Another company enters business rescue in South Africa

Yeast City Housing, a Tshwane-based non-profit social housing company, has been placed under business rescue after struggling to service a debt of over R130 million, including interest.

Yeast City Housing rents low-cost apartments and houses in several inner-city buildings across Tswhame.

The company’s creditors include the National Housing Finance Corporation (NHFC) and the Gauteng Partnership Fund.

“We don’t want any units to be lost. Business rescue practitioners are on the ground trying to save the company and the housing units. Everything is at risk at the moment. But I hope the company will be saved,” said Stephan de Beer, chairperson of its board, to GroundUp.

De Beer said its financial difficulties began during the COVID-19 pandemic in 2020, with a rent boycott by tenants at its Thembelihle residential complex. Although the company started civil proceedings, its legal action failed.

“We spent over R2 million in legal fees. We had to do something because people stopped paying the rent,” said De Beer.

“The result was that the City of Tshwane disconnected the electricity supply to the complex. The courts also failed us because we did not get even one eviction order.

“We are trying to line up investors. We want to protect the social housing units.”

He added that if its buildings are sold, they should go to another social housing company, which might absorb its nearly 60 employees.

“I’m hopeful the company will be saved,” said business rescue practitioner Sello Mkhondo from Engaged Business Turnaround.

The business rescue practitioner took over May at the invitation of the board.

Lance Thomas, acting co-CEO of the Tshwane Leadership Foundation, said the foundation established Yeast City Housing in 1999. Several properties were built, and ownership was handed over to Yeast City Housing in a trust.

Thomas said the foundation was particularly worried about losing its buildings and Gilead House – a property that caters for 60 homeless and vulnerable people who have chronic illnesses.

“The first option for us will be to buy back our buildings, but that will be a long process. We are exploring other options. We are hopeful that the company will be saved,” he said.

A growing list

Yeast City Housing is not the only company to enter business rescue; several well-known companies are also at risk of closing down.

Cross Trainer entered business rescue in August this year. The sports retailer faced cash-flow problems from the COVID-19 pandemic and struggled to keep up with its operational costs.

Retailer West Pack also sought business rescue in May as it was financially distressed and unlikely to pay its debts when they became due over the next six months.

That said, West Pack may receive a lifeline, with SPAR reportedly interested in acquiring the group.

AutoZone may also receive a lifeline after entering business rescue in July of this year. Following a private equity transaction funded by debt, its performance did not meet expectations.

Autozone is the largest privately owned automotive parts retailer and wholesaler in South Africa.

JSE-listed investment group Metair is reportedly interested in acquiring AutoZone for R290 million.

That said, not all business rescue proceedings result in positive outcomes

With no prospects of being saved, Solar company Hohm Energy and JSE-listed Ellies Holdings are undergoing liquidation following their business rescue proceedings.

This article features reporting from Warren Mabona from GroundUp. The contents were republished with permission. The original can be read here.

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