Five big businesses closing down in South Africa
In 2024, several well-known businesses in South Africa succumbed to mounting financial pressures, leading to liquidation, including Ellies, Hohm Energy, Zando owner Jumia Technologies, Drip Footwear, and most recently, The Cross Trainer.
As of August, data from Stats SA revealed that a total of 1,020 companies had shut down so far, marking a significant yet concerning trend.
Despite a slight 5.9% decrease in liquidations compared to 2023, where 1,084 businesses were liquidated, the figure remains alarmingly high, indicating persistent challenges in the business landscape.
Among the notable companies that have closed their doors in 2024 are energy firms Ellies and Hohm Energy, online retail giant Jumia Technologies, which owned Zando, and prominent sports and footwear retailers Drip Footwear and The Cross Trainer.
These liquidations highlight a difficult period for businesses across multiple sectors despite a broader downward trend in overall liquidations.
The year-on-year figures for August 2024 show a 9.9% decrease, with 128 companies liquidated compared to 142 in August 2023.
Experts attribute several factors to the growing pressure on businesses in South Africa.
In addition to the energy crisis, rising inflation and high interest rates have compounded these challenges.
Consumer spending, particularly on non-essential goods, has dropped significantly as households face tightening budgets due to increased living costs.
The South African Reserve Bank has been forced to raise interest rates to curb inflation, further straining business operations, especially in sectors like retail and accommodation.
According to the Reserve Bank, “The cumulative effects of inflation and higher borrowing costs are leading to reduced investment and consumer spending, pushing many companies into financial distress.”
Although the downward trend in overall liquidations may offer some optimism, experts warn that the economic environment remains challenging.
The struggles faced by major companies like Ellies, Zando, and Drip Footwear highlight the ongoing pressure on businesses to navigate these uncertain times.
Additionally, financing, insurance, and real estate services were some of the worst-hit industries in 2024, with 288 liquidations.
These sectors, heavily tied to the country’s economic performance, have been facing challenges such as decreased investment and tighter credit conditions.
Despite the challenges, experts remain hopeful as the overall liquidation trend continues to decline, showing improvements compared to pre-COVID-19 levels.
However, the struggles of major businesses serve as a stark reminder of the hurdles still facing South Africa’s economy.
Some background on the liquidations and the reasons for the decision to follow with the liquidation of the five businesses are outlined below.
Ellies (Liquidated, brand sold)
Ellies, once a prominent Johannesburg Stock Exchange (JSE) company, announced liquidation after its business rescue process failed.
The company, which started in 1979 selling TV aerials and expanded into satellite TV equipment and renewable energy, saw its fortunes decline due to government mishandling of digital migration.
Its share price collapsed by 99%, and it posted significant losses.
After failing to secure funding for a major acquisition, Ellies became insolvent, leading to the decision to cease rescue efforts and pursue liquidation.
SMD Technologies then later announced that it had acquired the Ellies electrical brand in South Africa following the liquidation of the group.
SMD, which was founded in 2005, currently carries various electronics brands, including Volkano and Rocka, and serves as an official distributor of other global brands like Logitech.
It has now added Ellies to its stable.
Zondo (Ending operations)
Jumia Technologies, which operates Zando in South Africa, is exiting the country by year-end due to intense competition and cost-cutting efforts.
Zando will hold clearance sales before its closure. This follows other closures in the South African retail sector, such as Snatcher and Drip Footwear, which also faced financial struggles.
Superbalist is planning major staff retrenchments, and other businesses, such as West Pack and AutoZone, are seeking business rescue due to economic pressures.
Hohm Energy (Liquidated)
Hohm Energy, a major South African solar company, has gone into voluntary liquidation due to cash flow issues and mounting debt.
Despite offering financing options for rooftop solar installations through partnerships with banks like Investec and Nedbank, the company struggled as demand dropped following improvements in the country’s load-shedding situation.
Hohm’s failure reflects a broader trend of business rescues and liquidations in South Africa, including companies like Ellies.
Drip Footwear (Liquidated)
Drip Footwear, a popular South African sneaker brand founded in 2019, has entered liquidation due to financial difficulties.
The company struggled to pay an R20 million advertising bill, which led to a court-ordered liquidation.
This has affected its 14 retail stores and employees, who were laid off after experiencing irregular salary payments.
Despite attempts by political figures to save the company, it could not recover.
Drip joins other businesses in South Africa that are facing liquidation amid ongoing economic challenges.
The Cross Trainer (Liquidation pending)
Frame Leisure Trading, the operator of The Cross Trainer, is facing liquidation after an unsuccessful business rescue attempt.
The sports retailer struggled with cash flow issues caused by the COVID-19 pandemic and the 2021 unrest in South Africa.
Compensation from Sasria was insufficient to cover its losses, leading to unpaid leases and salaries.
This follows a broader trend of retail failures in the country, with competitors like Drip Footwear also entering liquidation recently.
The group’s business rescue practitioners (BRPs) recently noted that there was no reasonable prospect of the company’s rescue, and applied for liquidation.
Following the reports of the group entering liquidation processes, a consortium, Connecting Creativity, noted that it had put forward a potential lifeline for the business.
However, the BRPs noted that all proposals that were put to creditors were met with a negative response. Despite this, they said they remained open to any transactions the creditors found favourable.
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