Covid-19 Roundup: South African companies looking at business rescue and job cuts

Businesses are falling victim to South Africa's weak economy that has been worsened by Covid-19.

The combination of the country’s weak economy and Covid-19 lockdown has resulted in companies looking at drastic measures to cut costs, some even entering business rescue.

Among these companies are: 

Comair

On 5 May, Comair announced that it will enter business rescue to safeguard the interests of the company and its stakeholders after the Covid-19 crisis disrupted the implementation of a turnaround plan.

Comair chief executive officer, Wrenelle Stander, said the company faced an unprecedented situation following the Covid-19 lockdown. 

“While we had started making good progress to fix the financial situation six months ago, the crisis has meant we have not been able to implement it as we intended,” she said. “We completely understand and support the government’s reasons for implementing the lockdown, however as a result we have not been able to operate any flights. Now that the phased lockdown has been extended the grounding is likely to endure until October or even November.”

Read more: Comair enters business rescue after Covid-19 disrupts turnaround plan

Edcon

On 29 April, the Edcon Group announced its plans to enter into business rescue. “The sales miss [due to lockdown], and the decline in collections of the debtor’s book has meant that Edcon is unable to pay its suppliers for both the March and April month-ends,” it said.

Flight Centre Travel Group

Flight Centre has announced that it will be closing 40 percent of its network as a result of Covid-19 impact on the business and the tourism sector. 

In a note to clients, Flight Centre Travel Group MD of MEA Andrew Stark (pictured) said: “Few have been as profoundly impacted as the tourism and travel sector, with government travel bans, grounded aircraft and non-essential business lockdowns preventing the free movement of our customers, whether travelling for business or leisure. While we deal with these unimaginable circumstances, we – and other businesses – are taking some very difficult decisions.”

South African Breweries 

South African Breweries (SAB) has warned that about 2,000 of its front line workforce are in the firing line, should it not be able to continue bottling or distribution duties. 

The brewer said that it may be forced to dump 132 million litres of beer if the government does not allow it to package and transport its current inventories between its depots and warehouses. 

SAB added that, if it is forced to dispose of its current stock, the company will be forced to operate at 50 percent of its capacity for four months, which could result in a loss of 2,000 jobs.

An additional 75,000 jobs could be adversely affected by the company’s supply chain, SAB warned.

Group Five Construction

The business rescue process for Group Five Construction, the main operating subsidiary for Group Five, has been disrupted by Covid-19. 

The planned payment of the first distribution to concurrent creditors in terms of the plan for the company has been delayed. The sales of Everite, its fibre cement product manufacturing business, has also been temporarily suspended.