A record 48 South African companies entered business rescue in February, according to recent data. For small business owners who have invested their savings in their companies, attempting to save a struggling business can come at a considerable financial cost. Research prepared for the Turnaround Management Association Southern Africa (TMA-SA) showed that 1,409 companies were in business rescue as of March 2026.
Business rescue is a legal process under the Companies Act intended to give financially distressed companies an opportunity to restructure their affairs rather than proceed directly to liquidation. A licensed practitioner temporarily supervises the company, certain legal proceedings against it are suspended, and a plan is developed to address its financial difficulties. The aim is either to restore the business to solvency or secure a better return for creditors and shareholders than immediate liquidation would have achieved.
The process of business rescue is not without its challenges and limitations. A recent Supreme Court of Appeal judgment involving Ubuntu Family Health Centre illustrated this limitation. The company entered business rescue in November 2023, after Capitec had cancelled its finance agreement for a Porsche 911. Capitec sought to recover the vehicle, and the Supreme Court of Appeal found that the business-rescue moratorium did not prevent the bank from reclaiming property that Ubuntu was unlawfully possessing.
For smaller businesses, the principle extends beyond luxury vehicles. Losing access to financed equipment or vehicles could undermine an attempt to continue trading. Successful rescues take an average of 18 months to complete, while companies that ultimately fail spend more than a year in the process before ending in liquidation. Warning signs of financial distress include persistent cash-flow shortages, difficulty paying suppliers or employees, mounting debt, and an inability to secure additional funding.
The cost of business rescue is not free, and the practitioner's remuneration is only one expense. For a small company, the prescribed basic practitioner tariff is capped at R1,250 an hour or R15,625 a day, inclusive of VAT, the Companies Act states. Reasonable expenses and certain approved additional remuneration may also apply. The business must also fund its ongoing operations, potentially including employees, suppliers, legal assistance, and restructuring costs.
In a November 2025 presentation to Parliament, the Industrial Development Corporation identified high costs of as much as R10 million, lengthy proceedings, and companies entering rescue too late as significant obstacles. It recommended introducing a rescue regime specifically tailored to SMEs to reduce costs, alongside early-warning measures to identify financially distressed businesses. TMA-SA's research suggests that two in three companies entering business rescue return to operation, preserving 87% of their economic value.
However, the IDC's November presentation placed the overall success rate at between 12% and 15%. TMA-SA director Stefan Steyn warned that rescue was neither quick nor guaranteed. For SME owners, business rescue therefore requires more than identifying a way to postpone creditors' claims. It requires a viable business, sufficient funding to continue operating, and a realistic prospect of implementing a rescue plan.
Key points
- A record 48 South African companies entered business rescue in February.
- The cost of business rescue can be high, with costs of as much as R10 million identified as a significant obstacle.
- The success rate of business rescue varies, with TMA-SA's research suggesting that two in three companies return to operation, while the IDC places the overall success rate at between 12% and 15%.
