Political uncertainty and corruption are key drivers of financial distressPolitical uncertainty, high unemployment rates, slow economic growth and severe drought has created a perfect storm of economic and political events for South Africa. This has placed pressure on the economy, forcing companies to restructure in order to adapt, compete and survive. According to Deloitte’s South African Restructuring Outlook Survey 2016, close to 39,4% of business restructuring experts expect a recessionary economy driven mainly by political uncertainty and corruption, concerns around global economic health and poor commodity prices. © gilc 123RF.com Despite these expectations, the same number of respondents believe that the extent of distressed funding available will be advanced. This highlights how few South African businesses are able to use this tool to manage financial stress. Understanding SA’s restructuring market“Restructuring refers to any formal or informal process involving a financial and operational restructuring of a company’s affairs as a result of financial stress,” explains Nisha Dharamlall, restructuring services leader at Deloitte South Africa. To better understand the challenges and expectations of South Africa’s restructuring market in 2016, Deloitte surveyed over 30 key restructuring professionals in the country. The survey started in 2014 and is in its third year. Respondents included a selected mix of commercial banks (40%), development finance institutions (21%), lawyers (16%), business rescue practitioners (10%) as well as academics and other key restructuring professionals (13%). Key themes that emerged from the survey
Daniel Terblanche, restructuring services leader at Deloitte believes that: “Despite restructuring being in its infancy in South Africa, results are encouraging in that the industry understands that it requires more support in financial restructuring. This is a significant trend at a time when increasingly more businesses in South Africa will need to become literate in managing financial stress professionally.” |