As employees of bankrupt SA Express enter the fourth week of not being paid their March salaries, the Unemployment Insurance Fund (UIF) has poured cold water on the state-owned airline’s plan of seeking financial assistance from the fund.

SA Express, whose flight routes typically serve smaller cities in SA and neighbouring African countries, has not paid most of its 691 employees their salaries since 25 March because it has run out of cash. SA Express is in business rescue, but its rescue practitioners want to liquidate the airline because it has no reasonable prospects of being restructured.

The Department of Public Enterprises (the sole shareholder of SA Express) has, on behalf of SA Express, applied to the UIF for financial assistance to pay outstanding salaries – becoming the first state-owned entity to do so.

The department has applied for two solutions on an emergency basis: to receive funds from the UIF’s normal temporary employee relief scheme (Ters), and a similar scheme that was recently put in place but only assists financially distressed companies to deal with the impact of Covid-19. 

The Covid-19 scheme will provide income support to formal sector employees, who have been temporarily or permanently laid-off due to the five-week Covid-19 lockdown, which started on 27 March but was extended by President Cyril Ramaphosa for an additional two weeks to the end of April.

UIF commissioner Teboho Maruping said although the applications by the department will be assessed “individually and with their own merits”, SA Express would not qualify for assistance under the special Covid-19 scheme.

“For the Covid-19 Ters, they [SA Express] don’t qualify for us to pay their March salaries because there were only three working days left in March [before lockdown started on 27 March]. We expect that they would have already paid March salaries to employees,” Maruping said in a Business Maverick interview.

In other words, the UIF’s special Covid-19 Ters benefits are only effective from 1 April and companies cannot retrospectively apply for benefits to cover March employment expenses (salaries). 

“But if SA Express wants assistance for the month of April, we will look at the case and its merits. As for March salaries, it doesn’t make sense to us [to consider the funding application],” said Maruping.

In relation to the other application under the UIF’s normal Ters, there will be several obstacles for SA Express.

The normal Ters, which is managed at the Commission for Conciliation, Mediation and Arbitration but whose employee benefits are processed and paid by the UIF, has its own rules such as a financially distressed company being required to present a convincing turnaround plan.

Maruping said benefits under both schemes (the normal Ters and Covid-19 Ters) are open to all employees only if their monthly UIF contributions, along with those of their employers, are up to date. That SA Express hasn’t made statutory contributions to the UIF on behalf of employees since it was placed under business rescue on 6 February 2020 means that the airline doesn’t qualify for UIF assistance.

SA Express trade unions

However, the National Union of Metalworkers of SA (Numsa) and the SA Cabin Crew Association (Sacca), which represent some SA Express employees, are still lobbying for UIF funds to be used to pay March salaries. The UIF has R40-billion in immediately accessible funds from its reserves to fund both Ters schemes.

On Thursday 9 April, Numsa and Sacca met with the SA Express rescue practitioners and officials of the Department of Public Enterprises and Department of Employment and Labour to discuss outstanding salaries. 

According to a WhatsApp message circulated to SA Express employees after the Thursday meeting, the labour and employment department, which oversees the UIF’s operations, has approved a “waiver” to “ensure that SA Express salaries are paid for March, April and periods [that] the Covid-19” lockdown may affect the airline, whose operations have been suspended. There was no undertaking on when March salaries would be paid.

“The director-general of the Department of Labour and Employment has approved this waiver and will engage the UIF Commissioner to ensure that they too approve this waiver, this will ensure SA Express salaries are paid from the Covid-19 [Ters] fund [or scheme].

“The UIF Covid-19 fund is a better solution for SA Express looking at the current financial situation SA Express finds itself in, as there are no restrictions that limit the unique situation SA Express finds itself in,” the WhatsApp message read. BM