The 2024 Deloitte Restructuring Survey painted a pretty alarming picture for South Africa and its ambitions to recover from its current Economic Crisis.
The Report starkly outlines the South African business environment, where unique challenges, not seen in other parts of the world, are impeding a swift recovery. Sectors such as retail and agriculture are bearing the brunt of these challenges.
The entertainment sector is also taking a hammering. Ster Kinakor exited business rescue less than two years ago, yet recent reports point out that the company plans to cut a third of its workforce as it shuts down cinemas nationwide.
Restructuring needed
The article points out that Ster-Kinekor is preparing to lay off almost a third of its 728 employees (236 people, or 32% of the workforce) amid plans to close up to nine of its cinemas in Gauteng, KwaZulu-Natal, and the Western Cape.
The cinema chain has stated that it needs to undergo restructuring due to factors such as a challenging economic environment, load-shedding, financial constraints, and the impact of the Hollywood strikes which saw many movie releases have been moved to 2025.
These factors have resulted in substantially lower cinema attendance, which has further impacted revenue.
“As these are forces largely out of the business’s control and the financial impact is likely to endure for some time, Ster-Kinekor Theatres has had to review its cost structure to ensure the continued survival and sustainability of its business,” the company said.
The nine cinema locations earmarked for closure:
- Bayside (WC)
- Boardwalk (KZN)
- Mimosa (KZN)
- Shelly Beach (KZN)
- Cedar Square (GP)
- Maponya (GP)
- Matlosana (GP)
- Southgate (GP)
- Sterland (GP)
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Section 189
The article points out that Ster-Kinekor served staff with a section 189(3) notice back in February 2024, beginning the retrenchment process of 236 of its 728 employees.
The company said that “Ster-Kinekor Theatres issued a notice to all staff informing them of the company’s intention to proceed with a restructure under Section 189 of the Labour Relations Act and to begin the consultation process.”
Affected positions include those in the CEO’s office, marketing, sales, human capital, business operations, content, finance, head office, regional operations, and information technology.
Ster-Kinekor said the “cinemas will be closed at gradual intervals, conditional on lease negotiation agreements”.
Under review
The article points out that, additionally, the company announced a review of eight more cinemas—Secunda, Wonderpark, Bedfordview, Cradlestone, Mooi River, N1 City, Rosebank Nouveau, and Rustenburg—for potential closure. This could lead to the loss of 69 jobs.
Gateway in KwaZulu-Natal would have only one role affected.
In January 2021, Ster-Kinekor entered business rescue due to the severe effects of the Covid-19 pandemic and lockdowns. Although the company was profitable before the pandemic, despite competition from streaming services, cinema closures, seating limitations, and curfews led to significant financial losses.
Additionally, the pandemic and ensuing lockdowns led to numerous film release delays, intensifying the challenges faced by the company.
Image By: Canva
As a result, the Board of Directors decided to initiate business rescue to address these issues and take advantage of legal protections.
The company successfully emerged from business rescue in November 2022, following an acquisition that secured a cash infusion of R250 million from UK-based Blantyre Capital and South African Greenpoint Capital.
Ignoring the inevitable?
How has this company begun a journey similar to that of Blockbuster?
Porter’s Five Forces is clear in that the threat of competition is ever present. This has been particularly true for cinema companies as access to the internet, download sites, and now streaming services means that consumers can access the cinema experience without leaving their homes and at a fraction of the price.
Have traditional entertainment models lost their allure? What will the impact of the big screen shift to the small screen be?
