Authors: Daryl Elliott – Consulting Director & Jo Mitchell-Marais – Associate Director
Corporate South Africa’s response to the March 2020 lockdown as a result of the COVID-19 pandemic resulted in reactive, crisis management measures to generate and preserve balance sheet liquidity and protect their cash positions. This was done in order to navigate the uncertainty of the recovery timeframe. But now, as companies seek to recover and thrive in an uncertain future, lazy balance sheets may prevent companies from taking advantage of growth opportunities.
Our 2021 Deloitte Restructuring Survey highlighted that the main actions taken by companies at the start of the pandemic were to achieve ‘quick-wins’ through requests to extend repayment terms with financial institutions, dramatic cost reduction initiatives and the deferral of non-essential and major capex projects.
Those companies that made rapid decisions and were able to implement cash-preserving strategies have been able to successfully navigate the COVID-19 fallout through the first lockdown and beyond. They have been able to increase the cash and cash equivalents on their balance sheets to the extent that the risk of the creation of ‘lazy balance sheets’ has become a reality.