Success factors for business rescue in South Africa

Abstract

ABSTRACT South Africa (SA), as an emerging market, is a diverse country with opportunities for all who reside in it. Since its democratic elections in 1994, the government has focused on promoting Broad-Based Black Economic Empowerment (BBBEE) policies to try and correct the past economic imbalance. This initiative has resulted in the government awarding more contracts to companies owned by individuals from previously disadvantaged backgrounds. In addition, the government has strived where possible to lower the barriers to entry so that BBBEE companies, with all their constraints, can still try and flourish into larger companies. As a result of this initiative, there has been a rapid increase in the number of BBBEE companies taking advantage of these opportunities. However, despite these advantages, BBBEE companies still operate in a business environment, where general market forces can either propel them to grow or cause their demise. The negative effects of the demise of a company are felt not only by its owners but by the general community too. An owner’s lack of management skills, insufficient funding, or general market forces out of the owner’s control normally cause the downward trajectory of a company. As a result, the Companies Act, No. 71 of 2008 RSA (2008) introduced a business rescue provision in Chapter 6 to try and assist distressed companies to recalibrate and emerge from their hard times. This research report looks at identifying the factors that cause a successful business rescue in SA. Primary data is collected by means of semi-structured, face-to-face interviews with experienced and senior business rescue practitioners (BRPs). Only experienced and senior BRPs were interviewed to enhance the reliability of the study. It is clear that most BRPs are aware of and are in agreement with the current factors that cause a successful business rescue. The research suggests that only one new factor be added, but recommends a number of enhancements to the current factors