Businesses are a critical engine of SA’s economic growth, driving innovation, employment and prosperity. Yet, many companies face financial difficulties that lead them to liquidation — the unfortunate end for far too many enterprises.

According to Statistics South Africa, 1 020 liquidations were recorded in the first eight months of 2024, slightly down from 1 084 during the same period in 2023 — a 5.9% year-on-year decline. While this small drop suggests some improvement, the number of businesses shutting down remains high, with a significant share likely being small, micro, and medium-sized enterprises (SMMEs).

In comparison, France, a country with a population similar to SA’s, is projected to record 60 000 liquidations this year. This raises a critical question: why do so many busi- nesses collapse before seeking help?

Reluctance to Seek Help in Time

According to experts, a primary reason is that many business owners and directors try to manage financial crises on their own, despite lacking the necessary expertise. Christine Erasmus, Senior Consultant at CureDebt, points out that these efforts often backfire.

“In their desperation to salvage the business, they may make decisions that place both the company and their personal assets at risk. Signing personal sureties for company debt, for example, can jeopardise personal finances if the business fails.”

Erasmus is emphatic that business debt requires expert handling to identify and implement effective solutions. However, many owners hesitate to act quickly, driven by fear of losing control or concerns about the perceived costs of business rescue.

The Business Rescue Solution

Business rescue is a formal legal process in terms of which a business rescue practitioner takes control to restructure and stabilise the company. The goal is to ensure the business can survive and avoid liquidation.

Dr Zolani Buba, a business rescue expert, says that many business owners resist business rescue out of fear. “There is a general reluctance, particularly among small business owners, to initiate business rescue because they fear losing control. Once a company enters business rescue, it is managed by an independent third party, which many owners find difficult to accept.”

Yet waiting too long to seek help can lead to devastating consequences. When business owners delay intervention, cash flow dries up, creditors become less willing to negotiate and viable recovery options diminish.

Tailored Solutions for Troubled Companies

There are several viable solutions available to struggling businesses, but timing is critical. Acting early and consulting professionals who understand the complexities of business rescue can make all the difference.

“Experts conduct a thorough investigation of the company’s financial troubles to identify the best survival strategy,” Erasmus says. Depending on the extent of the challenges, businesses can explore solutions such as:

Business bridging finance: A short-term loan to address cash flow shortages.

Business debt mediation: Negotiating with creditors to restructure repayment terms.

Business rescue: A formal restructuring process to keep the company afloat and avoid liquidation.

Don’t Wait Until It’s Too Late

The key to avoiding liquidation lies in early intervention. Business owners need to monitor for warning signs — such as mounting debt, shrinking cash flow, or creditor pressure — and act as soon as trouble emerges. Consulting professionals early provides the best chance to stabilise operations and create a plan for long-term survival.

As Dr Buba warns, “Waiting too long to act can have devastating consequences.” By seeking expert advice at the first signs of distress, businesses can improve their chances of recovery and continue contributing to SA’s economic growth.

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