Another major company in South Africa enters business rescue

Update: A previous version of this article referred to Spark Energy Services, which is not affiliated with Hohm Energy.

Solar company Hohm Energy has entered business rescue and ceased trading – several months after acquiring millions in finance.

The company entered business rescue due to cash flow challenges and its inability to service existing debts.

Speaking with TechCabal, representatives confirmed that the group is no longer trading and is working with legal counsel to better understand the company’s future.

The Companies and Intellectual Property Commission records show that the company entered into business rescue on 31 July 2024.

The company connects homeowners with installers and financiers to ease rooftop solar panel installation.

Hohm has secured deals to provide homeowners with financing options from several major banks, including Investec, Nedbank, FirstRand, and Capitec. Customers could pay for the panels, inverters, and batteries over several years.

The business rescue comes only months after the group raised roughly R155 million ($8 million) from venture capitalists.

The investments were made by funders E3 Capital and 4DX Ventures LP, creating the largest seed round for a tech startup in South Africa (previously $5.3 million).

The funding came in February just as South Africa’s load shedding started to turn the corner. The country had not seen load shedding for over 100 days, which was last achieved in 2021.

Solar boomed in 2023, with around 5,000 MW of solar installations built in the country.

Joins the long list

Several other companies in South Africa, including West Pack Lifestyle, Autozone, and Petzone, have been placed into business rescue over the last several months.

Autozone is the largest privately owned automotive parts retailer and wholesaler. It entered business rescue after its performance did not meet expectations following a private equity transaction funded by debt in 2014.

Amid growing debt service obligations, it needed to divert cash from operations to meet funding needs.

By 2021, it had fallen into a cycle of negative operating leverage.

That said, the company is confident that it can recover, given its strong national brand and branded products in South Africa.

West Pack also believes it can restructure its business.

The company was financially distressed and was unlikely to pay its debts when they became due over the next six months. It thus decided to enter business rescue in May.

Some of the business rescue initiatives include exploring offers to acquire some of West Pack’s assets or the full business.

It also plans to consider a corporate finance transaction and selling non-core assets to improve its financial position.

Petzone was also placed under business rescue in May, similar to its holding company WestPack, due to its inability to pay debts when they are due amid its financial distress.

Non-performing stores have already been closed, and discussions and processes to sell non-core assets have started.

Not all businesses survive business rescue, with former JSE darling Ellies going into final liquidation in July.

Business rescue practitioners said that the group faced no reasonable chance of being rescued.

Ellies entered business rescue after posting a R106.5 million loss for the six months ending 31 October 2023 and failing to acquire financing from banks to purchase Bundu power.

Stats SA data shows that 759 businesses were closed in the first six months of 2024. Although this is high, it is a decline from the 802 liquidations seen in the first half of 2023.

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