The types of SA businesses which are most likely to go insolvent
Business confidence is at an all-time low as a result of political uncertainty, poor economic performance, policy confusion and a general lack of leadership; and many South African businesses are in distress.
This is the sentiment of Alastair Macduff, CEO of the the Turnaround Management Association (TMA), who believes that businesses are feeling the impact of low investor confidence, weakening exchange rates and high fiscal uncertainty.
“The good news however is that South Africa has a relatively open economy – and a resilient business resolve,” said Macduff.
“To survive the current landscape, improved productivity and efficiency as well as diversified skills and flexibility will be paramount. Businesses will also need to find ways to decrease infrastructure and reduce financial risk in their environments,” he said.
Macduff warned that while growth will come from areas such as inbound investments, exports, and international investment, the restructuring and rescue industry will have a critical role to play in helping business transition to new and more effective business models in a turbulent setting.
Businesses in trouble
Citing a recent Deloitte survey, Macduff identified retail, agriculture, construction and resources as sectors which are the most at risk.
According to the CIPC, (Companies and intellectual Property Comission) 2,499 businesses have entered into business rescue proceedings over the past 5 years – with the majority coming from the wholesale and retail industry, ICT, and construction sectors, respectively, said Macduff.
Of the 1,358 business rescue proceedings that have been concluded, 29% reached substantial implementation to the satisfaction of creditors.
“South African businesses need to understand the options that are available to them and that business rescue could be a viable possibility,” said Macduff.
“We need a new perspective of doing business in Africa. Looking at the economic trajectory both locally and internationally for the next 6 – 12 months more businesses are likely to become distressed. Now’s the time to act.”
Read: Everything you need to know about opening a petrol station franchise in South Africa
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