescue practitioners are required by law to independently make decisions about SAA affairs, the government interfered in the rescue process. The rescue practitioners butted heads with the government on the retrenchment of workers, closure of unprofitable routes and required funding for the airline. The government decided to give SAA a R10.5-billion bailout for the business rescue process, which has still not been paid in full to the rescue practitioners. SAA was meant to resume flights in January 2021, but the airline is still grounded. 

SA Express

Like SAA, the rescue of state-owned airline, SA Express, is troubled. SA Express was placed in business rescue after a creditor, Ziegler SA, brought a successful court application in February. The SA Express business rescue practitioners were on a collision course with the government about how the airline should be rescued. Unlike SAA, SA Express has not received any assistance from the government to finance the rescue process. This prompted the rescue practitioners to place SA Express under provisional liquidation. SA Express is still in the throes of this process. 

Edcon 

Edcon has been in the doldrums for many years, losing market share to retailers including Woolworths, The Foschini Group (TFG), Mr Price and others. Edcon was placed under business rescue in April after it incurred R2-billion in Covid-19-induced sales losses and could no longer pay its debts. The Edcon business rescue practitioners have made headway in restructuring the retail group and making it smaller. The rescue practitioners sold Jet and parts of Edgars, Edcon’s two key assets.  About 371 Jet stores were sold to TFG for R480-million and parts of Edgars were sold to Retailability, a Durban-based retailer. The process to retrench almost 17,300 workers is still on-going. 

Phumelela Gaming and Leisure

The hard lockdown brought SA’s horse racing and sports betting industry to a standstill, severely impacting Phumelela’s profitability. But during Phumelela’s business rescue process, which started in May, the Oppenheimer family came to the company’s rescue. The prominent family threw R100-million to support Phumelela’s business rescue process and committed a further R550-million in future to save the company from collapse. Meanwhile, the horse racing industry has restarted under eased lockdown rules.  DM168

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available for free to Pick n Pay Smart Shoppers at these Pick n Pay stores.