REA­SONS FOR LACK OF PCF

Finweek English Edition - - INSIGHT: LOCAL -

Ev­i­dence from the avail­able re­search clearly re­veals that some of the main rea­sons for the lack of PCF is the fact that the leg­is­la­tion is still very new, ill un­der­stood and in­cor­rectly ap­plied in prac­tice. The im­pli­ca­tions of this fact are that the pro­vi­sions of the Act are in­ter­preted in­cor­rectly as well as some­times abused. Fur­ther, the lack of se­cu­rity avail­able in the busi­ness at the time of fil­ing, as well as the poor vi­a­bil­ity of the state of the busi­ness are con­tribut­ing fac­tors as to why fi­nanciers are not ad­vanc­ing PCF. The typ­i­cal par­ties that are ex­pected to pro­vide PCF are banks, trade cred­i­tors and share­hold­ers, but in re­al­ity, most of th­ese par­ties have not been co­op­er­a­tive or forth­com­ing with fi­nanc­ing due to the fact that they are con­cerned only with re­cov­er­ing their own money, or they are al­ready too fa­tigued to ad­vance any more money.

De­vel­op­ment fi­nanciers were seen as both very promis­ing and suit­able par­ties to pro­vide fi­nanc­ing, but all in­ter­vie­wees found their pro­cesses too slow and bu­reau­cratic to be able to ben­e­fit a busi­ness in fi­nan­cial dis­tress. Lastly, the most promis­ing group of fi­nanciers iden­tif ied were distressed lenders and pri­vate eq­uity in­vestors. How­ever th­ese par­ties are still rel­a­tively un­known in the lo­cal mar­ket and are them­selves try­ing to make sense of the busi­ness res­cue pro­vi­sions and op­por­tu­ni­ties. There­fore the nascent na­ture of al­ter­na­tive fi­nanciers in SA is a pro­hib­i­tive fac­tor for the ad­vance­ment of PCF.

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