Turnaround industry driving forces
Political turnaround industry driving forces
Transformation of the liquidation industry
The intention is to stamp out alleged corruption and implement BEE.
Transformation is expected to have an adverse financial impact on the liquidation industry. The incentives which liquidators get from auctioneers and other professionals with whom they deal are set to diminish.
Moreover, the liquidation industry is to help finance the business rescue fund.
During 2004/05 a Ministerial Committee of enquiry led by advocates Seth Nthai and Lindiwe Nkosi-Thomas, conducted an investigation into the liquidations industry (see Business rescue legislation ).
Social Plan
The Department of Labour’s Social Plan allows for employers and workers to request assistance to prevent or minimise job losses when large-scale retrenchments are in the offing.
Social Plan's Technical Support Facility functions under the auspices of the National Productivity Institute (NPI).
Turnaround professionals (BEE preferred) are sponsored by NPI at a rate of R3 500 per day.
Organised turnaround and business rescue industries
The Task Group for Organising the Turnaround and Business Rescue Industries spawned two industry bodies in 2004 to focus on turnarounds, and formal business rescue in terms of new business rescue legislation:
- Turnaround Management Association - Southern Africa , Southern Africa - a voluntarily industry association to promote turnaround, and for purposes of information exchange, networking, education and raising the standards of turnaround across both the informal and formal sectors.
- ABASA - Association of Business Administrators of South Africa - a proposed regulatory body of which membership will be compulsory to be admitted to the Turnaround Panel from which turnaround experts will be drawn to affect formal business rescue as per the Business Administration Act.
Economic turnaround industry driving forces
Shareholder activism
The past few years have witnessed an increased incidence of shareholders becoming less tolerant of mediocre performance.
Economic indicators
The dramatic strengthening of the Rand in 2003 put export-orientated industries under pressure, but the effect thereof have worn off.
On the other hand, the decline in interest rates over the years provided relief for all.
The robust economy has led to a sharp decrease in monthly compulsory company liquidations (see liquidation statistics).
The present economic circumstances, while good for the country, has severely shrunk the market for the turnaround industry.
Seen over a longer time frame, compulsory company liquidations averaging 30 a month are now just more than a third of the level experienced in the 90's.
Social turnaround industry driving forces
The imperative of job preservation
SA suffers from excessively high unemployment.
Four out of 10 South Africans who want to work cannot find jobs.
The official unemployment rate is 27,8% (counting only active job seekers) or 41,2% if the expanded definition is used (excludes the unemployed not actively looking for work).
Given the social cost of job losses associated with liquidation, there is a strong movement towards increased social responsibility in the form of a business rescue culture developing amongst distressed companies' lenders.
Technological turnaround industry driving forces
Turnaround as a discipline and profession has found increasing acceptance and credibility in SA.
There is a movement underfoot to strengthen distressed debt transactions and turnaround funding in the banking fraternity and private financing arena.
A turnaround educational course is being planned at University of Pretoria. Rhodes University already offers turnaround as a section of its Strategic Management course.
More and more workshops, conferences and seminars on turnaround are being held (see turnaround events).
Lastly, Turnaround Management SA on this web site has contributed to the promotion of the turnaround industry through making available turnaround news, events, opinions, links, references, industry structure information, industry associations information; new business rescue legislation information; and liquidation statistics and news.
Legal turnaround industry driving forces
Draft business rescue legislation as contained in Chapter 6 of the Companies Bill, 2007 is expected to become operational by 2009.
New business rescue regulation is expected to provide a major boost to the turnaround industry.
The most significant driving force is future new business rescue legislation, which in turn prompted the formation of industry associations.