How to restore confidence in the business rescue industry

The business rescue industry in South Africa is facing a crisis of trust, according to a recent report by Deloitte. The report highlights a growing gap in trust between business rescue practitioners and stakeholders, which could have serious implications for the economy. Jo Mitchell-Marais, Africa Turnaround and Restructuring Leader at Deloitte, shed some light on the key findings of the report in an interview on CNBC Africa. Mitchell-Marais expressed concerns about the deteriorating trust in the business rescue process and emphasized the importance of restoring confidence in the industry. One of the key issues identified in the report is the discrepancy between the number of registered business rescue practitioners and the actual number of qualified professionals actively working in the field. Out of 393 registered practitioners, only around 30 were deemed adequately skilled and qualified by respondents. This lack of qualified practitioners is a significant challenge that needs to be addressed to improve the effectiveness of business rescue operations. The report also highlighted concerns about fees charged by business rescue practitioners, with stakeholders questioning the fairness of fee uplifts. Mitchell-Marais pointed out the need for regulation in the industry to address issues of poor performance and ensure ethical standards are maintained. Additionally, the report indicated a shift towards distressed M&A activity as an alternative exit strategy in business rescue cases. Distressed M&A transactions offer potential benefits for stakeholders, including the opportunity to save businesses and preserve jobs. Successful outcomes of distressed M&A transactions, such as the Edcon and Stoke Medical cases mentioned in the report, demonstrate the potential of this approach to improve business rescue outcomes. Looking ahead, Mitchell-Marais noted the uncertain economic outlook and highlighted potential challenges stemming from inflation and rising interest rates. The post-COVID period may present a bumpy ride for businesses, with concerns about consumer pressures and liquidity issues. Despite the uncertainties, the report suggests that the restructuring landscape is poised for increased activity in the coming months, driven by evolving economic conditions.