By Adam Craker, CEO at IQbusiness
It’s hard to think back to a time of normalcy before the COVID-19 pandemic impacted every facet of life and work. And with the President’s announcement of a nationwide, 21-day lockdown, local businesses of all sizes and in all sectors have to face the reality of drastic operational changes that are likely to have negative knock-on effects on their profitability, productivity and employability.
And as the lockdown alters the business landscape, it may also have catastrophic implications on the South African economy, considering we are already in recession and this will only prolong it. Our slide into junk status compounds an already toxic situation, as our Minister of Finance, Tito Mboweni, explained, “The decision by Moody’s could not have come at a worse time. South Africa, like many other countries, is seized with containing the outbreak of the coronavirus.”
South Africa has been in a declining GDP cycle for the last decade, and our borrowing has sky-rocketed over the same period, with our debt to GDP rising from 34% in 2010 to 62% in 2020. Our economy’s immunity is low, and therefore, the country’s vulnerability is higher than it has been in a long time.
While the global health dilemma we are facing is likely to be overcome this year, the economic crisis that it is exacerbating in South Africa will last many years, potentially forcing our economy into a prolonged depression.
It is crucial, therefore, for business leaders to respond proactively and take decisive action quickly to enable their companies to weather the storm. Business rescue is one option that can provide much-needed relief to financially distressed businesses.
The benefits of business rescue
The Companies Act, 71 of 2008 defines business rescue as a process to rehabilitate a company by providing temporary supervision and management of the company; temporary suspension of legal proceedings against the company; and a plan to rescue the company by restructuring its business, property, debt, affairs, other liabilities and equity.
According to Schindlers Attorneys, joint initiators of the COBRA Consortium, business rescue acts as a lifeline for distressed companies and those on the verge of insolvency.When a company shuts down, the entire economy suffers as a result. However, when this business is successfully turned around through business rescue, creditors are paid, jobs are saved, and the company can continue to pay taxes and operate like normal.
The COBRA War Room solution
Purpose, vision and values are the currency of success in times of struggle. Rather than attempting to find purpose in the COVID-19 crisis, businesses should already have these elements in place to overcome challenges.
At IQbusiness, we have drawn from our learnings as a Conscious Company and B Corporation to inspire our response to the situation. The positive energy in our team is palpable as we run towards the problems we and our clients face, rather than running away from them.
As such, we have partnered with Schindlers Attorneys and, Engaged Business Turnaround, to launch our crisis management centre – the COBRA War Room (COVID-19 Business Rescue Assistance). By joining forces and combining our extensive legal, accounting, technology and business turnaround expertise, the COBRA Initiative aims to assist and sustain local companies of all sizes through the COVID-19 crisis with free services to help them receive coordinated bank, government and stakeholder support through a structured business rescue process.
The likelihood is that there will be a tsunami of both SMEs and large enterprises in distress over the next three months, and that’s exactly why we built our COBRA War Room – to support businesses with an agile response capability covering data assimilation, trend tracking, triage, decision support, communications, resource management, learning and development and change management disciplines.
Additional smart working tools
Beyond business rescue support, we also encourage local companies to make use of collaborative platforms to ensure fluidity when working from home.
We used Microsoft Teams to coordinate our COBRA set-up process across all partners and believe it is the ideal tool for communications, resource management and IP gathering and sharing. Zoom is another platform that has become a critical enabler of our ongoing business with our clients. We provide key services to essential businesses, including banks, retailers and telcos, and every step we take is based on our duty to care for our clients, IQers and business.
It is the responsibility of IQbusiness to help South African businesses in their hour of greatest need, and I urge those in financial distress to visit the COBRA War Room website for more information: www.cobra.org.za
Our Minister of Finance, Tito Mboweni provides our key motivation in his thought-provoking statement:
“Every crisis presents an opportunity. The opportunity we have today is to unite and work together to address our challenges. We have overcome insurmountable challenges in the past, and we can still overcome it. We shall rise. We must rise. We owe it to ourselves.”