The restructuring process of SAA by the business rescue practitioners over the past five months has come under intense criticism by the government, which has questioned how the R5.5-billion that the troubled airline recently received was spent.
Although the business rescue practitioners, Les Matuson and Siviwe Dongwana, were awarded R5.5-billion to fund SAA’s working capital requirements while it was being restructured, there has been little to show for how the money was spent or any benefit derived by SAA.
Since SAA was placed under business rescue in December 2019, the rescue practitioners received R2-billion from commercial banks and R3.5-billion from the Development Bank of Southern Africa – a total of R5.5-billion.
Public enterprises minister Pravin Gordhan said Matuson and Dongwana have not accounted for how the money was spent – considering that business rescue proceedings have been ongoing for five months and haven’t yet yielded a firm decision about SAA’s fate. Such proceedings should ideally last for three months.
Matuson and Dongwana have asked for several extensions in the deadline to table the final business rescue plan. The plan is now expected to be published on 29 May. Even with extensions to the deadline, Gordhan said the rescue practitioners haven’t produced a firm business rescue plan but “an outline”, which has detailed SAA’s history and “not too much about the future” of the airline.
Fees paid to consultancy firms
Gordhan was briefing parliament’s joint committee on public enterprises on Wednesday 6 May evening about the affairs of state-owned entities including SAA.
He said several consultancy firms had been hired by Matuson and Dongwana to advise on the business rescue process. But there is no evidence of the actual work that the firms had done to restructure SAA’s affairs.
Gordhan said large amounts of money were paid to consultancy firms from the R5.5-billion, including R35-million to US-based consultants Alvarez & Marsal (A&M), whose work on SAA he has never seen.
A&M was hired by the rescue practitioners to develop scenarios on how to restructure SAA such as cutting unprofitable long haul and regional flight routes and using SAA’s subsidiary, Mango Airlines, as the main mechanism through which the airline will only operate domestic flight routes. Matuson and Dongwana also hired audit firm PwC to cost the business rescue scenarios. Business Maverick was also informed that the duo is backed by a “massive” legal team, which is led by ENSafrica.
Some of the firms hired by the rescue practitioners have been asked by Gordhan to reduce their service fees by up to 40% but “we have not heard from them in this regard.” Gordhan said there will be a review of how the R5.5-billion was used by the rescue practitioners, whom he believes had “sole discretion” to restructure SAA since it was placed under business rescue.
Gordhan wants the business rescue process to lead to a new national airline being created on the ruins of SAA. The new airline won’t be fully state-owned as strategic equity partners will be introduced and will operate using SAA’s assets including the fleet of planes.
Details of the new airline, which will be launched at a time when the global airline industry is imploding due to the Covid-19 pandemic, are “still being worked at”. To launch the new airline, Gordhan is targeting the consolidation of SA’s airline industry to include private airline operator Comair, which voluntarily submitted itself for business rescue this week.
Gordhan won’t allow a fire sale of SAA assets or any move towards the airline’s liquidation. This will pit him against the rescue practitioners as they have proposed the sale of such as property (including buildings in Gauteng, Cape Town, Port Elizabeth, and East London) and aircraft parts (such as landing gears and engines). The proceeds from the sale would fund the payment of retrenchment packages to about 5,000 workers. BM
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