The weekend newspaper in the Western Cape covered the assets of a construction company under liquidation in its auction pages. When you look at the concrete mixer, generators and cut-off saw machine you get struck by the sadness of a business going into bankruptcy.
The sale didn’t only include these items but also the company’s construction, road and survey equipment and its office equipment and furniture. These items included containers, compactors, compressors, water pumps, moisture density gauges, generators and Leica Land Surveyor and large quantities of tools, ladders, drills and spares, scaffolding and trailers.
Even the company’s kitchen equipment and contents for off-site accommodation was on auction: beds, fridges, microwaves, washing and washing machines.
You get a different type of feeling when you see a business person’s tools of the trade on offer at a liquidation sale. These are the tools that help to provide an income and living for the managers and the employees of this construction company.
The question is: how did this construction company go into liquidation?
In this economy there are a number of things that could have happened. The company could have lost a local government tender, the business could have failed to pay its loan instalments, the demand for construction work may have shrivelled up, especially with a number of new entrants in the industry. The simple answer really is that the company most probably ran out of cash.
It’s easy sitting on the sidelines from some distant location in a foreign country telling a local South African business people what to do about rescuing, developing or growing their business. But when you are permanently living in South Africa you quickly understand that the local business environment has become incredibly tough for small businesses, particularly in the basic industries such as construction which is a highly contested marketplace. Local business owners need locally relevant business advice from business advisers living and operating in the country.
The number of liquidation sales in the weekend paper highlights the increase in insolvent companies in South Africa due to the depressed economy and the restructuring that is continually taking place. In this uncertain and ever-changing business environment what can you do to avoid landing up in insolvency?
I saw a month or so ago a business daily had quoted a spokesperson who said the number of liquidations in South Africa was close to 4,000. But I did my own digging with the online companies that track South African liquidations statistics and added up the 12 months numbers for 2013 and this totalled something like 2,400. I’m not sure where these experts get their numbers and how they come up with them but one can safely say that even 2,000 liquidations are far too many.
Many small business owners call for help when it’s too late. If you have not made that loan payment at the end of the month and the bank decides to call in its loan for whatever reason it’s really “game over”. Then all the tragic stuff starts and that includes receiving an order from the sheriff of the court for repossession of your personal business and personal assets that have stood as guarantees for the loans that you have taken out. And when they take everything, as you know, they take everything.
We could go into a number of remedies or solutions on how to avoid personal sureties but at this time the best advice I can give is to seek help before it’s too late. Don’t deny the early warnings. Don’t block your ears to the “soft voices” that you may here inside or outside your business. Listen for “blinking” words that raise an alarm about either business prospects or your cash position. Get in a local business adviser who knows the current local conditions to help rescue your business before it’s too late.