Parliament

SAA: No salaries from 1 May, R15.8bn losses over three years & still no final business rescue plan 

By Marianne Merten 15 May 2020
Caption
SAA Plane (Photo: Gallo Images)

SAA staff will not be paid from 1 May because the airline “doesn’t have the funds to pay staff salaries in May”. That emerged in Friday’s terse meeting of Parliament’s public spending watchdog, the Standing Committee on Public Accounts (Scopa), when friction between the minister and business rescue practitioners sparked.

Business rescue co-practitioner Siviwe Dongwane was left to deliver the bad news. “The company does not have the funds to pay salaries,” he said, adding employees from 1 May were on “unpaid absence”. 

And Public Enterprises Minister Pravin Gordhan’s frustration that had been simmering throughout the meeting burst.

“Mango pays 50% salaries… If this was done in SAA in March and April, we would not worry where the money for May (salaries) would come from. There was a way to make sure – if the interest of workers were taken seriously.”

That ministerial comment goes to the heart of the tensions of the now almost six-month-old business rescue process, criticised by the minister and his department not only for lack of clarity on fees, but also for lack of a business rescue plan.

“It is astounding Mr Dongwana says to you the business practice process will be done for a wind-down. That is shocking! Instead of presenting various options…” said Gordhan.

A wind-down would see the sale of assets that could at the end leave little but an empty shell. And that stands in direct contrast with what Gordhan must achieve – a restructured, viable, streamlined and cost-effective national flag carrier.

Or as the minister told parliamentarians, again, on Friday:

“Government decided SAA restructuring must continue, albeit through the business rescue process. This is a national interest matter”.

The only softening in that position is around the timeframe – now pushed back to two or three years – because of the devastation the Covid-19 pandemic wrought on international air travel and the aviation industry. 

Parliament’s public spending watchdog, the Standing Committee on Public Accounts (Scopa) never really got to discuss SAA’s draft financial statements – showing losses of R5.045-billion in 2019, R5.485-billion in 2018 and a restated loss of R5.4-billion in 2017.

These financials were finally submitted after Scopa’s months of requests – and pursuit why the national airline has failed to submit its statutorily required annual reports for three years.

And yet SAA has received tens of bailout billions – R40.3-billion in cash injections and guarantees since 2003, according to documents before Scopa. The 2020 February Budget allocating a further R9.2-billion so maturing loans can be met.

“The South African taxpayer does not deserve to be saddled with another state-funded airline when the evidence clearly shows that it will also be another fiscal drag just like its predecessor,” DA MP Alf Lees said in a statement on Friday.

“Gordhan should not be allowed to sacrifice the country’s financial wellbeing through regressive plans of trying to appease unions by promising them a new airline. South Africa can not afford it.” 

It echoed his question to both minister and business rescue practitioner whether SAA could actually be saved during Friday’s three-and-a-half-hour Scopa meeting.

SAA has not tabled its annual report in Parliament as is required by law after submitting the 2016/17 financial year documents – some seven months late in May 2018.

In October 2019, just past the statutory deadline, SAA publicly acknowledged it could not finalise its financials and annual report because it was not a going concern – or effectively bankrupt.

When Scopa pushed for the national airliner to comply with the law – and submit its financials and annual reports – tempers flared in November 2019. Then SAA told MPs it would not submit its financial or annual report until it was a going concern.

Some two weeks later, on 5 December, SAA was put into business rescue.

In January 2020, the governing ANC at its National Executive Committee lekgotla decided there must be a national flag carrier.

Almost six months later and tensions between the minister, department officials and the business rescue practitioners have been on public display twice in less than 10 days.

On Friday the minister again responded with impatience, and frustration, to the business rescue practitioners’ presentations, while praising trade unions at SAA for making “a positive contribution to an emergence of an alternative by taking a salary sacrifice”.

The levels of frustration also ran higher a week earlier. On Wednesday 6 May Parliament’s public enterprises committees heard of the terse and tense relationship with SAA business rescue practitioners as Gordhan let rip over lack of accountability and consultations and questioned spending patterns, including consultant fees.

 

“Liquidation as far as government is concerned is not on the cards. The question to ask is ‘Who’s waiting in the wings… to pick up the assets on the cheap?’.” – Pravin Gordhan

 

That meeting came after the latest proposal by business rescue practitioners to stop repatriation flights by 8 May as there was no money left, was halted by Public Enterprises. And Gordhan told lawmakers there would be further consultations.

May 8 came and went – repatriation flights would continue – but it seems meetings have failed to ease tensions.

On Friday, acting Public Enterprise Director-General Kgathatso Thlakudi told parliamentarians the business rescue practitioners had not yet submitted what was spent on what. 

Instead the department was told just over R7-billion were still needed for the process, down from R9.9-billion that was touted in February: 

“The restructuring costs have been a moving target,” the director-general said.

It was let slip the business rescue practitioners had collected some R30-million in fees four months into the process.

After slapping down the business rescue practitioners’ seeming preference for a wind-down, Gordhan made it clear in response to Lees’s question that liquidation was the only option.

“Liquidation as far as government is concerned is not on the cards. The question to ask is ‘Who’s waiting in the wings… to pick up the assets on the cheap?’.”

Curiously, it seems everyone is on the same page regarding no liquidation for SAA.

“We would not recommend a liquidation to anyone in a hurry,” said Dongwana’s co-business rescue practitioner Les Matuson, who earlier enthused how “Minister Gordhan had a vision of building something new and sustainable and he stood firm even as Coronavirus devastated the world”.

Parliamentarians were not impressed.

“Obviously we need further interactions. The more they provide answers, the more questions arise,” said Scopa Chairperson Mkhuleko Hlengwa. “The SAA headache can not continue to be a permanent feature of the public discourse…”

And while a plan what to do about the troubled SAA seems to be largely missing, the destination is clear. As Gordhan described it, “a viable, streamlined, trimmed down, cost-effective business”. DM

Gallery

CORONAVIRUS

Ramaphosa declares Nelson Mandela Bay a Covid-19 hotspot – extra restrictions in force

By Estelle Ellis