Business Maverick

Business Maverick

SAA retrenchment process hits a snag as workers bag crucial victory 

South African Airways planes at Cape Town International Airport. (Photo: Gallo Images/Jacques Stander)

The Labour Court has ruled that the retrenchment notices issued to almost 5,000 workers were ‘procedurally unfair’ under section 136 of the Companies Act because the SAA rescue practitioners, Les Matuson and Siviwe Dongwana, have not presented a decisive plan on how the airline will be rescued. 

The prolonged business rescue proceedings of SAA hit a snag on Friday 8 May, with Judge André van Niekerk of the Labour Court ordering the appointed rescue practitioners to withdraw retrenchment notices issued to the airline’s almost 5,000 workers. 

The court’s order adds another twist to the SAA business rescue proceedings, which have been ongoing for five months and haven’t yet yielded a firm decision about how the troubled airline will be rescued. 

Van Niekerk said the retrenchment notices were “procedurally unfair” under section 136 of the Companies Act because the appointed SAA rescue practitioners, Les Matuson and Siviwe Dongwana, issued them to workers without presenting a decisive plan on the airline’s fate.  The Companies Act governs business rescue proceedings in SA and sets out the duties of the rescue practitioners.

In interpreting section 136 (1) of the Companies Act, Van Niekerk said business rescue practitioners may only initiate a retrenchment process once a  business rescue plan has been presented to affected parties including SAA workers, their representative trade unions, creditors and others.  

“In the absence of a business rescue plan, the issuing of notices commencing a consultation process over proposed retrenchments is procedurally unfair,” Van Niekerk wrote in his judgment. 

He said section 136 (1) of the Companies Act must be read together with the Bill of Rights, which affords workers the right to fair labour practices and preservation of job security.

“Section 136 (1) (b) requires that any need to retrench must necessarily be rooted in the business rescue plan. It is the contemplation at that point that there is a prospect that employees will be retrenched as an element of the plan that brings section 189 and the 189A of the Labour Relations Act into play. There is no provision in section 136 (1), or anywhere else in chapter 6 of the Companies Act, that empowers a business rescue practitioner to retrench employees in the absence of a business rescue plan,” he said. 

Section 189 under the Labour Relations Act sets out the steps and the consultations a company must follow during retrenchments.

Matuson and Dongwana were not immediately available to comment on the Labour Court judgment. 

Delays in the rescue plan

The duo has not presented a final business rescue since the government placed SAA under voluntary business rescue in December 2019. 

After an initial agreement to publish the plan in February 2020, Matuson and Dongwana have twice asked for extensions in the deadline to table the final business rescue plan. The plan is now expected to be published on 29 May 2020. 

One of the reasons given by Matuson and Dongwana for the delays in publishing the plan is that they don’t have money to fund the next phase of the business rescue proceedings. The R5.5-billion awarded to Matuson and Dongwana by commercial banks and the Development Bank of Southern Africa since December 2019 – money that was set to fund SAA’s working capital requirements while it was being restructured – has been depleted. The government has rejected the request by Matuson and Dongwana in April 2020 for additional funding of between R7.7-billion and R10-billion.

The National Union of Metalworkers of SA (Numsa) and the SA Cabin Crew Association (Sacca), which in a coalition are the majority union at SAA, approached the Labour Court to stop Matuson and Dongwana from continuing with the retrenchment of the airline’s workers. 

To restructure SAA, on 9 March 2020, Matuson and Dongwana moved to cut employment costs at the airline by offering almost the entire workforce retrenchment packages that include one month’s salary, a week’s pay for every year of service at the airline, payment for untaken annual leave and a 13th cheque if they are entitled to one.

Numsa and Sacca argued in court that the Matuson and Dongwana couldn’t start section 189 consultations with SAA workers and trade unions about retrenchments while the plan to rescue the airline has still not been seen by affected parties. BM



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