31.03.2022 - Cast Products SA Business Rescue Plan

CAST PRODUCTS SOUTH AFRICA PROPRIETARY LIMITED
(IN BUSINESS RESCUE)
(REG NO. 2017/057592/07)
DRAFT BUSINESS RESCUE PLAN
Prepared in terms
of section 150 of the Companies Act 71 of 2008, as amended
Prepared by Johan Du Toit and Refilwe Ndlovu
(Joint business rescue practitioners)
Publication date: 31 March 2022
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Engaged Business Turnaround // Chrisyd Advisory Services
TABLE OF CONTENTS
Paragraph number and description Page
1. IMPORTANT NOTICE AND ACTION TO BE TAKEN .......................................................................... 3
2. PROLOGUE ........................................................................................................................................ 3
3. INTERPRETATION AND PRELIMINARY ............................................................................................ 6
4. STATEMENT ON CONFLICT OF INTEREST .....................................................................................18
5. STRUCTURE OF THE PLAN ..............................................................................................................18
6. PART A - BACKGROUND ..................................................................................................................20
7. PART B - PROPOSALS .....................................................................................................................39
8. PART C - ASSUMPTIONS AND CONDITIONS ................................................................................122
9. BRPs' CERTIFICATE .......................................................................................................................131
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1. IMPORTANT NOTICE AND ACTION TO BE TAKEN
1.1. This document is important and is being sent to all known Affected Persons of
the Company in accordance with the provisions of the Companies Act.
1.2. The document contains the Business Rescue Plan, prepared in accordance
with the requirements of Chapter 6 of the Companies Act, in particular, section
150 (2) of the Companies Act.
1.3. Your rights as a Creditor and/or shareholder of the Company will be affected
in the manner outlined herein and you are entitled to be present or
represented, and vote, at a meeting of creditors and/or shareholders to be
convened in terms of section 151 of the Companies Act, for the purposes of
considering the Business Rescue Plan.
1.4. If any Affected Person is in doubt as to what action should be taken arising
from the contents of this Business Rescue Plan, such Affected Person or
Affected Persons are advised to consult an independent attorney, accountant
or other professional advisor in addition to any consultation with or direction
received from the BRPs.
2. PROLOGUE
2.1. The Company, prior to its decline, was the largest and most respected cast
producing company in South Africa. The Company was also the main supplier
to state-owned enterprises, such as Eskom and Transnet, who are extensively
reliant on cast steel products.
2.2. The Company has been and still is at the core of the industrial hub of South
Africa and is a critical component to infrastructural development in South
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Africa. The Company’s ability to cast large products is intrinsic to its value
proposition in that many of its customers are consumers of heavy-duty
industrial castings.
2.3. The business of the Company, at the Foundries, has substantial capacity
through which it can service clients such as Transnet and Eskom and several
large players in the mining industry. The Company has in the past been known
as one of the best managed and technically proficient casting producing
companies in Southern Africa. Its ability to produce castings from five
kilograms up to fifty tons positions it uniquely as an end-to-end casting
solution.
2.4. The casting industry is a significant creation industry, converting raw materials,
like scrap steel, into a versatile range of products used in numerous industries.
2.5. The Company is ideally placed as a large-scale cast supplier. The Company
has minimal competition in the industry.
2.6. The Company is therefore extremely important to South Africa’s quest to
develop key infrastructure such as railways and power utilities.
2.7. Although the Foundries, and the equipment thereat, have been neglected over
the past four years, the Company still has some of the best equipment and
technologies in Southern Africa for generating high volumes of quality
products and castings. The BR Team believes that the Foundries can be
restored to its former glory, allowing the Company to continue producing
quality products for its clients.
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2.8. The turnaround process will include restoring the Foundries to their original
status and ensuring that the Foundries are once again amongst the best value
and employment generating assets for South Africa.
2.9. The BRPs’ high-level objectives for the Company are as follows:
2.9.1. To stabilize all operations during the ensuing six months, by
implementing programs to prevent historically loss-making
segments from incurring further losses and consuming cash;
2.9.2. To minimize job losses in the near term and get the business to the
point where it can operate without funding interventions; in so doing,
to protect this important asset to ensure continued supply to key
industry role players in South Africa’s industrial rebuild programs;
2.9.3. To invest in growing the Company with new business in the three
phased implementation of the Plan. These phases will:
2.9.3.1. In the first and second phase, involve rebuilding the brand
and the business to take its rightful place in the context of
South Africa’s infrastructure programs. During this
period, the BR Team will restructure the operations and
the balance sheet, implement an executive management
structure for the long term, and develop the Company’s
people sufficiently to ensure that the business can stand
alone and fund itself and satisfy its customers’ needs;
2.9.3.2. In the final phase of the Business Rescue, projected to
commence 9 - 12 months after the Plan is approved,
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envisages concluding a deal with a strategic equity
partner who will invest in taking the business forward and
unlocking its full potential for the benefit of all its
stakeholders and South Africa as a whole.
2.10. The process of turning around the Company is an immensely challenging one,
made possible by the work of a vastly experienced BR Team. The support of
the process by the key stakeholders has been of the utmost importance to
date, and will continue to be so throughout the process. The BR Team,
extends herein, their gratitude to the stakeholders for their support.
3. INTERPRETATION AND PRELIMINARY
The headings of the paragraphs in this Business Rescue Plan are for the purpose of
convenience and reference only and shall not be used in the interpretation of nor
modify nor amplify the terms of this Business Rescue Plan nor any paragraph hereof.
Unless a contrary intention clearly appears:
3.1. words importing –
3.1.1. any reference to one gender shall include the other gender and the
neuter;
3.1.2. the singular includes the plural and vice versa; and
3.1.3. persons include natural persons, juristic persons, created entities
(incorporated and unincorporated and the State) and vice versa.
3.2. When any number of days is prescribed in this Business Rescue Plan same
shall be reckoned exclusively of the first and inclusively of the last day unless
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the last day falls on a day which is not a Business Day, in which case the last
day shall be the next succeeding Business Day.
3.3. Words and expressions defined in the Companies Act which are not defined
in this Business Rescue Plan shall have the same meanings in this Business
Rescue Plan as those ascribed to them in the Companies Act.
3.4. Whilst every effort has been made to present an accurate and complete
overview of the affairs of the Company the BRPs have not independently
verified all the information contained herein. Neither the BRPs, their advisors,
the Company nor their respective affiliates, employees, officers, directors or
agents make any representations or warranties (express or implied) as to the
accuracy or completeness of the information contained in this Business
Rescue Plan or any statements, estimates or projections contained herein.
Consequently, none of those parties will have any liability for the recipients’
use of the information contained herein. This Business Rescue Plan will
include certain statements, estimates and projections.
3.5. The following terms and/or expressions shall have the meanings assigned to
them hereunder and cognate expressions shall have corresponding
meanings –
3.5.1. “Admitted Claims” means pre-commencement creditors’ claims
admitted by the BRPs in the Business Rescue;
3.5.2. “Adoption Date” means the date upon which the Business Rescue
Plan is approved in accordance with section 152 (2), read with
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section 152 (3) (b) and section 152 (3) (c) (ii) (aa), of the Companies
Act;
3.5.3. “Advisors” means the advisors to the BRPs;
3.5.4. “Affected Person” or “Affected Persons” shall bear the meaning
ascribed thereto in section 128 (1) (a) of the Companies Act and in
relation to the Company means shareholders, the Creditors, the
Employees and the Trade Unions representing the Employees;
3.5.5. “Amsted” means Amsted Rail Company Incorporated, a limited
liability company incorporated in accordance with the laws of the
State of Delaware, United States of America, under registration
number 843225;
3.5.6. “AUD$” means Australian Dollars;
3.5.7. “Boksburg Plant” means the foundry situated in Boksburg of the
Company, which manufactures manganese mill liners, screens and
grids used in the gold mining industry;
3.5.8. “BOMs” means bills of materials;
3.5.9. “BRPs” means the joint business rescue practitioners appointed in
terms of section 129 (3) (b) of the Companies Act, being Johan du
Toit and Refilwe Ndlovu;
3.5.10. “BR Production Team” means the BRPs and their production
team;
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3.5.11. “BR Team” means the BRPs and their team of technical,
operational, financial and legal advisors;
3.5.12. “Business” means the business of the Company from time to time
including, but not limited to, the manufacturing of castings and cast
products utilised in the rail, mining, power and engineering sectors.
3.5.13. “Business Day” means any day other than a Saturday, Sunday or
official public holiday in the Republic of South Africa;
3.5.14. “Business Rescue” means proceedings to facilitate the
rehabilitation of the Company, which is financially distressed, as
more fully defined in section 128 (1) (b) of the Companies Act;
3.5.15. “Business Rescue Plan” or “the Plan” means this document
together with all of its annexures, as amended from time to time,
and prepared in accordance with section 150 of the Companies Act;
3.5.16. “CIPC” means the Companies and Intellectual Property
Commission, established in terms of section 185 of the Companies
Act;
3.5.17. “Claim/s” means any claim against the Company, the cause of
action in respect of which arose:
3.5.17.1. prior to or on the Commencement Date; or
3.5.17.2. during Business Rescue; and
which have been admitted by the BRPs in the Plan;
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3.5.18. “Commencement Date” means 19 January 2022, being the date
upon which Business Rescue commenced in respect of the
Company in accordance with section 129 (1), read with section 132
(1) (a) (i), of the Companies Act;
3.5.19. “Company” means Cast Products South Africa (Registration
Number: 2017/057592/07) a company incorporated in accordance
with the company laws of the Republic of South Africa;
3.5.20. “Companies Act” means the Companies Act, No. 71 of 2008, as
amended;
3.5.21. “Concurrent Claims” means unsecured claims against the
Company which would constitute a concurrent claim in terms of the
laws of insolvency;
3.5.22. “Concurrent Creditors” means all unsecured Creditors as at
Commencement Date;
3.5.23. “Contingent Claim” means a Claim against the Company, the
existence and/or enforcement of which is dependent on the
happening of an uncertain future event;
3.5.24. “Creditors” means all persons, including legal entities and natural
persons, having Claims against the Company;
3.5.25. “Creditors’ Committee” means the committee, as prescribed by
section 145 (3) of the Companies Act, and which was constituted at
the first meeting of creditors;
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3.5.26. “Crushing Equipment” means Crushing Equipment Proprietary
Limited (Australia), a limited liability company incorporated in
accordance with the laws of Australia, under registration number
ABN 071478576;
3.5.27. “Disputed Claims” means any and all Claims which may have been
lodged by Creditors with the BRPs during the Business Rescue and
whose Claims have been rejected either in whole or in part by the
BRPs, or Claims which were lodged before the Commencement
Date against the Company by means of a formal legal process; and
which dispute may be determined in favour of or against such
Creditors in terms of the dispute mechanism contained in
paragraph 8.8 (Dispute Resolution);
3.5.28. “Distribution” means the respective distributions to be made to
Creditors in terms of the Business Rescue Plan;
3.5.29. “Eclipse Plant” means the Eclipse East Foundry of the Company,
which specialises in low alloy steel and high chromium iron mill
liners, manganese crushing wear parts for gyratory crushers and
jaw crushers and low alloy steel earthmoving undercarriage wear
parts;
3.5.30. “Employees” means all persons employed by the Company as at
the Commencement Date and who remain employed as at the
Adoption Date;
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3.5.31. “Employees’ Committee” means the committee, in terms of
section 144 (3) (c) of the Companies Act that is used for the
purposes of consulting with the Employees in terms of section 189
(3), read together with section 189A, of the LRA;
3.5.32. “Eskom” means Eskom (SOC) Limited;
3.5.33. “Final Claims Date” means the final date for the filing of Claims,
being 8 April 2022;
3.5.34. “Financially Distressed” shall bear the meaning ascribed thereto
in section 128 (1) (f) of the Companies Act;
3.5.35. “FOMIS” means Foundry Management Information System;
3.5.36. “Foundries” means the Eclipse Plant, the Union Plant, the
Boksburg Plant, the Wheel Plant, and the Standard Plant;
3.5.37. “FYE” means financial year end;
3.5.38. “Gestalt Consult” means Gestalt Growth Strategies Proprietary
Limited (Registration Number: 2007/006306/07);
3.5.39. “HR Team” means the human resources team of the Company;
3.5.40. “IDC” means the Industrial Development Corporation of South
Africa Limited (Registration Number: 1940/014201/06), a public
company with limited liability established in terms of section 2 of the
Industrial Development Corporation Act 22 of 1940, as amended;
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3.5.41. “Insolvency Act” means the Insolvency Act No. 24 of 1936, as
amended;
3.5.42. “KPAs” means key performance areas;
3.5.43. “KPIs” means key performance indicators;
3.5.44. “LRA” means the Labour Relations Act, No. 66 of 1995, as
amended;
3.5.45. “Magotteaux” means Magotteaux Proprietary Limited (Registration
number 1981/002257/07);
3.5.46. “Magotteaux Agreement” means the Licence and Technical
Assistance Services Agreement concluded between the Company
and Magotteaux, which agreement was terminated by Magotteaux
in October 2021;
3.5.47. “Management” means the senior management of the Company as
at the Commencement Date and/or at the Adoption Date.
3.5.48. “Naledi Foundry” means Naledi Foundry, being a casting founding
100% owned by Naledi Inhlanganiso Group, situated in Benoni;
3.5.49. “National Treasury” means the Department of National Treasury
of South Africa;
3.5.50. “Notice of Meeting” means the notice of meeting to all Affected
Persons as contemplated in terms of section 151 (2) of the
Companies Act;
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3.5.51. “PCF” means post-commencement finance as contemplated in
section 135 of the Companies Act;
3.5.52. “PFMA” means the Public Finance Management Act 1 of 1999, as
amended;
3.5.53. "Preferent Creditors” means those Creditors whose Claims
against the Company would be preferred on a liquidation;
3.5.54. “Proposed Turnaround Plan” means the proposed turnaround
plan as more fully set out in clause 7 of the Business Rescue Plan,
comprising of Phases 1 to 3 and more fully detailed below;
3.5.55. “Publication Date” means the date on which the first draft of this
Business Rescue Plan was published to Affected Persons in terms
of section 150(5) of the Companies Act, being 31 March 2022;
3.5.56. “Rand” or “R” or “ZAR” means the lawful currency of the Republic
South Africa;
3.5.57. “RMN Dawn” means RMN Dawn Solutions Proprietary Limited;
3.5.58. “Rustenburg Foundry” means Rustenburg Engineering & Foundry
Proprietary Limited;
3.5.59. “SARS” means the South African Revenue Service of South Africa;
3.5.60. “Scaw Metals” means Scaw Metals South Africa Proprietary
Limited;
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3.5.61. “Secured Creditors” means those Creditors who hold security over
assets of the Company for their Claims against the Company;
3.5.62. “South Africa” means the Republic of South Africa;
3.5.63. “Standard Plant” means the Standard Foundry of the Company,
situated at 25 Main Reef Road, Benoni, Gauteng, South Africa;
3.5.64. “Substantial Implementation Date” means the date upon which
the BRPs file with the CIPC a notice that all of those events
contemplated in paragraph 8.2 (Substantial Implementation) have
occurred and whereupon Business Rescue will terminate;
3.5.65. “Tax/Taxation” means:
3.5.65.1. levies payable to government authorities;
3.5.65.2. normal taxation;
3.5.65.3. capital gains tax;
3.5.65.4. value-added tax;
3.5.65.5. any taxation arising from new assessments of taxation
and/or the reopening of any income tax assessments of
the Company for any period prior to the Commencement
Date;
3.5.65.6. donations tax;
3.5.65.7. customs duty;
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3.5.65.8. securities transfer tax;
3.5.65.9. all Pay-As-You-Earn taxation (PAYE) not paid over;
3.5.65.10. all other forms of taxation, other than deferred tax;
3.5.65.11. any penalties or interest on any of the foregoing.
3.5.66. “the DTIC” means the Department of Trade, Industry and
Competition of South Africa;
3.5.67. “the Minister” means the minister of the DTIC;
3.5.68. “Trade Unions” mean the following registered trade unions
representing the employees of the Company:
3.5.68.1. Metal and Electrical Workers Union of South Africa;
3.5.68.2. National Union of Metalworkers of South Africa;
3.5.68.3. Solidarity;
3.5.68.4. United Association of South Africa, the Union;
3.5.69. “Transnet” means Transnet SOC Limited;
3.5.70. “Union Plant” means the Union Junction Foundry of the Company,
located at Penny Road, Dinwiddie, Germiston, Gauteng, South
Africa;
3.5.71. “VAT” means the value-added tax levied in terms of the South
African Value-Added Tax Act, No. 89 of 1991 as amended;
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3.5.72. “Wheel Plant” means the Union Junction Wheel Plant of the
Company, located at Penny Road, Dinwiddie, Germiston, Gauteng,
South Africa;
3.6. any reference to any statute, regulation or other legislation in this Business
Rescue Plan shall be a reference to that statute, regulation or other legislation
as at the Publication Date, and as amended or substituted from time to time;
3.7. if any provision in a definition in this Business Rescue Plan is a substantive
provision conferring a right or imposing an obligation on any person or entity
then, notwithstanding that it is only in a definition, effect shall be given to that
provision as if it were a substantive provision in the body of this Business
Rescue Plan;
3.8. where any term is defined in this Business Rescue Plan within a particular
paragraph other than this paragraph, that term shall bear the meaning
ascribed to it in that paragraph wherever it is used in this Business Rescue
Plan;
3.9. any reference to days (other than a reference to Business Days), months or
years shall be a reference to calendar days, months or years, as the case may
be; and
3.10. words or terms that are capitalised and not otherwise defined in the narrative
of this Business Rescue Plan (excluding capitalised words or terms used for
the purpose of tables) shall bear the meaning assigned to them in the
Companies Act.
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4. STATEMENT ON CONFLICT OF INTEREST
Neither the BRPs, their Advisors, nor any professional engaged by the BRPs with the
Business Rescue has any other relationship with the Company such as would lead a
reasonable and informed third party to conclude that the integrity, impartiality or
objectivity of that person is compromised by that relationship. Nor is any such person
related to a person who has a relationship contemplated in the above statement.
5. STRUCTURE OF THE PLAN
The Plan is formulated on information obtained from books and records from the
Company, the directors, Management and interviews with relevant persons and it
should be noted that:
5.1. There may be certain issues that require additional investigation for an
absolute determination to be formed. Where appropriate or necessary we have
highlighted these issues throughout the body of the Business Rescue Plan
and, to the extent necessary, have considered the possible impact of them
when making our recommendation to Creditors.
5.2. In the time available to the BRPs, the BRPs have not carried out a full audit
nor a comprehensive review of the Company’s documents, nor have the BRPs
had adequate opportunity to verify all of the information given to us by the
Company. We have had to rely on the information provided by the Company.
Any claim against the Company as depicted in the financial information as
presented in the Business Rescue Plan is not intended to be an
acknowledgement of debt merely by reference thereto in the Plan.
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5.3. The statements and opinions given in the Business Rescue Plan are given in
good faith and in the belief that such statements and opinions are not false or
misleading. Except where otherwise stated, we reserve the right to alter any
conclusions reached on the basis of any changes in, or additional to,
information that may become available to us between the Publication Date and
the Adoption Date.
5.4. Neither the BRPs, nor their Advisors, nor any member, director, employee or
consultant of the Company undertakes responsibility in any way whatsoever
to any person in respect of any errors in the Plan arising from incorrect
information provided to the BRPs.
5.5. Any projections and forecasts included in the Business Rescue Plan are by
their very nature forward-looking and the BRPs make no warranty, implied or
otherwise, as to their likely outcome.
5.6. In considering the options available to Creditors/Affected Persons and
formulating their recommendations, the BRPs have made the necessary
forecasts with respect to asset realisations and the quantum of total Creditors.
These forecasts and estimates may change as asset realisations progress and
claims are received by Creditors. Whilst the forecasts and estimates are the
results of the BRPs’ best assessment in the circumstances, it should be noted
that the ultimate deficiency and thus the distribution or outcome for Creditors
could differ from the information provided in the Business Rescue Plan.
5.7. For the purposes of section 150 (2) of the Companies Act, this Business
Rescue Plan is divided into 3 (three) parts as follows –
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5.8. PART A - BACKGROUND
Part A sets out the background to the Company and the factors that resulted
in the Company being Financially Distressed and being placed under Business
Rescue.
5.9. PART B - PROPOSALS
Part B describes the terms of the Proposed Turnaround Plan and includes,
inter alia, the benefits, for Affected Persons, in adopting the Business Rescue
Plan as opposed to the Company being placed into liquidation.
5.10. PART C – ASSUMPTIONS AND CONDITIONS
Part C sets out, inter alia, what conditions need to be fulfilled in order for the
Business Rescue Plan to achieve the desired outcome, and to be
implemented.
6. PART A - BACKGROUND
6.1. REASONS FOR DISTRESS
6.1.1. It is the BRPs’ understanding that the Company’s Financial Distress
came about as a result of, inter alia, the following:
6.1.1.1. Dysfunctional executive team that did not allow for a
cohesive management structure in the business;
6.1.1.2. Ineffective procurement process with prices paid to
several suppliers being higher than market-related prices;
6.1.1.3. No production planning, processes and controls to drive
efficiencies and customer service;
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6.1.1.4. Ineffective time management allowed for excessive
overtime charges by staff - up to 35% of gross payroll in
some months;
6.1.1.5. Security control was not effective allowing for pilferage
and loss of stock and products and assets;
6.1.1.6. Poor and outdated business systems and structures;
6.1.1.7. Poor organisational culture;
6.1.1.8. Lack of performance management and accountability
6.1.1.8.1. No proper cost management;
6.1.1.8.2. Actual production costs unknown;
6.1.1.8.3. Tendering system not working;
6.1.1.8.4. Management and staff not measured on
performance.
6.1.1.9. Lack of risk management and internal controls.
6.1.2. The above factors have had an adverse effect on the operations of
the Company and as a consequence, the Company has been loss-
making for a number of years. The COVID-19 Pandemic also
played a major role in hindering the success of the Company.
6.1.3. The COVID-19 Pandemic and consequent lockdown restrictions
negatively impacted many of the Company’s scheduled projects
which were halted, and some did not materialise due to the
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pandemic, resulting in the Company losing a lot of production time
and revenue.
6.1.4. An added consequence of the above is the loss of critical skills,
which the Company has, to date, not been able to recover from. It
is important to note that the Company was not performing even
when it did have these critical skills; almost certainly a result of
dysfunctional management as highlighted above.
6.1.5. As a result of the aforementioned reasons, the board of directors of
the Company resolved to place the Company in business rescue.
6.2. REASONABLE PROSPECT
6.2.1. The aim of Business Rescue in terms of the Companies Act is to
restore the Company to solvency and allow it to continue to trade
through the development and implementation of a business rescue
plan or, if it is not possible, to at least provide a better return to
creditors and shareholders than would be the case in a liquidation.
The “reasonable prospect” assertion in the Company’s case is
based on the business being able to trade out of Financial Distress.
6.2.2. An estimated liquidation calculation is included in Annexure “A” (the
financial pack) which reflects an average estimated dividend of
28 (twenty-eight) cents in the Rand or R305 151 586.00 to Secured
Creditors, and 0 (zero) cents in the Rand or R0.00 for the
Concurrent Creditors. There are no Preferent Creditors at the
Commencement Date.
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6.2.3. The reasonable prospect assertion is based on inter alia the
following:
6.2.3.1. Robust turnaround interventions executed in respect of
operational, human resource, technical, financial, sales
and capital structure;
6.2.3.2. Support from the IDC as major creditor and shareholder,
including the provision of PCF;
6.2.3.3. Strong and increasing potential demand for the
Company’s products in the mining sector which is surging
as a result of the commodities boom;
6.2.3.4. Strong demand for the Company’s products in the power
generation (Eskom) and rail (Transnet) sectors;
6.2.3.5. Sale of non-critical and non-income producing assets –
the BR Team has identified several non-critical assets,
and the sale process has commenced in respect of these.
In selling these assets, the BR Team has balanced the
need for cash in the business (to continue operations and
resume Creditor payments) versus the need to achieve
the most favourable sale proceeds possible.
6.3. LIST OF MATERIAL ASSETS
Please refer to Annexure “A”.
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6.4. LIST OF CREDITORS AND CREDITORS’ VOTING INTEREST
6.4.1. A Creditor has a voting interest equal to the value of the amount
owed to that Creditor by the Company on the Publication Date.
6.4.2. Your rights as a Creditor of the Company will be affected in the
manner outlined herein and you are entitled to be present or
represented, and vote, at a meeting of Creditors to be convened in
terms of section 151 of the Companies Act, for the purposes of
considering the Business Rescue Plan. The voting interest
accepted by the BRPs for the purposes of voting does not in any
way, manner or form concede and/or accept the actual amount
claimed by the Creditor.
6.4.3. A Creditor who has a Disputed Claim or a Contingent Claim, will
only be allowed to vote to the extent of the undisputed or non-
contingent portion of their claim. For the avoidance of doubt, this
will not affect the final distribution to such Creditor as the quantum
of their Claims will be finalised mutually between the parties or
through the dispute resolution mechanism as set out in clause 8.8.
6.4.4. In terms of Section 145 (4) (b) of the Companies Act, a Concurrent
Creditor who would be subordinated in liquidation has a voting
interest, as independently and expertly appraised and valued at the
request of the BRPs, equal to the amount, if any, that the Creditor
could reasonably expect to receive in such a liquidation of the
Company.
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6.4.5. All proven liquid Claims, including contingent (subject to what is set
out above) and suretyship or guarantee Claims will be allowed to
vote if the Claim has been allowed and approved by the BRPs. The
decision of the BRPs in this regard will, subject to any manifest
error, be final and binding on the Creditor(s) concerned.
6.4.6. If the value of a Claim of a Creditor arising prior to the
Commencement Date has changed since the Commencement
Date, the amount of the claim as at the Publication Date will be
determinative of such Creditors’ voting interest.
6.4.7. Please refer to Annexure “A” for a full list of the Creditors’ Claims.
6.5. LIST OF THE HOLDERS OF THE COMPANY’S ISSUED SECURITIES
6.5.1. The IDC holds 85% of the shares in the Company.
6.5.2. Amsted holds 15% of the shares in the Company.
6.6. THE BRPS’ REMUNERATION
6.6.1. In terms of section 143 of the Companies Act, the BRPs are entitled
to charge hourly fees based on the size of the Company in terms of
its public interest score and at the tariff prescribed by the Minister
from time to time. Currently, BRPs fees may not exceed R1 250 per
hour, with a maximum of R15 625 per day (inclusive of VAT) for a
small company; R1 500 per hour, with a maximum of R18 750 per
day (inclusive of VAT) for a medium company; or R2 000 per hour
with a maximum of R25 000.00 per day (inclusive of VAT) for a large
company or a state-owned company. The Company is classed as a
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“Large Company” and as such the standard tariff is R2 000.00 per
hour with a maximum of R25 000.00 per day, all-inclusive of VAT.
6.6.2. In addition to the BRPs’ aforegoing remuneration, the Companies
Act allows for the BRPs to propose to conclude a contingency fee
agreement with the Company for further remuneration based on the
attainment of any particular event or result, including the adoption
of a business rescue plan.
6.6.3. The current tariff of business rescue practitioner fees was laid down
in 2008, at the same time as the Companies Act came into effect
and have not been amended since. A liquidator will charge up to
10% plus VAT of the sale proceeds of the assets over and above
the costs of liquidation (advertising, marketing and auctioneers
costs) and, having to dispose of the assets in a forced sale, will
realise much lower proceeds. On this basis, the BRPs are confident
in stating that the costs resulting from liquidation will be significantly
higher than those of business rescue.
6.6.4. The BRPs usually charge a rate as senior restructuring and
turnaround professionals of R3 500.00 per hour. The BR Team
hourly rates usually range from R1 500.00 to R3 500.00 per hour
depending upon seniority. The BRPs and their support team will
record the hours spent at the applicable rate.
6.6.5. The above hourly rates charged by the BR Team are typically
complemented by a success fee based on the achievement of
genuine successes or success milestones in the business rescue.
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6.6.6. The BRPs have proposed the following fees and contingency fees
on the approval of the plan:
6.6.6.1. The BRPs will charge a fee of R3 150.00 per hour,
excluding VAT, applied retrospectively to all hours
charged from the Commencement Date and to all hours
charged until the termination of the Business Rescue, to
increase by 10% after 12 months if applicable. The
difference between the statutory hourly rate prescribed by
the Companies Act and the BRPs’ fee of R3 150.00 per
hour will be considered a contingency fee. The BRPs’
support team will charge hourly rates ranging from
R1 350.00 to R3 150.00 per hour depending upon
seniority, also subject to a 10% increase after 12 months
if applicable.
6.6.6.2. A contingency fee which has been agreed in principle
between the BRPs and the Company, being:
6.6.6.2.1. A success fee based on the value earned
for the IDC above liquidation value as a
result of the Business Rescue;
6.6.6.2.2. “Value earned” is based on the total of the
IDC’s debt repayment plus the IDC’s return
from equity on the sale or valuation of the
IDC’s equity on conclusion of Business
Rescue;
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6.6.6.2.3. The proposed success fee is determined
according to the following sliding scale:
Value earned BRPs’ success fee as % of the Condition / milestone upon
for the IDC IDC’s value earned in the Business which fee is payable
(ZAR) Rescue vs Liquidation (ZAR)
0 – 100m 5% Immediately prior to substantial
implementation, i.e., upon sale
of business or conclusion of
equity deal or valuation of
business (in the event of no
sale or equity deal)
100m – 300m 7.5% Immediately prior to substantial
300m + 10% Immediately prior to substantial
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6.6.7. By way of illustration, if the IDC’s total recovery (debt repayment
plus equity sale proceeds or valuation) as a result of the business
rescue is R550 000 000.00, and the IDC’s liquidation valuation at
the Commencement Date is R271 700 306.00 (as per liquidation
calculation in Annexure “A”), then the success fee is payable on the
difference of R278 299 694.00, at a rate of 7.5% (as per the table
above). The total success fee, which would be payable immediately
prior to substantial implementation, would in this case be
R20 872 477.00. For the avoidance of confusion, there are no
milestone payments envisaged in respect of the success fee.
6.6.8. The Creditors will be asked to approve the above hourly rates and
contingency fee in a section 143 of the Companies Act meeting to
be held immediately after or together with the section 152 of the
Companies Act meeting to vote on the Business Rescue Plan.
6.6.9. The draft agreement between the Company and the BRPs for the
payment of the additional remuneration and contingency fees will
be attached to the Business Recue Plan as Annexure “D” in
advance of the section 143 meeting to vote on the contingency fee.
6.7. POST COMMENCEMENT FINANCE
6.7.1. POST COMMENCEMENT FINANCE FROM THE IDC
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6.7.1.1. The IDC, an existing Secured Creditor and majority
shareholder of the Company, has provided and agreed to
provide further post-commencement finance to the
Company, for purposes of its operational requirements,
on the following terms:
6.7.1.1.1. PCF Loan Amounts: R24 900 000.00
(advanced February 2022);
R24 000 000.00 (will be advanced during
March 2022).
6.7.1.1.2. Interest: Prime Overdraft Rate plus 4%.
6.7.1.1.3. Repayment terms: No fixed repayment
terms, but repayable in full by the fifth
anniversary of the first drawdown date.
6.7.1.2. The PCF loan amounts as set out above are advanced by
the IDC in terms of a loan agreement signed on
15 December 2021. This loan agreement effectively
made available to the Company an amount of
R84 947 679.41 at date of signing. R30m of the loan was
drawn down by the Company shortly before the
Commencement Date. This R30m has been recognised
as part of the PCF loan amount due to the fact that the
utilisation thereof has occurred almost entirely post the
Commencement Date.
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6.7.1.3. The proceeds of any equity sale envisaged by Phase 3 of
the Plan will be applied firstly to the settlement of the
IDC’s PCF loan, subject to the availability of cash in the
business.
6.7.1.4. Free cash flow generated by the business during BR will
be paid back to the IDC after every financial year end. The
free cash flow calculation accounts for the business’s
working capital needs for the ensuing 3 months and
retains 50% as a buffer against unforeseen events. An
illustration of the free cash flow calculation is as follows:
FYE 2024 FYE 2025
Bank balance 121,954,649 207,398,410
Working capital required next 3 months:
- Creditors -2,728,344 -3,074,917
- Debtors and stock -9,459,485 -12,416,130
Free cash flow available 109,766,820 198,057,197
50% payable to the IDC against PCF loan 54,883,410 99,028,598
6.7.1.5. The provision of the PCF Loan is subject to this Business
Rescue Plan being adopted as contemplated in Section
152 (4) of the Companies Act, compliance with all
necessary statutory requirements, and the provision of
security to the satisfaction of the IDC (at its sole
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discretion) in respect of the existing debt PCF Loan,
which may, inter alia, include the following:
6.7.1.5.1. Registration of a special notarial bond over
unencumbered assets, and a general
notarial bond over all of the unencumbered
movable assets of the Company in the
amount of R50 000 000.00 and the
additional sum of R5 000 000.00.
Registration of this special notarial bond is
currently in process.
6.7.2. The IDC’s right to exercise its rights in terms of any security it may
hold for its Claim against the Company is not in any way being
impeded by the adoption of the Business Rescue Plan.
6.8. STEPS TAKEN SINCE THE APPOINTMENT OF THE BRPs
6.8.1. APPOINTMENT OF BRPS
6.8.1.1. The BRPs accepted were officially appointed on 24
January 2022.
6.8.2. MANAGEMENT CONTROL
6.8.2.1. In terms of section 140 (1) (a) of the Companies Act, the
BRPs took over management control of the Company.
6.8.2.2. The BRPs have control of the Company bank accounts.
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6.8.2.3. Further details of the assumption of management control
are set out in clause 6.8.5.2.2.
6.8.3. REPORTING TO CIPC
6.8.3.1. The BRPs have complied with all statutory obligations
under the Companies Act and will render monthly reports
to the CIPC as contemplated in section 132 (3) of the
Companies Act.
6.8.4. PUBLICATION OF BUSINESS RESCUE PLAN
6.8.4.1. In terms of section 150 (5) of the Companies Act, the
Business Rescue Plan is required to be published within
25 (twenty-five) Business Days from the appointment of
the BRPs.
6.8.4.2. Having obtained a 30-day extension for the publication of
the plan from the requisite majority of independent
creditors, the BRPs published the Business Rescue Plan
as required in terms of the Companies Act.
6.8.5. LEGAL
6.8.5.1. Suspension of Contracts
6.8.5.1.1. Section 136 (2) of the Companies Act
authorises the BRPs during business
rescue to suspend entirely, partially or
conditionally, for the duration of the
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business rescue proceedings, any
obligation of the Company that arises under
an agreement to which the Company was a
party at the Commencement Date and
would otherwise become due during the
business rescue.
6.8.5.1.2. The BRPs deemed it necessary to suspend
the Company’s obligations in terms of:
6.8.5.1.2.1. The Deed of notarial lease
entered into between the
Company and Scaw Metals
on or about 26 April 2018;
6.8.5.1.2.2. The master service
agreement between the
Company and Scaw Metals
on or about 26 April 2018;
6.8.5.1.2.3. Clause 3 of the Third
Amendment to the principal
licensing agreement entered
into between the Company
and Amsted on or about
December 2003.
6.8.5.2. Investigation into the affairs of the Company:
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6.8.5.2.1. In terms of section 141(1) of the Companies
Act the BRPs must investigate the
Company’s affairs, business, property and
financial situation.
6.8.5.2.2. Immediately following their appointment,
the BRPs consulted with Management in
order to inter alia:
6.8.5.2.2.1. ascertain the financial
position of the Company; and
6.8.5.2.2.2. identify the assets and
liabilities of the Company.
6.8.5.2.3. The BRPs will continue to exercise their
statutory obligations in terms of section 141
of the Companies Act.
6.8.5.3. General:
6.8.5.3.1. The BRPs were required to engage
attorneys to advise on, inter alia, issues
relating to:
6.8.5.3.2. Employment;
6.8.5.3.3. Regulatory issues, including compliance
with the relevant provisions of the PFMA;
6.8.5.3.4. Contractual disputes;
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6.8.5.3.5. PCF;
6.8.5.3.6. Post-commencement agreements;
6.8.5.3.7. The sales process;
6.8.5.3.8. Claims against the Company; and
6.8.5.3.9. Various other issues arising of the business
rescue.
6.8.6. PUBLICATION OF NOTICE OF MEETING AND BUSINESS
RESCUE PLAN
6.8.6.1. The publication of the Business Rescue Plan and notice
of meeting took place in the following manner:
6.8.6.1.1. by email to all known Creditors, to the extent
that the email addresses are available;
6.8.6.1.2. publication on the website of the Company.
6.8.6.2. Copies of the Business Rescue Plan and notice of
meeting are available at the registered office of the
Company.
6.9. LABOUR
6.9.1. EMPLOYEES’ MEETINGS:
6.9.1.1. The first meeting of Employees was held on
7 February 2022. Following that, employee roadshows to
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conduct townhall meetings with Employees commenced
from 21 February until 25 February 2022. These were
intended to engage the Employees on the reasons for the
business rescue, the process itself and how they could
contribute. The workers were very positive about the
process. Engagement with shop stewards representing
the Trade Unions has been an ongoing process since we
were appointed as BRPs, and we have been receiving
continual input from them. A formal meeting was held with
the national office bearers of all Trade Unions
represented at the Company on 2 March 2022. At this
meeting, we presented the reasons for the directors
electing to commence business rescue, the progress thus
far, the suspension of layoffs, the plan to have an
Employee Committee and to train them on their
engagement in the process according to the Companies
Act, as well as solicit their support. While they reserved
their rights to challenging the outcome of the process,
they indicated their support thus far.
6.10. CREDITORS
6.10.1. CREDITORS’ MEETING:
6.10.1.1. The first meeting of Creditors, as contemplated in section
147 (1) (a) of the Companies Act, was held on the 7 th of
February 2022 (“the First Meeting of Creditors”).
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6.10.1.2. At the First Meeting of Creditors:
6.10.1.2.1. the BRPs explained the basis for their
“reasonable prospect” assertion;
6.10.1.2.2. the BRPs addressed various queries raised
by Creditors;
6.10.1.2.3. the Creditors were invited to form a
committee in terms of Section 147 (1) (b) of
the Companies Act; and
6.10.1.2.4. The BRPs confirmed that Claims could be
received by email.
6.10.2. CREDITORS' COMMITTEE
6.10.2.1. A Creditors’ Committee was formed consisting of the
following representatives:
6.10.2.1.1. Grinding Techniques Proprietary Limited;
6.10.2.1.2. Scaw Metals;
6.10.2.1.3. The IDC;
6.10.2.1.4. Environmental Hygiene CC;
6.10.2.1.5. Carbide Industrial Products Proprietary
Limited;
6.10.2.1.6. Amsted;
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6.10.2.1.7. Alora Pallets Proprietary Limited;
6.10.2.1.8. Bellamark Proprietary Limited; and
6.10.2.1.9. Velaworks Proprietary Limited.
6.10.2.2. The Creditors Committee has been kept abreast of
material events affecting creditors up to publication of the
Business Rescue Plan.
6.10.3. STATEMENT REGARDING ANY INFORMAL PROPOSALS BY
CREDITORS
6.10.3.1. No informal proposals have been received from any
affected persons, other than those set out in this Business
Rescue Plan.
7. PART B - PROPOSALS
7.1. OBJECTIVE
7.1.1. The purpose of business rescue proceedings, as set out in section
128 (1) (b) (iii) of the Companies Act, is to develop and implement
a plan that:
7.1.1.1. rescues the Company by restructuring its affairs,
business, property, debt and other liabilities, in a manner
that maximises the likelihood of the business continuing
in existence on a solvent basis; or
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7.1.1.2. if the aforementioned is not possible, to ensure a better
return for the Creditors than would have resulted from the
immediate liquidation of the Company.
7.1.2. This Business Rescue Plan should provide Affected Persons with
information, so that they may:
7.1.2.1. assess the likely outcome of the dividend yield calculation
under Business Rescue; and
7.1.2.2. be assured of the likelihood of obtaining a better outcome
under Business Rescue for all Affected Persons, when
compared to liquidation.
7.1.3. The Business Rescue Plan and its proposal set out below seek to
achieve the primary objective of restoring the Company’s solvency.
7.2. SUMMARY OF PROPOSAL
7.2.1. The BRPs are of the opinion that the best outcome for Affected
Persons is for the Company to continue trading and implement the
Proposed Turnaround Plan which will lead to the Company
continuing to operate and a restoration of solvency and, if that
proves to be unsuccessful, allows for a sale of the business or
shares in the Company in a manner that would be preferable to a
liquidation of the Company.
Proposed Turnaround Plan:
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7.2.2. In order to rescue the Company, the BRPs have proposed a three-
phase approach in respect of the implementation of the Business
Rescue Plan. These phases have been termed,
7.2.2.1. Phase One: Clean Up and Restructuring;
7.2.2.2. Phase Two: Ongoing Trading and Optimisation, and
7.2.2.3. Phase Three: Sales Process.
7.2.3. Within each of the aforementioned phases there are various
processes to be undertaken, some of which will happen
simultaneously in phases one and two, while others in phase three
may only be implemented as and when the BRPs are of the view
that it is appropriate to do so based on the outcome of Phases One
and Two.
7.2.4. The salient, high-level features of the three phases are as follows:
7.2.4.1. Phase One: Clean Up and Restructuring (estimated
duration 6 months from adoption of the Plan). This phase
will consist of all the immediate action that the BRPs have
determined is required in order to bring stability to the
Company, to address the structural and financial issues,
as well as any employee related restructuring, including
but not limited to:
7.2.4.1.1. Balance sheet optimisation;
7.2.4.1.2. Production restructure and optimisation;
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7.2.4.1.3. Product costing restructure;
7.2.4.1.4. Appropriate corporate governance
implementation;
7.2.4.1.5. Rationalisation of business units;
7.2.4.1.6. Non-core asset sale;
7.2.4.1.7. Human capital review, re-organisation and
implementation;
7.2.4.1.8. Sales department re-organisation and
rebuilding of client relationships;
7.2.4.1.9. Procurement restructure;
7.2.4.1.10. Inter-departmental workflow restructure;
7.2.4.1.11. Commencement of the exploration of
potential strategic equity partner
relationships;
7.2.4.1.12. Further information in relation to Phase One
is set out in paragraph 7.3 to 7.6 below.
7.2.4.2. Phase Two: Ongoing Trading and Optimisation
(estimated duration 3 - 6 months from conclusion of
Phase One). This phase will consist of the continued
trading of the Company and various steps that are
required in order to make the operations of the Company
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more efficient and the business of the Company
competitive in the market. The work carried out in Phase
Two will to a large extent be a refinement and bedding
down of the Phase One turnaround interventions,
supplemented by the continuous implementation of
improvements and new initiatives. The exploration of
potential strategic equity partner relationships will
continue during Phase Two.
7.2.4.3. Phase Three: Sales Process (estimated duration 3 – 6
months from conclusion of Phase Two). This phase will
consist of a sales process that will endeavour to attract an
investor with the financial and technical ability to move the
Company from a stable business to a competitive and
profitable business. It is envisaged that this process will
take place either by way of a sale of a majority of the
Company’s shares, or a sale of its business. It is
contemplated that in order to implement Phase Three:
7.2.4.3.1. The BRPs will advertise the sale of the
Company’s business and/or/ invite a
subscription of shares of the Company on
their website and various national
newspaper outlets and/or in any other
manner which they deem to be efficient.
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7.2.4.3.2. Once the advertising period has lapsed and
offers have been received, the BRPs will
evaluate the offers received and conduct
investigations into the viability of the
potential purchasers.
7.2.4.3.3. The potential purchasers who possess the
financial and technical ability to move the
Company in a stable direction will be
required to submit non-binding indicative
offers to the BRPs.
7.2.4.3.4. The BRPs and their Advisors will evaluate
the offers whereafter same will be disclosed
to the shareholders of the Company.
7.2.4.3.5. Upon disclosure of the non-binding offers to
the shareholders, the potential purchasers
will be required to furnish the BRPs with
proof to the satisfaction of the BRPs that
they have the financial ability to conclude
and implement the transaction.
7.2.4.3.6. The potential purchasers demonstrating the
financial ability to conclude the transaction
will be granted access to a virtual data
room, site visits, meeting with management
and a suite of financial and legal reports,
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including financial, tax and other relevant
information in relation to the Company, in
order to conduct a due diligence.
7.2.4.3.7. Following the conclusion of the due
diligence process, the potential purchasers
will be required to submit final offers
together with proof of funds.
7.2.4.3.8. The BRPs will consider the final offers and
table same to the shareholders for approval.
7.2.4.3.9. In terms of section 54 (2) of the PFMA,
before the BRPs conclude the
aforementioned sales process which will
result in the disposal of a significant
shareholding (or the business) of the
Company, the BRPs will be required to
promptly and in writing inform the DTIC and
National Treasury of the transaction and
submit the relevant particulars of the
transaction to the Minister for the approval
of the transaction.
7.3. PHASE ONE TURNAROUND PLAN – PRODUCTION
7.3.1. Production Overview
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7.3.1.1. Since the Commencement Date, production has been
increasing steadily to the extent that March 2022 revenue
projections are in the region of R58m, increasing to R70m
for April 2022. Weekly planning targets are generally
being met and production has increased in all four
foundries. The following table illustrates actual and
projected output (in tonnes and Rand selling price) for
January to April 2022:
Month Tonnes Selling Price Rand

value (‘000)
January 2022 890 30,104
February 2022 989 41,847
March 2022 (projected based 1,215 57,991

on actual MTD & forecast)
April 2022 (budget) 1,517 70,209
7.3.1.2. Production is and has been one of the most critical focus
areas since the Commencement Date. There is currently
a production backlog of R153 292 065.00 worth of orders
which arose as a result of severe and worsening
production inefficiencies prior to the Commencement
Date. The total outstanding order book value is presently
R309 209 828.00.
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7.3.1.3. Whilst revenue generation from sales is also a key priority
for the BR Team, it is essential that production backlogs
be cleared before the Company can satisfactorily deliver
on its new and existing sales and delivery commitments
to customers.
7.3.1.4. The BR Production Team is headed by Danie Slabbert
(Professional Engineer) who is being assisted by Ferdi
Engelbrecht.
7.3.1.5. Boksburg Plant - this foundry is presently achieving the
most satisfactory production levels of the four plants. Its
production level is presently estimated by the BR Team
to be at 90% of the industry acceptable standard for a
single shift operation. The production backlog is currently
2,5 months and is expected to be cleared by end-June
through the addition of a second shift.
7.3.1.6. Eclipse Plant – this foundry is slightly behind on
production levels. Its production level is presently
estimated by the BR Team to be at 70% of the industry
acceptable standard for a single shift operation. The
production backlog is currently 1,5 months and is
expected to be cleared by end-May through the addition
of employees re-deployed from the Union Plant.
7.3.1.7. Wheel Plant – the Wheel Plant production is presently
below where it is required to be. It is currently casting 16
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– 19 wheels per heat, whereas the number should be 22.
The first week of March has seen casting of 20 wheels
per heat with an average cast time of 19 minutes. Prior to
the Commencement Date the plant was casting 12 – 14
wheels per heat. The plant is currently manufacturing only
34” Transnet wheels and presently has a backlog of 2 685
wheels which are required and expected to be delivered
at a rate of 400 per week. The Transnet delivery schedule
in respect of the backlog of 34” wheels is attached as
Annexure “B”.
7.3.1.8. Union Plant - The automated plant is not presently
working. The jobbing foundry is presently operating and
produces the Transnet non-wheel products, Eskom
products and mining products. One of the primary focuses
of the BR Team is to reduce the production cost of the
jobbing foundry.
7.3.1.9. As part of its analysis, the BR Team is calculating the split
of the machining cost between the Wheel Plant and the
Union Plant in order to determine the actual cost per plant
and product. This exercise is important for the following
reasons:
7.3.1.9.1. Machining takes up extensive space and
the overhead cost allocation per
plant/product needs to be accurate;
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7.3.1.9.2. Several of the Company’s financial
problems are directly related to the under-
utilisation of the machine shop;
7.3.1.9.3. It is important to identify where products are
re-machined as a result of casting
problems.
7.3.1.10. The BR Production Team has implemented several
efficiency and cost reduction programs for the next 12
months which include the following:
7.3.1.10.1. Scrap improvement program;
7.3.1.10.2. New orders, production improvement and
through put improvement program;
7.3.1.10.3. Increase production in all four plants
program;
7.3.1.10.4. Overtime management program;
7.3.1.10.5. Space improvement and Scaw Metals’ cost
reduction program;
7.3.1.10.6. Reduce WIP and redundant stock program;
7.3.1.10.7. Retrenchment planning program;
7.3.1.10.8. Meetings program;
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7.3.1.10.9. Capacity per foundry vs actual production
dashboard program;
7.3.1.10.10. Maintenance program; and
7.3.1.10.11. Foundry-specific projects.
7.3.2. Scrap improvement program
7.3.2.1. The scrap improvement program is aimed at reducing the
average scrap rate across the business from its pre-
Business Rescue levels of 10% non-wheel and 47% on
the Wheel Plant, to an industry-acceptable level of 5%
non-wheel and 22% on the Wheel Plant. The program
was implemented at the Commencement Date and
started to bear fruit in March 2022. During the month of
February there were still a number of products working
through the system (in the machining & fettling process
mostly), therefore the results of the program
implementation were somewhat delayed. The full effect of
the program will be seen once all products cast before the
Commencement Date have been completed and sold.
The required results will be obtained by establishing
focused responsibility, measurement of results and
improving the culture towards a sensitivity for quality and
effectiveness. Please refer to Annexure “A” where the
planned improvements in quality levels/ and scrap rate is
budgeted for each plant on a monthly basis. The
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emphasis is on reducing rejects in the Wheel Plant which
will have a major impact on the quality results of the
Company as a whole.
7.3.2.2. “Round 1” of the scrap improvement program is expected
to see the non-wheel scrap rate reduced to 7% and wheel
scrap rate reduced to 35% by end-May 2022.
7.3.2.3. As part of the foundry clean-up project a lot of additional
scrap is being unearthed which can be re-melted and is
thus likely to reduce scrap purchases.
7.3.2.4. An internal scrap review and analysis exercise is
performed daily.
7.3.2.5. Foseco, a supplier to the Company and the Foundry
Division of Vesuvius, is a global leader in products and
solutions for improving foundry performance and is
assisting with the quality program in the Wheel Plant.
7.3.2.6. In the Wheel Plant the BR Production Team has
implemented logistical control of all movements in respect
of wheel quantities cast, machined and delivered.
7.3.2.7. The duration of the scrap improvement program is 6
months from the Commencement Date, and is estimated
to result in an EBITDA improvement of some R2m – R3m
by end-March 2022 and ultimately some R5m per month
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when scrap levels have been reduced to industry
standards.
7.3.3. New orders, production improvement and throughput improvement
program
7.3.3.1. The intention of this program is to increase orders from
customers whilst increasing production levels and
ensuring the sales and production functions are properly
aligned via the planning program.
7.3.3.2. The duration of this program is 6 months from the
Commencement Date, and in tandem with the Increase
production in all four plants program, is estimated to result
in an EBITDA improvement of some R5m per month.
7.3.4. Increase production in all four plants program
7.3.4.1. This program targets a 30% improvement in production
levels month on month through improved efficiencies.
7.3.4.2. The BR Production Team is investigating inter alia the
implementation of a double shift at the Boksburg Plant
with 20% more cost but a 30% improvement in
production. This move will see the transfer to the
Boksburg Plant of Union Plant employees who are
presently not working. The Boksburg Plant currently
operates 12-hour shifts which will be replaced with two
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normal shifts. This will also have a positive impact on any
possible retrenchments.
7.3.5. Overtime management program
7.3.5.1. The management of overtime is a critical focus area for
the BR Production Team. Prior to the Commencement
Date, approximately 31% of the Company’s salary bill
related to overtime. This was exorbitant considering the
fact that a significant number of staff are presently sitting
idle, and that foundries, such as the Union Plant, have
substantial excess production capacity. Overtime going
forward will be limited to 5% of the salary bill. The
following table shows the value of overtime paid per
month for the 11 months to February 2022:
Month Rand value of
overtime paid (R’m)
April 2021 6,9
May 2021 7,9
June 2021 5,6
July 2021 5,2
August 2021 3,8
September 2021 5,9
October 2021 8,1
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November 2021 7,4
December 2021 3,6
January 2022 1,9
February 2022 3,4
Overtime forecast for the ensuing 6 months is as follows:
Month Rand value of
overtime paid (R’m)
March 2022 1,9
April 2022 1,0
May 2022 1,0
June 2022 1,0
July 2022 1,0
August 2022 1,0
7.3.5.2. The BR Production Team has re-allocated idle staff
(primarily from the Union Plant) to the areas of the
business where overtime has been excessive, in order for
production to take place under normal working hours as
far as possible.
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7.3.5.3. All overtime is required to be signed off in advance by the
BRPs. This measure is likely to curb the overtime cost
substantially.
7.3.5.4. There has been inevitable resistance from staff to the
reduction in overtime, as well as the re-allocation of staff
to different areas in the attempt to reduce overtime. This
resistance has been managed by the BR Team, by inter
alia helping the staff to understand that re-allocation of
staff is required for efficiencies and it also positively
impacts the on any potential retrenchments.
7.3.6. Space improvement and Scaw Metals’ cost reduction program
7.3.6.1. The space reduction process with Scaw Metals has been
finalised to the extent that the Company gave back
approximately 13 000 sqm to Scaw Metals effective
1 April 2022. Following this exercise, the Company has a
total rental area from Scaw Metals of approximately
130 000 sqm. The reduction has therefore resulted in a
rental saving of approximately 10% in both utilisation
areas and common areas.
7.3.6.2. Surveyors were appointed to recalculate all relevant
square meters and the allocation of space used by the
Company.
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7.3.6.3. The BR Team’s intention is for the total monthly charge to
be reduced substantially by the end of April 2022, which
will include the effect of the services agreement with
Scaw Metals. Certain of the services being paid for will no
longer be required and will be replaced with more
affordable options/services where practicable.
7.3.6.4. The program is thus expected to realise EBITDA
improvements of some R3m per month and is expected
to be completed by end-April 2022.
7.3.7. Reduce WIP and redundant stock program
7.3.7.1. There is presently R16 556 985.00 worth of Transnet
stock (primarily yokes and carriage parts) which were
manufactured pre-Business Rescue based on Transnet’s
planning and not on orders.
7.3.7.2. The Business Rescue production and sales teams have
engaged with Transnet in an effort to procure orders for
these items. A detailed list of the items and their prices
was presented to Transnet together with a request for
orders. Engagement to this effect is ongoing.
7.3.7.3. There is presently some R69m worth of old and
redundant stock in the Company’s warehouses. The BR
Production Team considers it likely that approximately
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R5m hereof can be sold back to suppliers in order to
defray the value of creditors’ claims in the Business
Rescue. A provision of R25m has been raised against
this stock. It is expected that the balance of R39m (after
sell-back and provision) can be used as trading stock
despite the age thereof.
7.3.8. Proposed retrenchment planning program assisted by the Human
Resources team
7.3.8.1. In order to achieve the cost savings required in order to
return the Company to profitability, it is regretfully
proposed that some employees be retrenched.
7.3.8.2. Through reallocation of staff, reduction of overtime, and
intensive attention to profitability improvement, the BR
Team has attempted to reduce the need for the proposed
retrenchments as far as possible.
7.3.8.3. The extent of the proposed retrenchments will be
contemplated in the Section 189 of the LRA notice and
the proposed Section 189 of the LRA process will
commence once the Business Rescue Plan is approved
and adopted.
7.3.8.4. The BR Production Team has been structuring
organograms of current positions for all four plants and
reconciling these with the HR Team to confirm that all
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positions and numbers are aligned to the human
resources’ records.
7.3.8.5. The Company is finalising its proposed estimates of the
number of staff that will be retrenched, with current
estimates indicating a cost saving of approximately R5m
per month.
7.3.9. Meetings program
7.3.9.1. The BR Production Team has introduced daily meetings
for all four plants to address:
7.3.9.1.1. Daily Production
7.3.9.1.2. Daily Scrap
7.3.9.1.3. Daily Dashboards
7.3.9.1.4. Review of daily minutes and actions.
7.3.9.2. The purpose of these meetings is to manage processes
and production more effectively. The meetings are
designed to improve communication with the end goal of
significantly improved efficiencies.
7.3.9.3. The BR Production Team has implemented a monthly
Plant Managers meeting to discuss how the four plants
can work better together to enhance cohesive planning
and execution across all four foundries.
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7.3.9.4. These meetings are designed to ensure that the four
plants share resources and operate more inclusively, with
the end goal of significantly improved efficiencies.
7.3.10. Capacity per foundry vs actual production dashboard program
7.3.10.1. The aim of this program is to constantly measure on
dashboards the actual production versus capacity per
foundry.
7.3.10.2. Both production and capacity per foundry are expected to
continuously improve over time; capacity as a result of
improved production efficiencies.
7.3.10.3. The program is ongoing and the dashboard measurement
discipline is expected to remain in place with the objective
of continuously improving both production and capacity.
7.3.11. Maintenance program
7.3.11.1. A restructuring of the centralised maintenance division
towards allocation of maintenance staff to specific
divisions under the control of the plant managers will
result in more focussed and effective maintenance
execution. Maintenance staff will then form part of the
production team instead of the maintenance department
being a service provider to production. The above
structure supported by preventative maintenance
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planning is likely to result in less downtime and improved
output.
7.3.12. Foundry-specific projects
7.3.12.1. Removal of all sand and debris out of the Union Plant
– This project has allowed for the improvement of
production and has free up much needed space on the
foundry floor. The debris presented a significant OHS
hazard and danger and the project was thus urgent. At
the Commencement Date there were approximately 900
tonnes of sand and waste on the foundry floors, which has
now been removed. The project summary presentation is
attached as Annexure “C”.
7.3.12.2. Removal of steel splashing and steel dirt from
foundry – The objective of this project is to clean up the
areas in front of all furnaces in order to comply with Health
and Safety standards. The majority of the splashing and
debris is required to be dumped, with a small amount
which can be re-melted. Approximately R500k savings
will be achieved from re-melting. The debris, dirt and
unused scrap is an obstacle to an effective melting
process, prevents controls from working effectively, and
is a major health and safety hazard. The project is
expected to be completed by end-March 2022.
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7.3.12.3. Production planning and systems to be loaded on to
new FOMIS to control comprehensive production
planning and processes - Both the Union Plant and
Wheel Plant are required to be fully operational on the
new FOMIS production planning systems by end-March
2022. FOMIS system trials are currently being
implemented at the Union Plant to ensure that the system
can cater for the Company’s production planning. Floor
intervention is being implemented in the Jobbing Foundry
to improve floor planning and execution. Once
operational, the system will enable understanding of daily
planning and melting for the plants, which will improve
efficiencies and processes significantly. This will
positively impact both the efficiency program and the
scrap program. This project is expected to be completed
by end-March 2022.
7.3.12.4. Fix lighting and visibility in foundry; working
environment to be clean and compliant with OHS
requirements in all areas - All lights were fixed/replaced
by 28 February 2022. All casting scrap in foundry was
removed by 31 March 2022.
7.3.12.5. Reduce areas used in the Union Plant to give space
back to Scaw Metals – Space to be handed back to
Scaw Metals is one machine shop area and three areas
of pattern shop changes. For further detail please see
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Space improvement and Scaw Metals’ cost reduction
program.
7.3.12.6. Fix and re-operationalise the Thermal Sand
Reclamation plant - This thermal plant once repaired will
assist in reclaiming sand and sand quality. It is not
currently operational but is expected to be working again
by end-March 2022 depending on the availability of parts.
7.3.12.7. Fix Furnace water systems – completion date estimated
as end-March 2022 depending on the availability of parts.
7.3.12.8. Fix and calibrate scale for accurate measurement of
steel loading - completion date estimated as end-March
2022 depending on the availability of parts.
7.3.12.9. Fix and upgrade Donobat machining centre in Wheel
Plant - completion date estimated as end-April 2022
depending on the availability of parts.
7.3.12.10. Fix and operationalise 2 spectrometers – This
project will assist with accurate analysis and ensure the
Company does not need to use the Scaw Metals’ lab,
which will result in a R50k per month direct saving and will
also assist in controlling the melting processes better.
Both spectrometers were acquired from Amsted and
since acquisition have not been operational. Expected
completion date is end-March 2022.
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7.3.12.11. Several Machine Shop equipment items not
working and required urgent maintenance and fixes –
An unsatisfactory percentage of the machine shop
equipment is presently fully operational. Machining ability
was previously +/- 300% higher than the current
production levels in the machine shops. The machine
shop capability has been severely hampered by the
machines not working or operating at full capacity due to
maintenance issues. Fixing the machines will greatly
improve through put and facilitate shorter delivery time to
clients. Several working machines are not working
optimally due to certain parts being in disrepair. The BR
Team intends to fix all required machine shop equipment
by end-April 2022.
7.3.12.12. Vacuum Stainless Steel Degassing Furnace
and Extraction plant to be assessed with a view to
either usage or sale – This plant, the only furnace of its
kind in South Africa, was acquired but never used. The
BR Production Team is deciding whether to use or sell the
asset, whose replacement value is estimated in the range
of R7m – R10m. Project completion date is scheduled for
end-May 2022.
7.3.12.13. Setup new security and asset control for short
term until control processes are effective – This
project was implemented to enhance physical security
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around scrap and assets after the apparent theft of steel,
scrap and assets was identified as a problem requiring
urgent attention. Physical security has been put in place
for the short term which will convert to controls and
processes in the long term. This project was implemented
in February 2022.
7.3.12.14. Re-organise pattern shops – This project
involves discarding obsolete patterns, stacking and
recording live patterns and establishing accurate pattern
records. The project is expected to be completed end-
April 2022.
7.3.12.15. Resolve Boksburg Air Emission Licence – The
BR Team is in negotiations with the relevant stakeholders
and the project is expected to be completed end-May
2022.
7.3.13. Other production-related opportunities
7.3.13.1. The BR Team has been approached by Naledi Foundry
with a view to the Company assisting with the machining
of Transnet wheels due to its excess machining capacity.
The BR Team considers this an opportunity for the
Company to generate additional income by using the
machine shops which are currently under-utilised.
Discussions with Naledi Foundry in this regard are
ongoing.
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7.3.13.2. The BR Team has been approached by Rustenburg
Foundry with a view to doing work potentially valued at
R100m per annum out of the automated plant.
Discussions with Rustenburg Foundry in this regard are
ongoing.
7.3.13.3. The BR Team is running trials with the FOMIS production
software. If the trials are successful, the team will acquire
the software for R830k with monthly licensing fees for
software maintenance of R30k per plant.
7.4. PHASE ONE TURNAROUND PLAN – HUMAN RESOURCES
7.4.1. Human resources management overview
7.4.1.1. Given the low staff morale and poor work ethic and
culture, the focus of the BR Team has been premised on
organisational renewal and team rebuilding, whilst
addressing staff rationalisation. This was done through
communication and recognition, auditing and correction,
cost reductions, staff relocations and rationalising, policy
drafting and training.
7.4.1.2. Human resources represent one of the most important
components in making the business run effectively and
purposefully. Thus, a key focus for the BR Team has been
to address current human resources challenges that have
almost paralysed the organisation.
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7.4.1.3. The human resources committee is headed by Dr Sello
Mkhondo, a senior business rescue practitioner with
experience in the steel industry, assisted by Anele
Chonco, a human resources specialist with over 15 years’
experience in human resource strategy. The team is
working closely with one of the joint BRPs of the
Company, Refilwe Ndlovu, to map out and provide
strategy to an otherwise bereft human resources
department at the Company.
7.4.1.4. Over the period of the Business Rescue the BR Team has
been working to develop and implement the following:
7.4.1.4.1. Communication and trust building;
7.4.1.4.2. Systems, processes and skills auditing and
correction;
7.4.1.4.3. Staff relocations and rationalising;
7.4.1.4.4. Cost reduction;
7.4.1.4.5. Human resources departmental team
restructuring and motivation; and
7.4.1.4.6. Policy drafting and training.
7.4.2. Communication and trust building:
7.4.2.1. Due to the fact that staff were distrusting of the business
rescue and of management in general, the BR Team
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together with the Acting Chief Executive Officer embarked
on a process of communicating and explaining the
rationale of embarking on business rescue, as well as
how the process would unfold.
7.4.2.2. On the basis of this a roadshow was organised, whereby
several town-hall meetings were held with staff at all the
plants and covering all shifts. Most employees appeared
calmed by the process and appreciated the openness
about the process.
7.4.2.3. The roadshows were preceded by several meetings with
union shop stewards and followed by a meeting with the
national office bearers of each of the Trade Unions.
These meetings also elicited support from the Trade
Unions.
7.4.2.4. From the beginning of the Commencement Date,
Employees, at factory level, have brought numerous
grievances to the BR Team, which had been outstanding
for several months and sometimes years. The BR Team
has spent time attending to these grievances, resulting in
trust being built with workers as they felt they were being
listened to.
7.4.2.5. The Employees have assisted in forming an Employee
Committee for purposes of engaging with the BR Team
on the business rescue. An Employee Committee has
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been formed with 17 representatives, being 12 union
shop stewards representing all Trade Unions, and 5
representatives for non-unionised staff members.
7.4.2.6. Following the appointment of the Employee Committee,
the BR Team embarked on training the representatives
on Chapter 6 of the Companies Act and its implications to
Employees, and how they can effectively engage with the
process.
7.4.3. Systems, processes and skills auditing and correction:
7.4.3.1. From the Commencement Date, the BR Team embarked
on a process of interrogating all human resources related
processes and systems, including the payroll system,
salaries processing, leave processing, overtime
processing, cost centre allocations, grading and
performance management system, appointments and
promotions, training system, succession planning, etc.
The BR Team also embarked on a skills audit to assist
with ensuring that suitable people are appointed in
relevant jobs, as well as determining any skills gaps:
7.4.3.1.1. Payroll system for wages and salaries is run
by Adapt IT with the Company payroll staff
doing the daily capturing of input from
Employee records such as the best time for
clocking in and out at work. The BR Team
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is engaged with several cloud service
providers to provide automation of these
manual systems.
7.4.3.1.2. Leave processing is currently also manual
resulting in missing documents and
uncaptured leave. This results in an
overstatement of the leave provision in the
balance sheet. An automated system has
been discussed with Adapt IT, although it
seems likely to be part of the proposed new
cloud service provider’s offering.
7.4.3.1.3. Processing of overtime has been most
problematic as Employees, including
workers and managers, tended to miss
timelines to submit information to the payroll
clerks. Since this is a manual processing
system, and overtime was previously not
pre-approved, there was a lot of
unauthorised and even illegitimate overtime
processed by under-pressure payroll staff.
The BR Team has since introduced a pre-
approval process for all overtime, with
approval only from Johan du Toit. An
instruction has also been given to strictly
stick to well-known timelines, in order to
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avoid last minute requests. Employees are
now adhering to these. It is also envisaged
that an automated system will alleviate most
manual interventions, thus reducing
leakages.
7.4.3.1.4. Over the years, new staff have been added
to new cost centres, and staff have
invariably moved between departments
without being moved in the system. The
result is a huge unmanageable number of
costs centres, with the possibility of hiding
ghost employees. Together with the Acting
Chief Executive Officer, the BR Team has
completed the cleaning of the cost centre
database on a spreadsheet and has now
begun the process of feeding this into the
SAP system. This is done systematically to
avoid system shut downs and loss of
information.
7.4.3.1.5. The BR Team is working with the HR Team
to select only one grading system. There
are currently two grading systems.
7.4.3.1.6. Due to the fact that a performance
management system does not exist in any
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form, the BR Team has embarked on
implementing a performance management
system within the HR Team, which is
intended to cascade throughout the
organisation. The KPAs and KPIs will be
signed off with the team imminently.
7.4.3.1.7. With few exceptions, appointments and
promotions have generally been
discretionary. This has resulted in some
disgruntled employees, especially in the
plants. A recruitment policy has recently
been approved for rollout by the BR Team,
and training of staff is to be embarked on
shortly, starting with the HR Team.
7.4.3.1.8. Training of staff is currently limited to factory
staff, and even so, in very limited forms.
Scaw Metals is paid approximately
R276 000.00 per month for training, and
Manufacturing, Engineering and Related
Services Sector Education and Training
Authority annually provides some additional
money for training. Together with the HR
Team, the BR Team is finalising plans to
increase the training to include corporate
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staff and in a more systematic and inclusive
way.
7.4.3.1.9. The BR Team working with the HR Team
have begun the process of identifying
skilled staff to be earmarked for succession
planning. This is part of the KPAs for the HR
Team.
7.4.3.1.10. The process of skills audit will ultimately
assist in identifying training needs as well as
succession planning for the entire
organisation.
7.4.4. Staff vacancy relocations and rationalisation
7.4.4.1. Prior to filing for business rescue, the Company had
identified about 106 positions that had been proposed to
be made redundant (mostly from high volume plants) that
were made redundant as a result of diminished sales in
their divisions. There was therefore a looming layoff for
most of them. Once in business rescue, the BR Team
suspended the layoffs, pending the drafting and approval
of the Plan.
7.4.4.2. In order to try to reduce the proposed rate of layoffs, the
HR Team had identified and advertised 30 vacant
positions within the Wheel Plant so as to absorb some
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staff. Once in business rescue, staff who had applied for
some of the positions were interviewed, with 17 staff
suitably qualified for the advertised positions. Together
with the Production Team’s assistance, the BR Team has
begun filling these vacancies.
7.4.4.3. The remaining 13 positions will be filled based on the
results of the skills audit that is currently being undertaken
by the BR Team. Where there are still skills gaps for the
remaining positions, a training programme will be put in
place to accommodate the employees.
7.4.4.4. Furthermore, in order to reduce the excessive overtime in
the Wheel Plant and other areas, an introduction of
double shifts is taking place.
7.4.4.5. In addition to this, there have been about 80 vacancies
identified at the Boksburg Plant and the Eclipse Plant due
to their higher operational requirements as a result of a
significant order backlog. In order to reduce overtime,
second shifts will be introduced.
7.4.4.6. Section 189 of the LRA further rationalisation of staff is
proposed within corporate. The recruitment of various
executive positions that are vacant will occur 3-6 months
post the approval and adoption of the Business Rescue
Plan.
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7.4.5. Cost reduction
7.4.5.1. As mentioned above, the proposed rationalisation may
result in the redundancy of further positions and,
consequently retrenchments of potentially affected
employees. In the event that this happens, costs will
further reduce although there will be upfront retrenchment
costs.
7.4.5.2. Further human resources related cost reductions are
likely to come from a reduction of the costs charged
monthly by Scaw Metals. These monthly charges include
Occupational Health Services (R49 152.00), buses for
staff (R309 696.00), the medical centre (R308 768.00),
training (R276 912.00), phone (PABX) system
(R25 870.00), as well as human resources related SAP
costs (part of the R970 562.00 monthly information
technology charge).
7.4.5.3. Monthly human resources related savings from Scaw
Metals charges are expected to be over R500 000.00.
7.4.6. Proposed restructuring of human resources department and team
performance management
7.4.6.1. In an organisation where accountability is a major
problem, it is imperative for the BR Team to ensure the
implementation of KPAs and KPIs for the organisation.
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This process, however, starts with the HR Team, as they
will be required to roll it out and then cascade it throughout
the organisation.
7.4.6.2. The departure of the human resource lead has provided
an opportunity to reconfigure the HR Team, and provide
them with clear goals to drive the renewal of the
organisation. Thus far, the HR Team is motivated enough
to carry on the huge task ahead, with the BR Team and
human resources committee’s support.
7.4.6.3. Anele Chonco is currenting acting as the human
resources leader. The BR Team believes that she will
provide the needed initial support to the HR Team, mostly
in upskilling areas of development that have identified.
7.4.6.4. Several KPAs have been identified for the HR Team and
are in the process of being drafted into KPIs. This process
will be completed prior to end-March 2022, and it is
envisaged that by then the process of rolling them out
through the organisation will have been begun by the HR
Team.
7.4.7. Human resources policy drafting and training on policy:
7.4.7.1. The organisation currently does not have a
comprehensive and coherent human resources policy.
Staff currently function without policies, and generally rely
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on historical practice, whims or pieces of policy from
Scaw Metals. The current HR Team has recently
attempted to draft some human resources policies, but
save for one which was adopted, they were all in draft
form.
7.4.7.2. The adopted policy, the grievance policy, has not been
implemented, and staff are oblivious of it, including most
of the HR Team. Since the Commencement Date, the BR
Team has adopted one further policy, the recruitment
policy.
7.4.7.3. The BR Team is in the process of drafting the complete
human resources policy document, embracing some of
the drafted policies once approved and adopted.
Furthermore, the BR Team has embarked on training staff
on the two adopted policies, and will continue to do so as
the policies are adopted.
7.4.7.4. It is envisaged that the whole process could take up to six
months.
7.5. PHASE ONE TURNAROUND PLAN – SALES AND CLIENT LIAISON
7.5.1. Sales and Client Liaison Overview
7.5.1.1. The sales team at the Company has experienced
significant loss of key management and skills which has
led to sub-optimal performance of the sales function.
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7.5.1.2. In order for the BR Team to turn the sales function around,
a full marketing strategy is to be implemented in order to
create new sales volume going forward.
7.5.1.3. The following action points are being implemented in
order to effect the necessary restructuring:
7.5.1.3.1. Analysis of sales team organogram and
strengthening thereof;
7.5.1.3.2. Assessment of where the decline in
revenue stems from (main decline occurring
in the Union Plant and inefficiencies coming
through from the Wheel Plant);
7.5.1.3.3. Re-costing and update of standard costing
system currently in place;
7.5.1.3.4. Clearing of quotation backlog currently in
the system;
7.5.1.3.5. Top 10 client (circa 85% of Revenue)
interaction and focus strategy;
7.5.1.3.6. Focus on Eskom and Transnet relating to
clearing of backlogs and correction of
pricing; and
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7.5.1.3.7. New go-to-market strategy to be developed
to increase uptake of new clients and
growth in product line sales.
7.5.2. Sales team organogram
7.5.2.1. There has been a loss of key skills in the sales team. In
the past, there were four sales personnel and two
managers (one manager for rail and one for mining). This
has been reduced to only three sales people with no
senior manager or sales lead in place. This lack of critical
top-level management has led to the following:
7.5.2.1.1. No capacity in the current sales team to look
for new business;
7.5.2.1.2. Unnecessary administration-type functions
being undertaken by the sales personnel as
opposed to administrators. This has led to
the sales personnel having insufficient time
to service their clients properly and it is
evident that more time needs to be spent on
dealing with clients as opposed to
administrative functions;
7.5.2.1.3. No generation of new sales leads or follow-
up with existing clients in order to assess
new and old client requirements; and
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7.5.2.1.4. Lack of decision making and interaction with
the rest of the business, leading to
departments acting in silos with a
breakdown in communication and problem
solving.
7.5.2.2. Recruitment of skills into the sales team is necessary in
order to accomplish the goals of the Business Rescue
Plan. The following key skills will need to be recruited:
7.5.2.2.1. Sales lead - A requirement for a skilled and
experienced head of sales is required in
order to facilitate new sales orders as well
as giving guidance and direction to the more
junior members of the team. There is the
possibility that this resource can be
recruited inhouse once a full assessment of
the sales team’s capabilities has been
undertaken.
7.5.2.2.2. Recruitment of additional members of
the sales team - At least one additional
middle management sales person would be
required to alleviate the pressure currently
experienced by the sales team.
7.5.2.2.3. Recruitment of an additional
administration clerk - The role of the
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resource would be to support the sales
team members with administrative
assistance, particularly with reference to
logging new enquiries and facilitating the
administrative process around quotations
and ensuring that quotations reach the
desired clients in time.
7.5.2.3. The below organogram illustrates the loss of skill and
personnel in the sales department that the BR Team will
address in order to facilitate the upskilling and right sizing
of the sales department:
Lead Commercial
(vacant)
Vacant N. Simelane
Sales Manager Sales Manager
Mining, Crushing (Railway & Power Gen)
(not required)
Vacant
N. Geldenhuys Sales Engineer
A. Redelinghuys
Internal Sales
Sales Representative Supervisor
P. Qhamakoane L. De Bruyn J. Thobane

G. Ndla Sales Admin Sales Admin Customer Service
Sales Representative Rep.
VACANT
Key: J. Fortune
Sales Engineer Customer Service
Blue: Current positions Rep
Yellow: Not required

VACANT D. Leggitt
Sales Representative
Red: New positions required Senior Projects
Engineer
7.5.2.4. The re-organisation and streamlining of the sales
department has led to the following being implemented:
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7.5.2.4.1. Meetings have been held or have been
scheduled with the Top 10 clients by value
of sales, in order to assess and fully
understand the level of satisfaction that
clients are currently experiencing. This will
enable the BR Team to tailor make
solutions specific to each client’s
circumstances;
7.5.2.4.2. Daily follow up with each sales person to
ensure that all queries or problems
encountered are dealt with and handled
expeditiously (the aim is to turn around
client queries within 48 - 72 hours);
7.5.2.4.3. Weekly meetings with the sales team to
allocate resources where required in a co-
ordinated manner; and
7.5.2.4.4. Bi-weekly meetings with the heads of each
foundry to ensure tie-in to production
scheduling, in order to ensure that client
delivery dates are not missed. If delivery
dates are missed, these meetings serve to
implement a remedial plan of action and
communicate to the affected clients as soon
as practically possible.
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7.5.3. Assessment of sales revenue decline
7.5.3.1. The decline in sales is primarily related to the decline in
productivity and inefficiencies at the Union Plant. This has
been exacerbated by the loss of key personnel in key
positions that has led to a break in the chain of command.
7.5.3.2. There has been a decrease in volume, particularly in the
Union Plant, of which the majority of the decline is related
to decreased output of liners to Eskom (Lethabo power
station liners) and decreased volumes for Transnet. This
has been exacerbated by the backlog in manufacturing
these clients’ orders which led to volumes dropping over
time.
7.5.3.3. The decline in volumes was further exacerbated in 2021
by the following:
7.5.3.3.1. Severe cash flow constraints in the period
June-August 2021. This affected the
Company’s ability to procure materials
timeously which led to backlogs in the
foundries.
7.5.3.3.2. In October 2021 there was an almost
month-long strike in the engineering sector
which further exacerbated the backlogs and
negatively impacted production and sales.
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7.5.3.3.3. The table below illustrates sales volumes
per client, focused on the Top 10 clients,
from which over 85% of the Company’s
revenue is earned:
2022 2021 2020 2019

Customer
tonnes* tonnes tonnes tonnes
Transnet 6 630 12 399 12885 9931
Eskom 1 867 3 403 2887 3097
Harmony 1 694 1 820 1 982 2 314
Sibanye 1 029 1 081 1 759 1 493
IMS 670 843 1 055 1 192
Doering 520 374 - -
Amsted 333 163 112 -
Impala 292 288 304 326
Rhovan 219 167 106 -
Bafokeng 202 153 - -
Total 13 455 20 691 21 090 18 353
* Pro-rata for FYE 2022 based on end-Feb 2022 data
7.5.3.4. There has been a decline in sales volumes, mainly driven
by the inefficiencies of the Union Plant and the ceasing of
certain product lines due to cost overruns. The slow down
and eventual cancellation of the Magotteaux Agreement
furthermore caused sales to decline.
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7.5.3.5. The peak of volumes at the Union Plant, the Eclipse Plant
and the Wheel Plant in 2020 are almost double the
volumes in 2022. The problems encountered in
production have flowed through to sales results achieved.
Counter measures are being implemented in the
production planning in order to increase revenue through
these plants. The total volume across the plants has
moved from a peak of 22 038 tons in FYE 2020 to a
projected volume of only 14 450 tons for FYE 2022. The
BR Team intends to increase efficiencies across the
plants in order to fulfil present client demand and
increased demand in future.
7.5.3.6. An analysis of the Top 6 clients by volume is illustrated in
the below graph:
Volume analysis 2019 - 2022

14 000
12 000
10 000
8 000
6 000
4 000
2 000
-
Transnet Eskom Harmony Sibanye IMS Doering
2022 TONS 2021 TONS 2020 TONS 2019 TONS
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7.5.3.7. By client, the major decline has been experienced in
Eskom and Transnet which has had a significant impact
on the performance of the business.
7.5.4. Quick win opportunities:
7.5.4.1. Eskom – Liner sales to Lethabo power station. Revenue
of circa R33.5 million was recorded in the 2020 financial
year for this product. This fell to R3,5 million in 2021 and
orders were almost non-existent in 2022. A new tender
has been published for these liners which is due at the
end of March 2022. The BR Team has ensured that the
pricing of this tender is competitive in order to take
advantage of this. The BR Team is leading a complete re-
costing exercise which it hopes will ensure that a good
portion of this business is obtained at competitive but
profitable pricing.
7.5.4.2. Eskom – recent new tender has been published which is
due towards end-March. This encompasses a multitude
of products (particularly rings), that the Company supplied
to Eskom in the past. Due to the Company’s pricing being
non-competitive, volumes were lost. A re-costing and
streamlining exercise of the cost drivers is currently being
performed by the BR Team to ensure that the Company
is as competitive as possible on this tender. In this way,
volumes related to these products should increase going
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forward. Of 5 rings that Eskom requires, the Company
presently only supplies one to Eskom.
7.5.4.3. Transnet – There has been a slowdown in Transnet’s
wagon build programme which has negatively affected
the Company, compounded by a backlog in outstanding
orders. However, the Company has recently been
awarded a substantial portion of the 34” wheel tender,
which calls for a contractual quantity of 1,484 wheels per
month. Due to the boom presently being experienced in
commodities, it is anticipated that these volumes can
increase as a result of inter alia increased coal volumes
for export. In addition, Eskom is expected to be putting
out a 36” wheel tender shortly.
7.5.4.4. Mining – Due to the present worldwide commodities
boom, it is anticipated that there will be increased demand
for cast items for South African mines due to higher
throughput by the mines as they take advantage of higher
commodity prices. This should result in an increased
demand for the Company’s products in this sector of the
economy (inter alia mill liners, screens, lifter bars, mantle
and bowl liner wear parts for crushing machinery). The
Company is well poised to take advantage of this potential
windfall.
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7.5.4.5. Rail (Wabtec) - the Company is presently supplying four
frames to this client per month. From our interactions with
the client, this can be moved to 16 - 32 frames per month
dependant on the Company’s capacity and reaching a
new agreeable price point with the client. If executed
correctly and agreement can be reached on pricing, the
increased revenue potential is approximately R5 million
to R13 million per month depending on the volume that
the Company is able to produce. This would also enable
the Company to bid on other frames that the client
currently uses going forward.
7.5.4.6. Magotteaux - The Company was party to the Magotteaux
Agreement which was terminated in October 2021.
Historical revenue from the sale of the Magotteaux
licenced product was circa R50m per annum. In terms of
the agreement, the Company utilised Magotteaux
technology in its process for the manufacture of chrome
liners for the mining industry, for which Magotteaux
earned a royalty of 11.25% of sales. Magotteaux’s
primary reason for cancelling the Magotteaux Agreement
in October 2021 was the fact that there were long
outstanding royalties which the Company wasn’t paying
them. From discussions between the BR Team and
Magotteaux it appeared there had been a general
breakdown in the relationship which culminated in the
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termination of the agreement. Shortly after the
Commencement Date, a meeting was held with
Magotteaux’s representative Mr Patrick Viseur. At this
meeting and in subsequent engagements the BR Team
proposed and encouraged the continuation of
manufacture and sale under the licencing agreement, in
light of the fact that the Company had a new leadership
team in place who were capable of ensuring the success
of the relationship. Magotteaux ultimately declined the
proposal citing that they had been let down too many
times in the past by the Company, and were in advanced
discussions with another manufacturer. It was agreed
between the Company and Magotteaux that the Company
could manufacture and market a comparable product of
its own to its customers, provided that it did not do so
using the Licenced Intellectual Property as defined in the
erstwhile Magotteaux Agreement. The Company
subsequently employed the services of RMN Dawn,
headed by Mduduzi Nkwanyana, as it’s technical sales
partner for the manufacture and sale of a product
comparable to that previously sold under the Magotteaux
Agreement. Assisted by RMN Dawn, the Company is
presently engaging with its erstwhile purchasers of the
licenced Magotteaux product to present a business case
for the customers to purchase the comparable product
from the Company, which the Company is in the process
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of licencing. The business case is based inter alia on the
following:
7.5.4.6.1. The Company can supply the product
significantly cheaper than it was previously
supplied under the Magotteaux Agreement;
7.5.4.6.2. The Company will demonstrate continuous
improvements in lead times and after-sales
service as a result of the turnaround
interventions being implemented by the BR
Team with the assistance of RMN Dawn;
7.5.4.6.3. The Company manufactures the
comparable product using its own
intellectual property and will in due course
do so under its own licence; and
7.5.4.6.4. There is no restraint of trade in place
preventing the Company from
manufacturing the comparable product, and
the product is not presently being
manufactured using the Licenced
Intellectual Property as defined in the
erstwhile Magotteaux Agreement.
7.5.5. Client interaction related to clearing of backlogs:
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7.5.5.1. The table below illustrates the extent of backlogs (by
tonnage) that are currently being experienced in the
foundries:
Percentage of orders in
backlog 52%
- percentage of backlog related to the Wheel
Plant
38%
- percentage of backlog related to the
Eclipse Plant
11%
Union Plant
25%
Boksburg Plant
26%
7.5.5.2. The foundries that have the largest backlogs are the
Union Plant, the Boksburg Plant and Wheel Plant. The
Eclipse Plant is presently the most efficient in terms of
delivering orders on time.
7.5.5.3. The backlogs related to the Wheel Plant amount to
approximately 3,405 units of 34” wheels, which have a
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sales value of circa R50 million (excluding VAT). The
turnaround of the Wheel Plant is explained in more detail
in the production section of the Plan.
7.5.5.4. These backlogs are creating pressure on an already
overstretched sales team with disgruntled clients not
receiving their orders on time.
7.5.5.5. The BR Team has initiated a process of interacting with
each client in order to assess:
7.5.5.5.1. Each client’s direct requirements relating to
re-scheduling of non-critical items required;
7.5.5.5.2. Placing emphasis on immediate order
requirements and re-scheduling priorities in
order to alleviate the impact that the
backlogs will have on clients’ own
processes and requirements; and
7.5.5.5.3. Explaining the Business Rescue to clients
in face-to-face meetings to gain the clients’
confidence that the Company has the ability
to turn the current situation around.
7.5.5.6. The above is being done in tandem with the BR
Production Team to ensure that re-scheduling of client
orders is in line with projected production and
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communication to clients in respect of delays is being
processed as quickly as possible.
7.5.5.7. The face-to-face interactions with the clients and
rescheduling of production has become an iterative
process between the sales and production teams.
7.5.5.8. The communication and re-scheduling of production is
being handled in a way that attempts to ensure that all
clients are treated equally irrespective of order value and
quantity.
7.5.6. Clearing of quotation backlogs
7.5.6.1. Due to inter alia the headcount shortage in the sales
team, there is a backlog of quotations in the Q-Pulse
system. There are currently 73 (seventy-three)
outstanding quotations dating back as far as March 2021.
7.5.6.2. It is evident that many of these required quotations have
expired. Working from the latest required quotation, the
process being undertaken to clear the quotation backlog
is as follows:
7.5.6.2.1. Assessment of quotation required and
whether in the Company scope of works;
7.5.6.2.2. Stratifying quotations into existing clients
and new client quotation requests;
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7.5.6.2.3. Contacting potential clients where quotation
logged in Q-Pulse is older than 3 months
and enquiring whether a quotation is still
required (there is a likelihood that if the
enquiry prior to the Commencement Date
then the quotation may no longer be
required);
7.5.6.2.4. Re-sending acceptable enquiries to the
costing department for costing; and
7.5.6.2.5. Due to the backlogs experienced, BR
Production Team will be brought into the
process to ensure that delivery dates for
enquiries can be met before any new
enquiries are costed.
7.5.6.3. It is anticipated that the enquiry backlogs can be cleared
by the end of March.
7.5.6.4. The objective of the quotation clearing exercise is to
ensure that going forward all enquiries received are
responded to within 48 - 72 hours of receiving an enquiry,
and that 100% of enquiries which the Company would
want to respond to are submitted on time according to
quotation due dates stipulated in the enquiries received.
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7.5.7. Re-costing exercise of SAP Bill of Materials and Standard Costing
system:
7.5.7.1. Due to a lack of skills and staff attrition, the SAP systems’
bills of materials are not up to date with current costs.
7.5.7.2. Due to inefficiencies and cost overruns, it is often the case
that the standard costs for products are not reflective of
the actual costs that are incurred. This is a contributing
factor to the losses that are being incurred. Due to poor
management and labour inefficiencies as well as the
standard costs not been up to date, a product may be
costed and a quotation sent to the client that is not
reflective of the cost reality in the foundries.
7.5.7.3. Therefore, all costs in the SAP system as well as all
standard costs for products are in the process of being
reviewed by the BR Team for acceptability. The process
being undertaken is as follows:
7.5.7.3.1. Extraction of all BOMs out of SAP into Excel
for analysis purposes;
7.5.7.3.2. Review of all products that are currently
showing a negative margin, and
investigation thereof;
7.5.7.3.3. Where margins are negative, analysis of
whether the product lines can be profitable
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or not by performing a re-costing exercise
on these products; and
7.5.7.3.4. Review of the usefulness of the current
costing system presently in place.
7.5.7.4. The present costing system appears to be overly complex
and will be re-designed and aligned to the changes that
are expected to take place in the foundries.
7.5.7.5. All new orders received are being re-costed and
compared to the current BOMs. Where information is
lacking or errors are found, the BOMs are being updated
accordingly.
7.5.7.6. It is expected that a complete review of all costs and
product lines will be completed by mid-May 2022.
7.5.8. Go-to-market strategy
7.5.8.1. A new go-to-market strategy will be developed for the
Company. This will be all-encompassing and will overlap
with other departments to ensure that an integrated and
inclusive approach is followed. Various initiatives will be
undertaken across the business, led by the sales team.
7.5.8.2. The first item that needs to be resolved is the filling of the
necessary posts in the sales team.
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7.5.8.3. A market analysis will be undertaken as well as a
customer satisfaction survey. The results of these will
give guidance on which sectors of the market (e.g.,
Mining as a result of the boom) should be targeted.
7.5.8.4. The results of the re-costing exercise will also give insight
into product lines that are profitable to the Company.
7.5.8.5. Where the likelihood of converting non-profitable products
into profitable ones is low, these products will be ceased
in order to minimize further losses going forward.
7.5.8.6. Full assessment of client sales history will be performed
in respect of both current and old clients, and clients who
are no longer supplied by the Company.
7.5.8.7. A review of the capability and potential of the high-volume
line will be carried out, and clients targeted that would
require castings out of this line.
7.5.8.8. Contracts will be identified that currently carry penalty
clauses the financial impact thereof will be assessed.
Where clients intend to institute penalties against the
Company, it may be necessary for the BRPs to suspend
those penalty clauses in order to negate the impact of
these punitive measures.
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7.5.8.9. The DTIC will be engaged to discuss, explore and
potentially implement measures to protect the Company
against cheaper imported castings.
7.5.8.10. A sensitivity analysis will be conducted on the different
types of castings currently being sold, to determine the
product mix that will achieve maximum margin out of the
combined foundries.
7.5.8.11. An internal control matrix will be developed and
implemented across the business in order to identify
control weaknesses so that a more robust and efficient
controls environment can be created.
7.5.8.12. It is anticipated that a go-to-market strategy will be
complete by July 2022.
7.5.9. Other sales-related matters - Amsted
7.5.9.1. The BR Team has weekly recurring meetings with
Amsted during which the following points have been
discussed:
7.5.9.1.1. Reconciliation of Amsted’s claim in the
Business Rescue according to the
Company’s records;
7.5.9.1.2. Recovery of the Amsted debtor balance of
circa R5,7m by the Company, and the
return to Amsted of certain patterns; and
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7.5.9.1.3. Reasons for the valuation or actual losses
of inventory and fixed assets in Crushing
Equipment, to the value of circa AUD$ 4m
or R44m.
7.5.9.2. Reconciliation of Amsted’s claim in the Business
Rescue according to the Company’s records – this
reconciliation has been largely resolved but for some
relatively minor differences. Any unresolved/disputed
balance will be recorded in the Plan and the dispute will
be resolved during the normal course of Business Rescue
before and/or after the adoption of the Plan.
7.5.9.3. Recovery of the Amsted debtor balance of circa
R5,7m by the Company, and the return to Amsted of
certain patterns – The BR Team requires the Amsted
trade receivable of R5,7m to be paid by Amsted in order
for certain patterns which they have requested to be
returned to Amsted. There are various sundry payables
and receivables between the companies (some being
costs related to the patterns to be returned), the net effect
of which is presently as follows:
7.5.9.3.1. The Company to keep Core Box owned by
Amsted, value circa R1,1m;
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7.5.9.3.2. The Company require calibrated coupler
gauges back from Amsted (value circa
R1,2m);
7.5.9.3.3. The Company to offset R1,408,726 (being
the net effect of various sundries) against
the R5,7m Amsted debtor balance, upon
dispatch by Amsted to the Company of the
aforementioned coupler gauges and
agreement by Amsted to settle the net
debtor balance of R4,3m; and
7.5.9.3.4. Upon settlement by Amsted of the net
debtor balance of R4,3m, the requested
patterns will be released by the Company.
7.5.9.4. Reasons for the valuation or actual losses of
inventory and fixed assets in Crushing Equipment to
the value of circa AUD$ 4m or R44m – The BR Team
understands that circa AUD$ 4m of inventory and fixed
assets were either written down to net realisable value or
are unaccounted for since 2019 when the net asset value
of Crushing Equipment per the audited financial
statements was circa AUD$ 5,1m. The net asset value of
Crushing Equipment as at May 2021 was circa AUD$
1,1m. Amsted have advised the BR Team that it is
Amsted’s understanding that there have been no physical
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losses of inventory or fixed assets over the noted period,
instead only financial statement write downs of the
inventory and fixed assets to net realizable value due to
obsolescence in accordance with applicable accounting
standards. The BR Team has requested Amsted to assist
in clarifying the issue, and Amsted have agreed to do so
as far as it is within their capacity to do so. As a first step
towards investigating the issue, the BR Team has
requested the directors of Crushing Equipment to provide
a full reconciliation of assets and inventory from the start
of FYE 2019 to date, together with a list of assets and
values (supported by audit certificates) reportedly held in
a 3rd party warehouse at present. As the matter is of
serious concern to the BR Team, it has been decided to
send a senior resource to Australia as soon as possible
to properly investigate the matter.
7.5.10. Other sales-related matters – Urgent action on B-BBEE level
7.5.10.1. Based on the stated requirement for the Company to
retain their B-BBEE Compliance at Level 4, the BR Team
engaged with Gestalt Consult to provide a short-term
strategy to achieve this for the current financial year (FYE
March 2022). The proposed strategy included additional
spending on skills development and compliance on the
enterprise, supplier and socio-economic
requirements. The implementation is expected to gain
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the Company 87.5 points, measured conservatively. This
is 2.5 points away from a possible Level 3, which could
be gained from further information on procurement and
skills. The total cost in cashflow and expenditure for the
current financial year is R1,35m.
7.5.10.2. Gestalt Consult is also mandated to develop an optimal
strategy for the next financial year taking into
consideration the expected revision of the Preferential
Procurement Framework that has been published by
National Treasury for public comment. Included in this
mandate is to consider the options for the Company to
potentially improve its B-BBEE to a Level 1 or Level 2.
7.5.10.3. Gestalt Consult is a 30% Black Women Owned BEE
Level 1 consultancy.
7.6. PHASE ONE TURNAROUND PLAN – PROCUREMENT AND SUPPLIERS
7.6.1. Suppliers:
7.6.1.1. The Company has more than one thousand suppliers on
its database and majority with no trade contracts in place.
Suppliers are supposed to be appointed in terms of the
PFMA based on the value of goods supplied, however
that practice is applied inconsistently.
7.6.1.2. Payment terms are inconsistent across all suppliers which
makes payment management difficult.
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7.6.1.3. Quality control for input material is a major risk as goods
are not checked and receipted into the system before
allocated to production lines. This has led to huge stock
write offs over the years as the value of stock in the
balance sheet does not correspond to the value of stock
on hand.
7.6.1.4. Due to inconsistent payment terms and lack of financial
controls, most creditors are not paid on time which results
in discontinued supplies from time to time.
7.6.2. Current Procurement Structure:
7.6.2.1. The Procurement team consists of four buyers and one
vendor administrator, and all Procurement employees
report directly to the Chief Procurement Officer. The
current structure is not aligned to the functional duties,
and Human Resources records.
7.6.2.2. Employees were appointed at different levels of seniority
and with no responsibilities aligned to their level of
seniority. The existing structure also shows three more
vacancies which includes a procurement manager. There
are too many buyers for the active suppliers on the
database, which points to the fact that that the recent
appointments were probably not necessary.
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7.6.2.3. A high staff turnover rate was noted within the
Procurement department in last 2 years. The recently
appointed employees including management have no
relevant procurement nor PFMA experience and this was
due to lack of human resource policies.
7.6.2.4. The current total monthly cost for the procurement
headcount amounts to approximately R270 000.00,
which is high for the number of employees and the skill
set in place.
7.6.3. Restructuring:
7.6.3.1. The existing hierarchical structure is overloaded,
therefore the department’s restructuring by the BR Team
is imminent. A structure with relevant skills and
experience will address gaps identified within the
department.
7.6.4. PFMA Non – Compliance:
7.6.4.1. As the Company is a subsidiary of the IDC it is required
to comply with the PFMA. The Company has not been
compliant since inception. The Company has applied for
the PFMA exemption for the past (two) financial periods
and both applications were declined. A further application
was submitted for the current financial year and awaiting
response from National Treasury, however, there is an
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expectation that the Company’s application will be
declined once more.
7.6.4.2. All policies, processes and procedures were last reviewed
and approved before the spin out of Scaw Metals,
therefore procurement policies, processes and procedure
are non-existent.
7.6.4.3. The PFMA Regulations require supply chain
management officials and other role players to recognise
and disclose any conflict of interest that may arise. Since
inception of the Company, there have not been any
declarations or disclosures of conflicts of interest between
employees and the Company.
7.6.4.4. The PFMA’s general rule is that procuring departments
should consider only conforming, compliant or responsive
tenders. Tenders should comply with all aspects of the
invitation to tender and meet all requirements laid down
by it in its tender documents. Since incorporation, the
Company has been non-compliant.
7.6.5. PFMA Compliance:
7.6.5.1. To address and to ensure that the Company is PFMA
compliant, the BR Team has engaged with a PFMA
specialist team to review all procurement policies,
tendering documents, processes and procedures in order
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to align to PFMA compliance rules. A list of all
procurement policies, processes and procedures has
been compiled and is currently being reviewed, and is
expected to be finalised by 30 April 2022.
7.6.5.2. In addition, the PFMA training specialist will ensure that
compliance is implemented across the organisation. The
specialists are expected to start work on the PFMA
compliance from 1 April 2022. The project is to be
completed within a period of six weeks. Ongoing training
is also planned to address skills gaps identified across the
Company. Training on policies, processes and
procedures will be conducted as part of policy/process/
procedure implementation as and when there is a need.
The cost of the project is estimated at a rate of R1200.00
per hour and the project is expected to be completed by
mid-May 2022.
7.6.5.3. Furthermore, to comply with the PFMA Regulations, the
BR Team developed and signed off the conflict-of-interest
policy. The implementation of the policy and declaration
of any interest is planned to be completed by
31 March 2022 across the Company. This is aimed at
addressing any exploitation of positions for personal gain.
7.6.6. Inbound Warehousing:
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7.6.6.1. The Company operates a decentralised warehousing
process, with all foundries managing their own stock.
7.6.6.2. The three warehouses based in the Germiston premises
service mainly the Union Plant and the Wheel Plant.
These warehouses operated without a manager for over
two years. The supervisor resigned in January 2022 and
the stock controller is retiring at end of March 2022.
7.6.6.3. Since the warehouse manager position is considered to
be a critical placement, the BR Team appointed the
manager on a six-month contract from 9 March 2022. The
appointed manager has over 20 years of experience in
logistics & supply chain from both national and
multinational organizations and also has extensive
experience in managing and executing various supply
chain projects. The BR Team is confident that the new
resource will bring positive change and improve the
warehouse function. The permanent position will be
considered when the Company’s cashflows can
accommodate it. The stock controller is planned to be
appointed internally as part of the redeployment process.
7.6.6.4. Currently, the warehouse has four clerks and due to the
staff shortage all clerks receive and issue stock. Some of
the warehouse responsibilities are assumed by
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production teams and this has created numerous issues,
as noted in 7.6.6.5.
7.6.6.5. The Eclipse Plant and the Boksburg Plant have no
warehouses and all stock is received directly into the
plants. Other than receipting of goods into the system
(elaborated on below), few issues were noted with this
process.
7.6.6.6. The BR Team investigated where issues were emanating.
It was noted that often suppliers’ stock is received and not
captured on the system, especially for stock directly
delivered to the various plants. This creates delays in the
payment of suppliers, prolonged and unresolved
suppliers’ queries, and unnecessary variances when
stock counts are performed.
7.6.6.7. For an immediate solution, a communication was sent to
all affected plants & parties to reiterate the importance of
stock being receipted timeously onto the system and
addressing suppliers’ queries within the stipulated
turnaround time. Adherence to these processes will be
monitored closely and will serve to address the payment
issues.
7.6.6.8. A medium-term solution will be to centralise the
warehouse function across the organisation. All stock will
be required to be received and issued through the
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warehouse processes. This project is expected to be
completed by 31 May 2022. The project will be led by the
warehouse manager and no additional cost is expected
for new improvements. Additional resources will be
placed in the centralised warehouse through the
redeployment process.
7.6.6.9. A number of internal control weaknesses were identified
in the warehouse process, especially in stock requisitions
and issuing:
7.6.6.9.1. Stock reservation approval: The stock
reservations approval function was disabled
on the system, therefore requested stock
items are issued with no evidence of
approval. Upon investigation it was
reported that the approval function was
disabled due to the non-implementation of a
SAP user clean-up which was supposed to
have been done months ago.
7.6.6.9.2. Whilst the user clean-up is progress, and
expected to be completed by
31 March 2022, a manual approval control
has been put in place until the system
approval function is enabled. All stock
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reservations must be signed by the
authorised persons for stock to be issued.
7.6.6.9.3. Stock verification at bulk stores: There is no
verification process for stock issued from
the bulk stores. This was reported to be a
result of a limited number of security guards
having been allocated to the Company by
Scaw Metals. This has created unexplained
stock variances in the past and was noted
as a concern requiring immediate attention.
7.6.6.9.4. To address the issue an additional security
guard will be placed on site on 1 April 2022
to check and verify stock leaving the bulk
stores. The BRPs have recently signed a
new contract (independent from Scaw
Metals) to address security needs across
the Company.
7.7. PHASE ONE TURNAROUND PLAN – FINANCIAL ANALYSIS
7.7.1. The set of assumptions used in the Financial Analysis and the Plan
forecasts is included in Annexure “A”.
7.8. MORATORIUM
7.8.1. In terms of section 133 (1) of the Companies Act, the
Commencement Date places a moratorium on legal proceedings
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and enforcement action against the Company. This means that
Creditors, even though their rights may be secured, will not be able
to proceed in any forum against the Company for non-payment of
debts, and/or any enforcement action/proceeding during the
Business Rescue. For the avoidance of doubt, this moratorium does
not include claims arising against sureties, guarantors or directors
or officers of the Company and accordingly, the Creditors shall not
be precluded from exercising their rights in the event they elect to
instigate civil and/or criminal action for whatever reasons (subject
to what is set out below).
7.8.2. The moratorium intends to give the Company breathing space in
order to allow for the best possible chance to implement the
7.8.3. In the current circumstances, the moratorium in relation to the
Company commenced on the Commencement Date and will remain
in place until the BRPs file a notice of substantial implementation of
the Business Rescue Plan with the CIPC.
7.9. LIST OF ASSETS
7.9.1. The assets of the Company are listed in Annexure “A”.
7.9.2. The movable assets valuation was conducted by WH Auctioneers
Proprietary Limited. The appraisal was conducted in the month of
February 2022. All Foundries were visited during the appraisals. A
list of assets and valuation reports are included in Annexure “A”.
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7.9.3. The appraisal has been compiled to include a strategy for the
disposal of the assets. The appraisal was not produced using the
asset register, and it does not reflect the International Financial
Reporting Standards (IFRS) valuation. Some assets are grouped
while others are appraised as a single item. All assets were
physically inspected, however not all assets were tested to confirm
working order.
7.9.4. Assets that were partially stripped or appeared not to be in use were
noted as non-operational assets. Each asset / asset group was
attributed three values 1) forced sale value, 2) market value, and 3)
in situ value, however it was noted that values can change based
on the quantity of items available in the market.
7.9.5. Scrap, stock in stores and any other stock items were not included
in the appraisals.
The table below is a summary of total moveable assets value in each site:
Site Forced sale value Market value In-situ value
(ZAR) (ZAR) (ZAR)
Union & Wheel Plant 100,353,840 165,895,050 338,927,400
Boksburg Plant 2,935,750 4,305,900 7,053,000
Eclipse Plant 12,863,700 19,940,450 32,155,900
Standard Plant 5,572,850 8,143,200 13,584,050
Total 121,726,140 198,284,600 391,720,350
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7.10. OPERATIONAL AND NON-OPERATIONAL ASSETS AUDIT
7.10.1. A detailed assets audit will be conducted in phase two. The exercise
will primarily separate the operational and non-operational assets
of the Company. The process is anticipated to commence on 15
April 2022 and be completed by May 2022. The total cost for this
valuation process will amount to R800 000.00.
7.11. ASSETS HELD AS SECURITY
7.11.1. All assets of the Company are encumbered in favour of the IDC and
Amsted respectively, as shareholders and majority creditors of the
Company. Both parties have perfected their general notarial bonds
in line with their exposure.
7.11.2. Immovable Properties housing operations at the Boksburg Plant,
the Eclipse Plant and the Standard Plant are encumbered in favour
of the IDC.
7.11.3. There is a dispute between the IDC and Amsted on the ranking of
their respective security and accordingly during the course of
Business Rescue the parties, with the support of the BR Team will
embark on a dispute resolution process.
7.12. DISCHARGE OF DEBTS AND CLAIMS
7.12.1. The BRPs draw the attention of the Creditors of the Company to the
provisions of Section 154 of the Companies Act. It provides that if a
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business rescue plan which has been approved is implemented in
accordance with its terms and conditions, a creditor:
7.12.1.1. who has acceded to the discharge of the whole or part of
a debt owing to that creditor will lose the right to enforce
the relevant debt or part of it; and
7.12.1.2. is not entitled to enforce any debt owed by the Company
immediately before the beginning of the business rescue,
except to the extent provided for in the business rescue
plan.
7.12.2. Under the Business Rescue Plan, it is proposed that Creditors will
be compromised as follows:
7.12.2.1. Trade creditors (i.e. creditors other than shareholder
loans) will have an option to receive an immediate
payment of 40 cents in the Rand upon the adoption of the
Business Rescue Plan and confirmation of funding from
the BRPs, or receive between 40 and 60 cents in the
Rand which will be settled from the proceeds of the sale
of assets and properties, and will be compromised to the
extent that the sale proceeds from these assets fall short
of the total trade creditors’ BR claims. The Standard Plant
as well as non-use assets will be sold to settle creditors.
The BR Team believes the Standard Plant will realise at
least R25m and the unused assets approximately R10m
for a total of R35m. Trade creditors will be guaranteed a
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minimum of 40 (forty) cents in the Rand on their BR
Claims and will be paid as income is realised from the sale
of assets.
7.12.2.2. A proposed conversion of shareholder loans to equity is
dealt with in the section below “Shareholder Loans and
Conversion”.
7.12.2.3. The proposed compromise attributable to each class of
creditors is detailed in Annexure “A”.
7.13. SURETIES AND GUARANTEES
7.13.1. Subject to any compromise, whilst creditor repayments are being
met as envisaged by the Plan, Creditors will not act on any sureties
or guarantees that exist in their favour in respect of the debts of the
Company.
7.14. EXISTING CONTRACTS
7.14.1. As at the Publication Date, the BRPs do not envisage terminating
any material contracts of the Company. The BRPs will take steps to
cancel the Company’s contractual obligations to certain
counterparties where it is in the interests of the Company and
Affected Persons to do so.
7.14.2. The obligations of the Company under several equipment rental
contracts were suspended by the BRPs following their appointment.
Most of the equipment in respect of the suspended contracts is still
being utilised by the Company. The Company is however paying
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for the use of these assets. To this end, all normal hire purchase
and rental instalments have been honoured by the Company since
the Commencement Date.
7.14.3. The detail of the termination by Magotteaux on 1 October 2021 of
the erstwhile license agreement, is dealt with in clause 7.5.
7.15. SETTLEMENT OF CLAIMS AND POST COMMENCEMENT LIABILITIES
Creditors’ Claims will be settled as follows:
7.15.1. SECURED CREDITORS
7.15.1.1. Secured Creditors will continue to be paid their
instalments, if applicable, in the normal course of
business.
7.15.1.2. Select assets have been identified for sale in order to
reduce the exposure of certain Secured Creditors.
7.15.1.3. The cash flow forecast in the financial projections
attached as Annexure “A” sets out how Creditors will be
settled.
7.15.2. POST COMMENCEMENT CREDITORS
7.15.2.1. Only PCF or supplies expressly accepted in writing by the
BRPs to constitute PCF shall be treated as such. All
debts incurred post the business rescue date accepted as
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PCF will be paid in full in line with the preference
conferred by the Companies Act.
7.15.3. CONCURRENT CREDITORS
7.15.3.1. Concurrent creditors are expected to receive 40 (forty) to
60 (sixty) cents in the Rand depending on their election
as set out in clause 7.12.2 as envisaged by the cash flow
forecasts (Annexure “A”). This is dependent on the
fulfilment of the conditions set out in clause 8.3 of the
7.15.4. TIMING OF PAYMENTS
7.15.4.1. The envisaged timing of payments to Creditors is as per
the cash flow forecasts, as detailed in Annexure “A”,
subject to the assumptions referred to in clause 8.
7.15.5. SHAREHOLDER LOANS AND CONVERSION
7.15.5.1. All unsecured loans and amounts owing to shareholders
will be converted to equity (debt to equity) except for PCF
funding (current and future) which will remain in place as
loans;
7.15.5.2. The conversion of debt to equity will be done on the basis
that all unsecured amounts owing to shareholders will be
converted to equity. This conversion will be done upon
the earliest of the following occurring:
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7.15.5.2.1. All creditors have been paid or settled in
terms of the Plan;
7.15.5.2.2. Immediately before the Plan is substantially
implemented; or
7.15.5.2.3. On conclusion of a deal with an equity
partner or when the business is sold.
7.15.6. DISPUTED CLAIMS
7.15.6.1. Creditors whose claims are proved or admitted by the
BRPs before or within 2 months after the adoption of the
Business Rescue Plan shall be treated as independent
concurrent pre-commencement creditors for purposes of
receiving a business rescue dividend, on the basis that
payment of instalments to them shall commence 30 days
after the claim is finally proved or admitted.
7.15.6.2. Disputed creditors whose claims are not proved or
admitted within 2 months after adoption of the Plan shall
be treated as independent concurrent pre-
commencement creditors and, if such claims are later
proved or admitted, be entitled to a concurrent dividend
of five (5) cents in the Rand payable within 30 days after
the claim is finally proved or admitted. In the event that
the Company has a liquidated claim against the creditor,
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the dividend accruing to that creditor will be set off against
the Company’s claim.
7.15.6.3. All claims for legal costs including taxed costs shall be
treated in the same manner.
7.15.6.4. The aforesaid dispute resolution period of 2 (two) months
may be extended at the sole discretion of the BRPs, by
written notice.
7.15.6.5. In the event that the business has available surplus cash
then payments will be accelerated.
7.15.6.6. Should any disputes be prolonged beyond the 2 (two)
month period, an amount equal to the maximum dividend
payable to the disputed creditor in respect of these
remaining disputed amounts will be transferred to the
Company’s lawyers to be held in trust pending the
outcome of the dispute. This will be paid as and when the
dispute is finally settled.
7.15.6.7. All settlement costs, including but not limited to all legal
and administration costs incurred by the Company and
associated with resolving these individual disputes after
15 June 2022 will be for the claimants’ account.
7.15.6.8. All unresolved disputes are to be dealt with in terms of
clause 8.8.
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7.15.7. COMPARISON OF BENEFITS THE CREDITORS WILL RECEIVE
IF THE PLAN IS ADOPTED, VERSUS A LIQUIDATION
In liquidation, as per Annexure “A”:
7.15.7.1. Secured Creditors are expected to receive a dividend of
32 (thirty-two) cents in the Rand in liquidation (Annexure
“A”) and a minimum of 60 (sixty) cents in the Rand in the
Business Rescue.
7.15.7.2. There are no Preferent Creditors (as defined by the
Insolvency Act) as employees and SARS are fully paid
up.
7.15.7.3. Concurrent Creditors will receive an estimated 0 (zero)
cents in the Rand in liquidation (Annexure “A”) and
between 40 (forty) and 60 (sixty) cents in the Rand in
Business Rescue.
7.15.8. SALE OF BUSINESS
7.15.8.1. In the event that Phase 3 of the Proposed Turnaround
Strategy is implemented, and the business is sold, the
Creditors authorise the BRPs, in their discretion, to sell
the Company’s business and/or the greater part of its
assets for the purposes of achieving Substantial
Implementation. In the event of such a sale, it is agreed
that the publication of the Business Rescue Plan
constitutes publication of the sale of the business in terms
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of Section 34 of the Insolvency Act and, to the extent
necessary, on approval of the Business Rescue Plan, the
Creditors waive any and all rights they may have now, or
at any time in the future, arising in terms of section 34 of
the Insolvency Act.
7.16. SHAREHOLDING OF THE COMPANY AND THE EFFECT THAT THE PLAN
WILL HAVE ON THE HOLDERS OF ISSUED SECURITIES
7.16.1. The shareholding of the Company is as follows:
7.16.1.1. The IDC – 85%;
7.16.1.2. Amsted – 15%
7.16.2. The Plan will affect the rights of shareholders if Phase 3 of the
Proposed Turnaround Strategy is implemented as envisaged in
clause 7.2.4.3 above. The consent of a majority of shareholders is
therefore required for the adoption of the Plan.
7.17. DAMAGES
7.17.1. In respect of any Creditor’s claim lodged with the BRPs for
expenses, losses or damages, whether contractual or delictual and
whether arising before or after the Commencement Date, against
the Company, and such losses or damages claims being accepted
by the BRPs or proved by way of the dispute mechanism, such
damages claims:
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7.17.1.1. Shall be treated as an unsecured concurrent claim, and
treated for dividend payment purposes as such unless the
creditor holds security for such claim;
7.17.1.2. Will be deemed to be limited to general damages suffered
over the lesser of 2 (two) months from the date on which
the alleged damages claim arose or the balance of the
contract duration. For purposes hereof, general damages
are those which, on an objective basis, would be
reasonably foreseeable at the time of entering into the
relevant contract as a probable consequence of, and with
a sufficiently close connection to, any breach by the
Company of such contract so as to be said to flow
naturally and generally and not to be too remote;
7.17.1.3. Will be deemed to exclude all consequential damages
(including loss of profit) and indirect damages; and
7.17.1.4. If disputed, will be resolved in terms of the dispute
mechanism, detailed in clause 8.8 hereunder.
7.18. TAXES
7.18.1. The adoption and implementation of the Business Rescue Plan may
result in a compromise in respect of tax claims.
7.18.2. If the Company is required to implement a compromise with
creditors then, on request from the individual creditor (“the
Claimant”), the BRPs will issue a certificate of compromise (‘the
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Certificate”) to such Claimant specifying the amount of loss suffered
by the Claimant as a result of the compromise. This will enable the
Claimant to claim an income tax deduction against their taxable
income, being the value of the compromised amount.
7.18.3. Payment of the compromised amount and any statutory amounts
associated therewith will be made over the period set out in the
Business Rescue Plan, except for the statutory amounts dealt with
in clause 7.12.
8. PART C - ASSUMPTIONS AND CONDITIONS
8.1. CIRCUMSTANCES IN WHICH THE BUSINESS RESCUE WILL END AND
THE TERMINATION OF BUSINESS RESCUE
The Business Rescue will end –
8.1.1. if the Business Rescue Plan is rejected at the Section 151 meeting
and the BRPs or an Affected Person/s do not act to extend the
Business Rescue in any manner contemplated by Section 153 (1)
of the Companies Act; or
8.1.2. this Business Rescue Plan is adopted and implemented and the
BRPs have filed a notice of substantial implementation of the
Business Rescue Plan with the CIPC; or
8.1.3. a High Court of South Africa orders the conversion of the Business
Rescue into liquidation proceedings.
8.2. SUBSTANTIAL IMPLEMENTATION
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8.2.1. The BRPs define substantial implementation as the point when one
of the following objectives have been met:
8.2.1.1. All Creditors have been settled as envisaged by the
Business Rescue Plan in respect of both pre-
commencement debt (40 (forty) to 60 (sixty) cents in the
Rand) and post-commencement debt (100 (one hundred)
cents in the Rand); or
8.2.1.2. The business has been sold, or a deal has been
concluded with a strategic equity partner (which may
coincide with the envisaged or additional conversion of
shareholder debt to equity).
8.3. ANY CONDITIONS THAT MUST BE FULFILLED BEFORE THE PLAN CAN
COME INTO OPERATION OR BEFORE IT CAN BE FULLY IMPLEMENTED.
8.3.1. As required in terms of section 150 (2) (c) (i) (aa) of the Companies
Act, the Business Rescue Plan will come into operation upon the
conditions listed below having been fulfilled:
8.3.1.1. The approval and adoption of the Business Rescue Plan
in terms of section 152 of the Companies Act;
8.3.1.2. Approval of the IDC, the Minister (to the extent
necessary), as executive authority for the Company, for
the implementation of those aspects of the Business
Rescue Plan which involve transactions requiring such
approval in terms of section 54 (2) of the PFMA, read with
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the Significance and Materiality Framework applicable to
the Company;
8.3.2. Approval of the IDC and the Minister, as representative shareholder
of the Company, for the implementation of those aspects of the
Business Rescue Plan which involve transactions requiring such
approval in terms of the memorandum of incorporation of the
Company.
8.3.3. Should the conditions set out in clause 8.3.1 not be fulfilled by 14
October 2022 the Business Rescue Plan will be deemed
unimplementable and a meeting of Creditors will be convened on
21 October 2022 for Creditors to consider amending the Business
Rescue Plan, failing which for the BRPs are to discharge the
Business Rescue. Such meeting will be convened in terms of
section 151 of the Companies Act.
8.3.4. Prior to the meeting contemplated in clause 8.3.3 the BRPs will
publish a report on the conditions fulfilled, if any, and the status of
the conditions not yet fulfilled.
8.4. THE EFFECT THAT THE BUSINESS RESCUE PLAN WILL HAVE ON THE
NUMBER OF EMPLOYEES AND THEIR CONDITIONS OF EMPLOYMENT
8.4.1. As set out in clause 7.3.8.3 upon the adoption of the Business
Rescue Plan a Section 189 of the LRA process will commence and
the outcomes of that process will determine the extent of the
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retrenchments and changes to terms and conditions of
employment.
8.5. PROJECTED INCOME STATEMENT AND BALANCE SHEET FOR THE
PERIOD UP TO THE SETTLEMENT OF ALL CLAIMS BASED ON THE
ASSUMPTION THAT THE PLAN IS ADOPTED
Please refer to Annexure “A”.
8.6. GENERAL
8.6.1. Binding nature of the Business Rescue Plan once adopted – the
BRPs draw the attention of the Affected Persons to the provisions
of Section 152 (4) of the Companies Act. It provides that a Business
Rescue Plan that has been adopted in accordance with the
provisions of Section 152 (2) of the Companies Act is binding on the
Company, and on each of the Creditors of the Company and every
holder of the Company's securities, whether or not such a person:
8.6.1.1. was present at the meeting to determine the future of the
Company in terms of Section 151 of the Companies Act;
8.6.1.2. voted in favour of the adoption of the business rescue
plan; or
8.6.1.3. in the case of Creditors, had proven their claims against
the Company.
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8.6.2. Discharge of debts and claims – the BRPs draw the attention of
Affected Persons to Section 154 of the Companies Act wherein it
provides that where a business rescue plan has been approved and
is implemented in accordance with its terms and conditions, a
creditor:
8.6.2.1. who has acceded to the discharge of the whole or part of
a debt owing to that creditor, will lose the right to enforce
the relevant debt or part of it;
8.6.2.2. is not entitled to enforce any debt owed by the Company
immediately prior to the Commencement Date, except to
the extent provided for in the business rescue plan.
8.6.3. The BRPs shall have the right to amend the Business Rescue Plan
once adopted in the following circumstances:
8.6.3.1. If it comes to the BRPs attention that material information
(material in the BRPs’ professional opinion) has been
withheld, or if additional information comes to their
attention;
8.6.3.2. If it becomes apparent that the Plan cannot be
implemented without such amendment;
8.6.3.3. If the BRPs consider it just and equitable to do so.
8.6.4. Notice of any such amendments to the plan will be furnished to
affected persons.
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8.6.5. Should the amendment require a material change to the Business
Rescue Plan which has an adverse effect on Creditors (e.g., a
change that will result in creditors receiving a dividend lower than
that envisaged by the financial forecasts), the BRPs will convene a
further meeting of Creditors and seek the approval of Creditors in
terms of section 152 (2) of the Companies Act to amend the plan.
8.6.6. Upon the adoption of the Business Rescue Plan, the Creditors
agree to indemnify the BRPs and the BR Team against any and all
claims, save for in the event of gross negligence, from whatsoever
cause and howsoever arising, against them.
8.7. SECURITY AND CLAIMS REVIEW
8.7.1. The claims of Creditors reflected in the Plan have been recorded
according to the books of account of the Company. The BRPs do
not accept the books of account of the Company as adequate proof
that any Claim is due, owing and payable. The fact that the Business
Rescue Plan has been furnished to any person by the BRPs must
not be construed as an admission that the recipient is a legitimate
Creditor of the Company. Any Creditor wishing to establish its Claim
must lodge a proof of its claim with the BRPs, which Claim must be
to the satisfaction of the BRPs, on or before 8 April 2022, which is
expected to be 5 business days before this Business Rescue Plan
is voted on by the Creditors at a meeting convened in terms of
section 151 of the Companies Act. This final claims date may be
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waived or amended on a blanket or case by case basis at the sole
discretion of the BRPs.
8.7.2. Any Creditor which had instituted legal or arbitration proceedings
against the Company or lodged a counterclaim against the
Company in any such proceedings prior to the Commencement
Date, shall be entitled to lodge its Claim by means of furnishing to
the BRPs a copy of its summons, counterclaim, notice of motion,
statement of claim or counterclaim, or similar formal process by
which monies were claimed from the Company.
8.7.3. Proof of claims forms were sent to all known Creditors before the
first meeting of Creditors.
8.8. DISPUTE RESOLUTION
8.8.1. Save as provided for in section 133 of the Companies Act, in respect
of all or any disputes by the BRPs on Claims submitted by
Creditor(s) and Employees, which disputes include, but are not
limited to, disputes on the existence or otherwise of Claim(s), on
quantum of Claim, security claimed by a Creditor, the nature of the
security, the extent and value of the security and the like (“the
dispute”) such dispute can only be resolved in accordance with the
dispute mechanism outlined below.
8.8.2. The dispute mechanism procedure will be as follows:
8.8.2.1. All Creditors who have received notification from the
BRPs of a dispute are within 15 days after such
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notification (“Additional Claim Period”), to contact the
BRPs and request to meet with the BRPs in an attempt to
reach agreement on the dispute.
8.8.2.2. If the Creditor does not avail itself of this 15-day
opportunity or if after having availed itself and the dispute
is not resolved within the 15 day period, the Creditor will
be afforded 7 days (reckoned from the date of expiry of
the 15 days) to nominate a retired judge as an expert (not
as an arbitrator or mediator) to preside over and to resolve
the dispute. Should the Creditor not make this nomination
the BRPs will do so on her behalf and this nomination will
be binding on the Creditor(s).
8.8.3. The retired judge when nominated and who agrees to accept such
appointment (hereinafter referred to as the “expert”) will endeavour
to complete his mandate within 30 days of his appointment or within
such further time period as the expert in his/her sole discretion may
determine. To the extent that any expert as nominated by the
Creditor or Employee/s refuses to act or is not available to act, the
Creditor, or if such Creditor refuses or does not do so within three
days of being requested by the BRPs to do so, the BRPs on their
behalf are then obliged to choose another retired judge(s) from the
above list until one such judge is available to act and is agreeable
to act.
8.8.4. The expert will in his / her sole and absolute discretion determine:
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8.8.4.1. the venue at which the dispute is to be resolved;
8.8.4.2. the rules, regulations and procedures that will govern the
determination of the dispute;
8.8.4.3. the date(s) for the determination of the dispute;
8.8.4.4. will give his / her award / determination within 5 days of
the completion of the process as determined by him / her;
and
8.8.4.5. will as part of his / her award / determination determine
who is liable for the costs of the determination such costs
to include his costs, legal costs, venue costs, recording
equipment (if applicable), transcript of evidence (if
applicable) and the like.
8.8.5. The Creditor/s agree that, save for any manifest error, the
determination of the expert will be final and binding on the
Creditor/s, the Company and the BRPs and will not be subject to
any subsequent review or appeal application / procedure / process.
8.8.6. The expert shall be entitled to make an award for costs in his / her
discretion.
8.8.7. The Creditor, the Employee/s, the Company and the BRPs agree to
use their utmost endeavours to ensure that the entire dispute is
determined by the expert within the 30-day period as set out above.
130 | P a g e
8.8.8. Should a creditor with a Disputed Claim commence the dispute
resolution mechanism but not follow the requisite dispute resolution
steps as indicated above, the Creditor’s claim will remain as
disputed and will be treated as set out in clause 7.15.6 above.
9. BRPs' CERTIFICATE
9.1. We, the undersigned, Johan Du Toit and Refilwe Ndlovu, hereby certify to the
best of our knowledge and belief that:
9.1.1. any actual information provided herein appears to be accurate,
complete and up to date;
9.1.2. the BRPs have relied on financial information including opinions and
reports furnished to them by Management of the Company and its
Advisors, where applicable;
9.1.3. any projections provided are estimates made in good faith on the
basis of factual information and assumptions as set out herein;
9.1.4. in preparing the Business Rescue Plan, the BRPs have not
undertaken an audit of the information provided to them by the
senior management of the Company and by the Company’s
Auditors, although where practical, the BRPs have endeavoured to
satisfy themselves of the accuracy of such information.
We hope that the above Business Rescue Plan will meet with your approval. Should you
have any comments or questions, please do not hesitate to contact us.
Yours faithfully,
131 | P a g e
_____________________________
Johan du Toit – Joint Business Rescue Practitioner
31 March 2022
_____________________________
Refilwe Ndlovu – Joint Business Rescue Practitioner
31 March 2022
132 | P a g e

31.03.2022 - Cast Products SA Business Rescue Plan

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31.03.2022 - Cast Products SA Business Rescue Plan

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CAST PRODUCTS SOUTH AFRICA PROPRIETARY LIMITED

(IN BUSINESS RESCUE)

(REG NO. 2017/057592/07)

DRAFT BUSINESS RESCUE PLAN

of section 150 of the Companies Act 71 of 2008, as amended

Prepared by Johan Du Toit and Refilwe Ndlovu

(Joint business rescue practitioners)

Publication date: 31 March 2022

Paragraph number and description Page

1. IMPORTANT NOTICE AND ACTION TO BE TAKEN .......................................................................... 3

3. INTERPRETATION AND PRELIMINARY ............................................................................................ 6

4. STATEMENT ON CONFLICT OF INTEREST .....................................................................................18

5. STRUCTURE OF THE PLAN ..............................................................................................................18

6. PART A - BACKGROUND ..................................................................................................................20

7. PART B - PROPOSALS .....................................................................................................................39

8. PART C - ASSUMPTIONS AND CONDITIONS ................................................................................122

9. BRPs' CERTIFICATE .......................................................................................................................131

the Company in accordance with the provisions of the Companies Act.

with the requirements of Chapter 6 of the Companies Act, in particular, section

150 (2) of the Companies Act.

in the manner outlined herein and you are entitled to be present or

represented, and vote, at a meeting of creditors and/or shareholders to be

considering the Business Rescue Plan.

Affected Persons are advised to consult an independent attorney, accountant

or other professional advisor in addition to any consultation with or direction

received from the BRPs.

to state-owned enterprises, such as Eskom and Transnet, who are extensively

reliant on cast steel products.

Africa and is a critical component to infrastructural development in South

proposition in that many of its customers are consumers of heavy-duty

as one of the best managed and technically proficient casting producing

companies in Southern Africa. Its ability to produce castings from five

kilograms up to fifty tons positions it uniquely as an end-to-end casting

has minimal competition in the industry.

2.6. The Company is therefore extremely important to South Africa’s quest to

develop key infrastructure such as railways and power utilities.

technologies in Southern Africa for generating high volumes of quality

restored to its former glory, allowing the Company to continue producing

quality products for its clients.

and employment generating assets for South Africa.

2.9.1. To stabilize all operations during the ensuing six months, by

implementing programs to prevent historically loss-making

segments from incurring further losses and consuming cash;

point where it can operate without funding interventions; in so doing,

to protect this important asset to ensure continued supply to key

industry role players in South Africa’s industrial rebuild programs;

phased implementation of the Plan. These phases will:

and the business to take its rightful place in the context of

South Africa’s infrastructure programs. During this

period, the BR Team will restructure the operations and

the balance sheet, implement an executive management

structure for the long term, and develop the Company’s

people sufficiently to ensure that the business can stand

alone and fund itself and satisfy its customers’ needs;

2.9.3.2. In the final phase of the Business Rescue, projected to

commence 9 - 12 months after the Plan is approved,

partner who will invest in taking the business forward and

unlocking its full potential for the benefit of all its

stakeholders and South Africa as a whole.

made possible by the work of a vastly experienced BR Team. The support of

date, and will continue to be so throughout the process. The BR Team,

extends herein, their gratitude to the stakeholders for their support.

3. INTERPRETATION AND PRELIMINARY