Last updated on Aug 6th, 2020 at 05:09 pm

Edcon, one of southern Africa’s largest non-food retailers has been in operation for 90 years and has a number of divisions throughout the region…

However, the coronavirus pandemic struck a final brutal blow to the business, and in April the group was placed in business rescue. According to a report by Business Live, it incurred 2bn in Covid-induced sales losses and could no longer pay its debts. Edcon owes suppliers, landlords and other creditors about R6.7bn.

A lifeline was thrown out in July when one of Edcon’s competitors, The Foschini Group, offered to buy 371 of the existing 472 Jet stores for R480m. This could save up to 17,000 jobs – a massive relief for workers in South Africa as the country battles economic turmoil.

But what happens to all of the accounts from Edcon customers?

How does the business rescue process affect repayments, and will accounts be taken over by The Foschini Group?

PJ Veldhuizen, attorney and  business rescue specialist sums up the situation in a nutshell, “Account holders must continue paying their accounts as per usual, even while the company is in business rescue. If the business rescue fails and the company were to go insolvent, they would continue paying to the liquidator. If the company were sold, the new owner would take over the ‘book’ and customers will continue to pay to the new company.”

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Foschini Group makes multi-million rand offer to buy JET stores from Edcon

Here’s a more detailed explanation of the whole process below:

What is business rescue?

“The purpose of business rescue is to restructure a company in order for them to either continue trading on a solvent basis, or to achieve a better return to creditors than what they would receive on a liquidation,” says Julian Jones, partner at Webber Wentzel attorneys.

Payment obligations remain intact

“Any payment obligations which parties may have to the company in business rescue remain intact despite the commencement of the business rescue proceedings,” says Jones.

“In the event that you were a customer of Edgars, the amount you owed to the company, would constitute an asset in the books of the company.”

Just because the company has gone into business rescue, does not mean that customers are off the hook for their accounts.

The customer debt is “sold” as part of the business by the business rescue practitioner to the new business owner. The new owner would then collect payment from the customers.

Emanuel Cristaudo, business head of personal finance website JustMoney agrees. “If a retail or any other business that issues you with a credit card, a store card, homeloan, personal loan, etc. closes down, you are still liable to pay back the amount borrowed or taken on credit.”

“You have purchased the goods, received value and therefore must continue to pay for these.”

Payment obligations remain intact

What if the business isn’t sold?

“The business rescue practitioner would either seek to collect the indebtedness themselves by appointing a collection agent, or dispose of the book debts at a discount to a 3rd party,” says Jones.

“The accounts constitute a valuable asset on the balance sheet of the company. Business rescue practitioners would no doubt do everything within their powers to collect these amounts in order to maximise any distribution to creditors.”

What about liquidation?

“In the event that the business rescue plan fails and the company is placed in liquidation, the outstanding debt would still constitute an asset in the company’s estate,” says Jones.

“The liquidator would either dispose of the book debt to a third party. OR the liquidator could proceed to recover the various accounts themselves. In all likelihood, the debt would be disposed of to a third party at a discount in order to realise funds to distribute to creditors.”

“Even in the worst-case scenario, account holders will still have to pay up for the amounts owing,” concludes Jones.

Debt protection plan
Debt protection plan
Copyright : jakkapan (

What about account protection plans?

“The account protection plan won’t cover you for this event – it covers you for conditions within an existing running business.  Account balance protection is essentially there to cover for the likes of your death, occupation disability, retrenchment, loss of income and temporary loss of income,” says JustMoney’s Cristaudo.

The type of cover also often depends on age category and job type.

“For example, the benefits a pensioner receives will exclude occupational disability.  Similarly, someone that is self-employed will be covered for functional disability and loss of income, but not for occupational disability and retrenchment.”

Can I apply for protection if I’m retrenched?

“If you are retrenched or if your income is negatively affected, you may have a claim against the account balance protection plan,” says Cristaudo. “IF the business that gave you the credit in the first place is still running, and IF you are up to date with your instalments.”

“So you must reach out to the retailer and lodge a claim. If for some reason the claim is denied and you find yourself over-indebted and cannot afford payments to your credit providers (home loan, car, retail account, personal loans, etc) you can reach out to a reputable debt counsellor who may be able to assist you.”

“Banks may still give you a payment holiday on some of the credit products you have with them, but you do need to discuss this with them.”

Statement from RCS (the owners of Edcon’s debtor’s book)

RCS supports Edcon’s decision to file for voluntary business rescue and remains committed to working closely with Edcon and its customers during this extremely challenging time.

“In respect of the Edgars and Jet cardholders acquired by RCS, we would like to assure these Edgars and Jet Thank U account cardholders that they will not experience any change or disruption to their credit account facility, irrespective of the outcome of the Edcon business rescue process.”

“RCS, as the leading provider of retail consumer finance products in South Africa, purchased the Edcon debtor’s book from ABSA in 2019. As such, these customer accounts will remain with RCS and will not form part of the business rescue plan or any sale deal,” comments Regan Adams, CEO of RCS.

“These Edgars and Jet Thank U account cardholders will continue to be able to use their cards for purchases and will be required to manage their account in the same manner as any other credit product, ensuring they pay their monthly installment to maintain a healthy profile at the credit bureau. In addition, RCS is currently working on enhancing the card offerings to include additional benefits.”

“RCS – a wholly-owned subsidiary of global bank, BNP Paribas – would like to thank Edcon customers for their ongoing support. RCS is actively working with Edcon to assist customers in responsibly managing their debt throughout this difficult time.”