S.Africa’s business rescue debate: Success or failure?

Business rescue has become a critical tool for struggling companies in South Africa, offering a lifeline in times of financial distress. However, the effectiveness of the business rescue process has come under scrutiny, with data showing that only a small percentage of companies successfully implement their rescue plans. A 2024 report by the CIPC revealed a 36% success rate of rescued companies over a 10-year period, raising questions about the system's ability to save businesses or simply delay inevitable liquidation. To delve deeper into this complex issue, CNBC Africa hosted two experts in business rescue, Siviwe Dongwana, MD at Adamantem Chartered Accountants, and Eric Levenstein, Director at Werksmans Attorneys. The discussion centered around the challenges and opportunities presented by the business rescue framework in South Africa. The experts shed light on key factors contributing to the success or failure of business rescues, including timing, intervention, and stakeholder trust. Eric Levenstein highlighted the importance of early intervention, noting that many companies delay entering business rescue due to a reluctance to acknowledge financial distress. He emphasized the need for education and awareness among directors to recognize the benefits and upside of the business rescue process. Siviwe Dongwana echoed this sentiment, stressing the critical role of business rescue practitioners in leading the turnaround of distressed companies. He emphasized that while practitioners are granted authority by the Companies Act, collaboration with directors and executives is essential for successful outcomes. The conversation also touched on specific high-profile business rescue cases, such as Tongaat Hulett, which brought legal scrutiny to the process. Eric Levenstein highlighted the agnostic nature of business rescue mandates across various sectors and emphasized the potential for distressed M&A opportunities. Both experts expressed confidence in the business rescue system and indicated a willingness to invest in companies undergoing the process. Siviwe Dongwana underscored the importance of value preservation and the potential for salvaging businesses through business rescue. Despite the challenges and complexities associated with business rescue, the experts remained optimistic about its role in facilitating corporate restructuring and preserving value in the South African business landscape.