Major South African retailer saved from collapse

The new owners of West Pack have big plans for the popular retailer after the group was placed under business rescue last year.

West Pack voluntarily commenced business rescue proceedings in May 2024 because the group was unable to pay its debts when they became due.

The group noted that a key reason for its distress was its rapid growth, which led to cash flow problems.

With too many stores opened too quickly, the group needed to stock the stores with inventory, and the company utilised its cash reserves, making it far more challenging to repay debts.

However, individual buyers saved the group, which should ensure the brand’s continued success and stability and the security of its franchisees.

“This acquisition marks an exciting new chapter in the life of Westpack, as we move forward with a renewed commitment to our customers, Franchisees, and the broader community,” said the group.

The company consists of two main divisions: West Pack Franchise and West Pack Corporate.

The franchise division comprises individually owned stores operated by franchisees, which mainly maintained customer loyalty and sales turnover during the business rescue process.

There are currently 66 franchise-owned stores, and several additional locations are being actively explored and planned due to strong demand for the Westpack offering.

The Corporate stores, which were previously owned by the founders, were sold to an individual investor during the business rescue process and will soon become part of the franchise network.

Due to the issues facing the business rescue, these stores could not stock a full range of products.

The group expects a significant stock investment over the coming months to restore the variety and availability of its typical inventory.

Looking ahead, the group expects to expand its franchise model, focusing on strengthening the brand in regions where it currently has limited or no exposure.

The group also offers opportunities for new franchisees to open stores or acquire existing ones at highly competitive prices.

Some survive, others not so lucky

West Pack may have exited business rescue proceedings, but many other companies in South Africa were not as lucky.

Last year, the Ellies Group was liquidated after its business rescue practitioners saw no reasonable chance of the business being rescued.

Ellies, a former stalwart, grew rapidly and became a favourite among investors, reaching a peak share price in 2013.

However, the company bet big on digital TV migration and invested heavily in satellite dishes and related equipment. With slow digital migration and DStv’s drop in popularity, the company suffered.

Although it tried to enter alternative energy products, poor execution prevented the company from benefiting.

Despite the group’s overall liquidation, SMD Technologies took over the Ellies electrical brand in South Africa, with Ellies Electronics continuing to trade.

Question marks remain if Bushveld Minerals will follow a path similar to Ellies. The company, a primary, upstream vanadium producer that owns mines and processing plants, entered business rescue late last year.

Despite the Commercial Court in Guernsey, where the company is incorporated, approving the group’s application for liquidation in April, its South African operations are still running.

As reported by News24, Bushveld Minerals South African operations, including Bushveld Vametco Holdings, Bushveld Vametco Alloys, and Bushveld Minerals SA, are still under a business rescue strategy.

Other companies could not escape a full-blown liquidation, with popular sports retailers Drip Footwear being liquidated following a court order in September last year.

Nevertheless, like West Pack, AutoZone was saved from business rescue last year after JSE-listed Metair acquired it for just under R300 million.

AutoZone, the largest privately owned distributor of auto parts, spares, and car accessories in South Africa, entered business rescue as it could not pay off its debts when they became due.