Advice and Opinion

Business rescue system saving many struggling, but prospective, South African businesses

The growing popularity of the government’s newly instituted business rescue system for the turning around of companies that are in financial difficulties but have prospects of ‘coming right’ is based on very substantial achievements to date: some 65% of those who have agreed to accept the system have been kept in business as a result of action by the Department of Trade and Industry’s accredited business rescue practitioners. 

“This is good news,” says Bill Rawson, Chairman of the Rawson Property Group, “but as yet the system has not proved helpful to the property sector, especially to those developers who are struggling.”

The reason for this, he believes, is that one of the tactics adopted by the practitioners is to raise rescue capital by selling off certain assets.

“For many companies, especially those in property development, struggling to get units in proposed new developments sold, the sale of land acquired in previous boom times (often at very high prices) is not a solution because the prices achieved will inevitably be far too low.”

In some cases, says Rawson, developers are being held liable by those who bought into schemes for not providing all the facilities and amenities originally promised.

“If such developments go into business rescue they will be asked to sell certain plots. This, however, is almost impossible once it is known that the scheme is being rescued in this fashion.”

Ironically, says Rawson, in certain precincts and certain price brackets demand for new development units remains very strong.

“It is a known fact that the four completed Rawson Developers’ developments in the academic belt of the Southern Suburbs of Cape Town have all been sold out and the incomplete development, “The Beaumont”, is already almost sold out. This should not, however, be seen as typical of the developments as a whole in South Africa today.”

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