Publications
Partners
Cape Town – The SA Reserve Bank’s decision to place African Bank under curatorship, has caused great concern among suppliers of its loss-making furniture unit, Ellerine Holdings, which has applied for business rescue earlier this month.
Already in July this year African Bank Investments [JSE:ABL], the holding company of African Bank, indicated that it wanted to sell Ellerine.
Under South African law, business rescue provides temporary protection of a company's property from creditors.
Abil bought Ellerine in 2007 for R10.6bn to widen its product offering to include furniture sold on credit, but bad loans spiralled as its low-income client base struggles in the face of economy hardships.
African Bank’s curator Tom Winterboer of PwC has already addressed concerns of Fin24 users, who bought furniture on credit at Ellerine, and who have loans or accounts with African Bank.
Now the curator responds to suppliers to Ellerine:
Fin24 user Cecil Kagan writes: I am the CEO of a business providing Ellerine with soft furnishings for the past 20 years.
We employ 420 people and use 80% of South African products in our manufacturing process.
Our opposition is the Chinese imports and with the exchange rate above R8 to the dollar, we and many SA manufacturers, are well placed to compete and supply home grown furniture to the SA retailers.
Ellerine for many years prior to being taken over by African Bank, managed their own debtors’ book very successfully, as do Lewis Stores, JD, House and Home and OK Furniture.
African Bank removed this asset from Ellerine and it needs to be asked what will happen now that Ellerine is in business rescue and will in all likelihood be liquidated in the near future.
Is this fair to numerous suppliers to Ellerine, who will in all probability also be liquidated alongside Ellerine as a result of having to write off what Ellerine and African Bank owe?
This in turn will lead to many of the companies in the supply chain being left with a similar fate, resulting in severe job losses and the retail furniture groups importing more Chinese products into SA.
Sarb has intervened with African Bank. Who will intervene to assist the furniture industry and protect the job losses, sustainability of the manufacturing industry and small business?
Where is the department of trade and industry in all this?
Everyone is always talking about the impact of imports, job creation and small business driving the SA economy.
Where are these people and government now?
Fin24 user John writes: I am a very concerned supplier to the Ellerine Group - 1 200 stores and 11 000 staff, let alone the suppliers.
They pay 68 days from the date of the statement and even with these terms have destroyed what was once a very successful operation.
If they don’t alleviate suppliers' fears in the next week, they might as well shut their doors as no supplier is willing to supply them presently.
They pay each month on the 8th, which is exactly the date they applied for business rescue and nobody was paid, including ourselves.
In my opinion there was total mismanagement of what was once a real income earner.
The African Bank curator responds: Business rescue is a process to facilitate the rehabilitation of a company that is financially distressed.
A business rescue process provides for the temporary supervision of the company and the management of its affairs. The intention is to prevent liquidation.
It is for the business rescue practitioner to decide on how the company operates in the future, including on how the company manages its suppliers.
* Are you a concerned Ellerine supplier? Has African Bank's curatorship impacted you so far? Let us know.
- Fin24
Disclaimer: All articles and letters published on MyFin24 have been independently written by members of the Fin24 community. The views of users published on Fin24 are therefore their own and do not necessarily represent those of Fin24.
