Business rescue is failing black-owned SMEs. Who pays the price?

For black-owned small businesses in South Africa, the promise of business rescue often rings hollow. A record 48 companies entered the process in February alone, but for owners who have poured their savings into their enterprises, the road to recovery is paved with exorbitant costs and legal traps that can strip them of everything they have built.

Research prepared for the Turnaround Management Association Southern Africa (TMA-SA), based on an analysis of 4,373 Companies and Intellectual Property Commission (CIPC) proceedings, shows that 1,409 companies were in business rescue as at March 2026. Yet the Industrial Development Corporation (IDC) told Parliament in November 2025 that the overall success rate is a dismal 12% to 15%. For a community still fighting to overcome the economic legacy of apartheid, these numbers are a stark indictment of a system that was supposed to offer a lifeline, not a trap.

What is business rescue, and why does it matter for black entrepreneurs?

Business rescue is a legal process under the Companies Act designed to give financially distressed companies a chance to restructure rather than face immediate liquidation. A licensed practitioner temporarily supervises the company, legal proceedings are suspended, and a plan is developed to restore solvency or secure a better return for creditors than liquidation would achieve.

For black-owned SMEs, this process was meant to be a shield against the brutal realities of a still-unequal economy. But as the IDC noted, the costs can reach R10 million, proceedings drag on for years, and many companies enter rescue too late to be saved. The system, in its current form, often serves the interests of creditors and practitioners, not the workers and owners who built the business.

When should you consider business rescue?

Do not wait until your company is insolvent. Under the Companies Act, a company is financially distressed if it is unlikely to pay its debts within the next six months or is likely to become insolvent in that period. Warning signs include persistent cash-flow shortages, difficulty paying suppliers or employees, mounting debt, and an inability to secure additional funding.

The board can initiate voluntary rescue if it reasonably believes the company is distressed and there is a reasonable prospect of recovery. Alternatively, an affected person, such as a creditor, employee, or shareholder, can apply to court. But here is the catch: for black entrepreneurs who have often been denied access to traditional credit, the very act of seeking rescue can expose them to predatory practitioners and legal fees that swallow what little remains.

What will it cost, and who really benefits?

Business rescue is not free. The practitioner's basic tariff is capped at R1,250 an hour or R15,625 a day, inclusive of VAT, but reasonable expenses and approved additional remuneration can push costs sky-high. The business must also fund ongoing operations, including employees, suppliers, legal assistance, and restructuring costs. For SMEs already struggling to meet obligations, this is a near-impossible burden.

The IDC's November 2025 presentation to Parliament identified high costs, lengthy proceedings, and late entry as major obstacles. It recommended a rescue regime tailored to SMEs to reduce costs and early-warning measures to identify distressed businesses. Yet the government has been slow to act, leaving black-owned businesses to navigate a system designed for larger, better-resourced companies.

Consider the June 2025 Pretoria High Court judgment that set aside the rescue of Seacrest Investments, a company with no employees, income, or operating business. Its practitioner received more than R2.2 million in remuneration, while the company's sole property sold for R3.4 million. The court found the rescue was initiated in bad faith and ordered punitive costs. This is not an isolated case; it is a pattern of exploitation that disproportionately affects those who can least afford it.

What happens to your money and your personal guarantees?

A company is legally separate from its shareholders, so owners do not automatically become personally liable for company debts. But this protection is illusory for many black entrepreneurs. If you signed personal surety for a company loan, you can still face claims under that agreement. Money you personally advanced to the company may be at risk, and if the business is liquidated without sufficient assets, you could lose your entire shareholding.

Business rescue does not automatically release personal guarantees or protect your investment. For black owners who have used their homes or retirement savings as collateral, the stakes are existential. The system, as it stands, can turn a failed business into a lifetime of debt, deepening the racial wealth gap that apartheid created.

Does business rescue actually work for black-owned SMEs?

TMA-SA's research claims that two in three companies entering rescue return to operation, preserving 87% of their economic value. But the IDC's own figures tell a different story: a 12% to 15% success rate. Stefan Steyn, TMA-SA director, warned that rescue is neither quick nor guaranteed. Successful rescues take an average of 18 months, while failed companies spend over a year in the process before liquidation. He asked whether some businesses are entering rescue too late or remaining in the process without realistic prospects of recovery.

For black-owned SMEs, the answer is clear: the system is stacked against them. The Companies Act requires a practitioner to apply for liquidation if there is no reasonable prospect of rescue, but by then, the costs have already mounted. Business rescue requires a viable business, sufficient funding, and a realistic plan. For many black entrepreneurs, these are precisely the resources that apartheid and its legacy have denied them.

What needs to change?

The IDC's recommendation for a dedicated SME rescue regime is a step in the right direction, but it is not enough. We need early-warning systems that identify distressed businesses before it is too late, caps on practitioner fees that prevent exploitation, and a legal framework that prioritizes the interests of workers and owners over creditors and profiteers. We also need to address the root causes: the racial inequality in access to capital, the legacy of land dispossession, and the ongoing marginalization of black-owned enterprises.

Business rescue was supposed to be a tool for economic justice, a way to save jobs and build a more inclusive economy. Instead, it has become another mechanism for extracting wealth from black communities. The Rainbow Report demands accountability: from the government, from practitioners, and from a legal system that too often serves the powerful. Our people cannot afford to lose their shirts to a process that was meant to save them.

Frequently asked questions

What is the success rate of business rescue in South Africa?

The Industrial Development Corporation reported an overall success rate of between 12% and 15% in its November 2025 presentation to Parliament, despite TMA-SA research suggesting that two in three companies return to operation.

Can I lose my personal assets if my company enters business rescue?

Yes, if you signed personal surety for company debts or personally advanced money to the company, you may face claims against those assets. Business rescue does not automatically release personal guarantees.

How much does business rescue cost for a small business?

The practitioner's basic tariff is capped at R1,250 per hour or R15,625 per day, but total costs, including legal and restructuring expenses, can reach R10 million, according to the IDC.

When should a company consider entering business rescue?

A company should consider business rescue as soon as it becomes financially distressed, meaning it is unlikely to pay debts within six months or is likely to become insolvent. Waiting too long reduces the chances of success.