Cross Trainer is the latest well-known company to go into business rescue.

The sports retailer has faced cash-flow problems stemming from the Covid-19 pandemic and has struggled to keep up with its operational costs.

The group entered business rescue on Wednesday, 14 August,

Speaking to Newzroom Afrika, George Nell from Corporate Business Rescue, Cross Trainer’s business rescue practitioner, said that there are 67 Cross Trainer stores in the country, with many having issues with their landlords.

Nell said that the company employees are protected under the business rescue process but did warn that “difficult times are ahead” and that they would negotiate with trade unions.

Several former employees said they did not know the company was under financial stress or would be retrenching staff. Others said that they were owed compensation from April.

“Sometimes the situation is that the procedures just follow one another so quickly that they cannot follow the legitimate procedures, but we will go back and see what uh what happened, and we will rectify what the company did wrong,” said Nell.

He added that an update on the labour issues would be provided in a few weeks.

Ongoing issue

Several other companies in South Africa, including AutoZone, West Pack Lifestyle, and Hohm Energy, have also been placed under business rescue over the last several months.

Autozone is the largest privately owned automotive parts retailer and wholesaler in South Africa. In 2014, it entered business rescue after its performance did not meet expectations following a private equity transaction funded by debt.

Due to growing debt service obligations, it needed to move cash from operations to meet debt servicing costs.

By 2021, it had fallen into a cycle of negative operating leverage.

However, given its strong national brand, the company believes it will recover.

West Pack also believes that it will succeed in restructuring its business.

The group entered business rescue in May as it was financially distressed and unlikely to pay its debts when they became due over the next six months.

One of its business rescue initiatives involves exploring offers to acquire some of West Pack’s assets or the whole business. It also plans to sell non-core assets to improve its financial position.

Solar company Hohm Energy also entered business rescue and ceased trading at the start of August.

The company entered business rescue amid cash flow challenges and the inability to service existing debts.

The business rescue process comes only months after the group raised roughly R155 million ($8 million) from venture capitalists.

Although Autozone and West Pack are confident that they turn their business around, many companies can’t be saved and are liquidated.

The business rescue practitioners of former JSE-darling Ellies recently said that the group faced no reasonable chance of being rescued.

Ellies entered business rescue after failing to acquire bank financing to purchase Bundu power. It recorded a R106.5 million loss for the six months ending 31 October 2023.

Data from Stats SA showed that over 750 businesses were closed in the first six months of 2024.