Five well-known South African companies technically insolvent

Five of South Africa’s best-known companies, MultiChoice, the SABC, Cell C, the SA Post Office, and Stefanutti Stocks, are technically insolvent.
A company is technically insolvent when its liabilities outweigh its assets. In this situation, the company has negative equity.
Negative equity means a company cannot settle all its liabilities if all its assets are liquidated, pointing to the need for drastic measures to improve the balance sheet.
Although technical insolvency does not mean a company is bankrupt, it creates a situation where bankruptcy becomes more likely if left unchecked.
A good example is Comair, which had operated the low-cost airline Kulula and British Airways in South Africa.
The company faced numerous challenges before the pandemic, including operational inefficiencies, rising costs, and a competitive airline market.
When the pandemic severely disrupted air travel and grounded flights in South Africa, it was too much for the airline.
The company became technically insolvent and entered voluntary business rescue proceedings to address its insolvency.
However, despite resuming operations in 2020, the South African Civil Aviation Authority’s (SACAA’s) decision to ground Kulula.com planes in March 2022 was the final blow.
Despite the efforts of business rescue practitioners to save Comair and, therefore, Kulula, they were unsuccessful, and it filed for liquidation in June 2022.
There are also many success stories, including Pick n Pay. Its results for the year that ended 25 February 2024 showed it was technically insolvent.
The retailer’s total assets were R46.51 billion, while its total liabilities were R46.69 billion. This means total liabilities exceed total assets by R183 million.
To address the issue and strengthen the balance sheet, Pick n Pay unveiled a two-pronged approach to raise money to reduce debt.
Pick n Pay launched a successful Rights Offer, raising R4 billion, and listed Boxer, through which it raised another R8.5 billion.
This money significantly strengthened Pick n Pay’s balance sheet, and the company is now in a healthy and solvent financial position.
MultiChoice

MultiChoice’s financial statements for the year ended 31 March 2024 showed that it had become technically insolvent.
MultiChoice’s total assets declined from R47.6 billion to R43.9 billion, while liabilities increased to around R45 billion.
This leaves MultiChoice with a negative equity of R1.068 billion, which means it is technically insolvent.
In November 2024, Multichoice CEO Calvo Mawela said they were making good progress in addressing the technical insolvency.
He said they expected to return to a positive net equity position by the end of November 2024, which will be reflected in their next annual results.
Cell C

Cell C’s annual financial statements for the 2024 financial year revealed that it remained technically insolvent. Its liabilities of R17.3 billion exceeded its assets of R14.1 billion.
However, the balance sheet improved over the last year. Its negative equity of R3.2 billion was much lower than the R4.0 billion.
That shows that Cell C is progressing in cleaning up its balance sheet and is on a path to becoming solvent.
After the recent recapitalization and with a new management team, there is a renewed focus on turning the struggling operator around.
South African Post Office

The South African Post Office’s balance sheet deteriorated significantly over the last few years despite receiving billions in bailouts.
Assets plunged from R16.07 billion to R4.5 billion in three years. Liabilities increased in the past five years, reaching R12.4 billion last year.
This resulted in the Post Office becoming technically insolvent and unable to repay its liabilities if it were to liquidate all assets.
Its business rescue practitioners (BRPs), Anoosh Rooplal and Juanito Damons, proposed a plan to significantly cut costs by reducing the Post Office’s headcount and branch network.
Despite the cost-cutting measures, the Post Office is on the brink of shutting down. The BRP warned it may have to close its doors without additional funding.
The SABC

The South African Broadcasting Corporation’s (SABC’s) latest annual report revealed that the state-owned enterprise is technically insolvent.
“The impact of actuarial valuations on post-employment benefits since FY2020 has given rise to the negative equity reported in the Statement of Financial Position as of 31 March 2024,” it said.
The SABC’s chief financial officer, Yolande van Biljon, said it remains a “material uncertainty” whether they will be able to meet their obligations in the next twelve months.
It will require the ongoing implementation of severe austerity measures at the state-owned enterprise.
Stefanutti Stocks

Stefanutti Stocks is one of South Africa’s most prominent listed construction companies and focuses on infrastructure development projects.
Its latest annual report showed that it remained technically insolvent, with its liabilities exceeding its assets by R52 million.
The good news is that Stefanutti Stocks’ negative equity has been improving, from R90 million in 2022 to R66 million in 2023 and R52 million in 2024.