| Nature of Business: | Roadworks and Construction |
| Entity Type: | Proprietary Limited (Pty Ltd) |
| Location: | Eastern Cape, South Africa |
| Public Interest Score: | 743 |
| Staff: | 419 Employees |
| Date of Business Rescue: | December 2015 - March 2016 |
| Total Debt: | R96 272 821 |
| Vote of Proposed BR Plan: | 97.15% in Favour |
Case Study: Masekani Construction
Established in 2004, this business provided specialized construction services, focusing on roadworks and general civil engineering projects in the greater Eastern Cape region. The company held a BEE Level 2 rating and an impressive CIDB rating of 8 CE PE, making it one of only two companies in the area with this level of accreditation at the time. Some of the business's most well-known contracts included the bulk earthworks for the 2010 Nelson Mandela Bay Soccer Stadium and the tarring of gravel roads for the Nelson Mandela Bay Metropole (NMBM). At the time of filing for business rescue, the company held contracts exceeding the R100 million turnover threshold.
In December 2015, the business found itself in financial distress due to a combination of external challenges and internal difficulties. Although not necessarily insolvent, the company experienced significant delays in payments from clients, primarily due to certain claims against its work. These issues, combined with mounting operational pressures, ultimately led the directors to file for voluntary business rescue under Section 129 of the South African Companies Act.
In accordance with Section 141 of the Companies Act 71 of 2008, the Business Rescue Practitioner conducted a thorough investigation into the affairs of the business, as well as the concerns raised by the creditors, and published a business rescue plan in February 2016.
A last-minute offer was presented to the practitioner for the outright purchase of the business as a going concern. The new owners provided post-commencement finance (PCF) to complete certain projects already secured and committed to completing more projects once the transaction was finalized. As part of the arrangement, the new owners partially settled the concurrent creditors, while a connected business took responsibility for settling the secured creditor. The business rescue process was designed to provide a better outcome than traditional liquidation and successfully preserved more than 90% of the jobs.
The creditors voted to approve the proposed business rescue plan, despite the fact that they would receive less than 50 cents to the rand. However, as outlined in the business rescue plan, this outcome was substantially better than what creditors would have received in a liquidation. In fact, concurrent creditors submitting claims in a liquidation would likely have faced cost contribution claims. Most importantly, several hundred jobs were saved in the process.
This business rescue serves as a clear example of the importance of the second part of the definition of business rescue as per Section 128(1)(b) of the Companies Act. The plan was adopted with a 97.15% majority vote and received unanimous approval from the shareholders
This case highlights that business rescue is not always about creditors being settled in full or shareholders retaining involvement, but rather about achieving a better outcome than liquidation and, most importantly, preserving jobs. In this instance, despite creditors receiving less than 50% owed, the rescue process saved hundreds of jobs and ensured a more favorable result for all stakeholders. It underscores the critical role that business rescue plays in balancing the interests of all affected parties as per section 7(k) of the Companies Act.