Business Maverick

BUSINESS MAVERICK OP-ED

Who will finance SAA’s latest flight of fancy?

In its current state, SAA is a case study of what constitutes bad corporate governance and its dire consequences, says the writer. (Photo: Flickr / Mark Camenzuli Burmarrad)

The flagship carrier is on the skids and barely functioning. Thousands of its employees last saw a salary in April 2020. The government is grappling with the economic fallout from the Covid-19 pandemic, which leaves little room for another generous bailout or guarantee to SAA. Whichever way the pendulum swings, the landing will be painful for most involved – not least the nearly 5,000 SAA employees who are caught in the middle.

There is an air of incredulity surrounding South African Airways’ (SAA) business rescue plan. Rightly so, because it has a whiff of desperation mixed with despair about it.

It does not represent the grand denouement that many watchers had anticipated in this long-running corporate soap opera. Indeed, it has thrown up more confusion and left many questions unanswered.  

Even the statement from the Department of Public Enterprises released upon the publication of the plan late on 16 June 2020 had an undercurrent of uncertainty. The department itself does not appear to be entirely convinced about what the business rescue practitioners (BRPs) have pieced together. 

“We will assess the plan which, we are concerned, might have not been adequately accomplished,” reads part of the statement the department sent out just before the clock struck midnight on 16 June.

In short, the department, whose minister is the government’s shareholder representative at SAA, does not seem to have much confidence in what it has gleaned from the BRPs’ plan. Don’t be surprised if the department comes up with an alternative plan, with help from unions and its own advisers, Seabury Aviation Consulting.

There is, after all, the Leadership Compact Forum – also known as the Labour Consultative Forum – comprising two SAA unions and the department. It is here, on this forum, where difficult and detailed conversations have taken place in the absence of the BRPs.    

The forum was constituted after two of the major unions at the airline felt the BRP-led process was an affront to transparency and offended the principles of robust engagement. In simple terms, the unions did not trust that their inputs would be taken into account substantively.

In its statement, the department alludes to this: “… Government has enabled consultations with employee representatives in the Labour Consultative Forum. This process must be embraced by the BRPs and taken to a state of completion.” 

That last line effectively opens the door for further tweaks to what has already been published. Crucially, meaningful consultation with labour is a precondition for the plan’s legitimacy.

This is a strange turn of events, considering that the department gave its backing to the business rescue process when it commenced in December 2019. In contrast, unions resisted the business rescue of SAA from its onset.  

But six months is the equivalent of a lifetime in South African politics.

And so, here we are, at this juncture, where the department and the two unions have thrown their lot together in the expectation of an equitable outcome for one of the flagship carrier’s most crucial stakeholders: its employees.

In the same vein, Public Enterprises Minister Pravin Gordhan’s reputation is also on the line. It is in Gordhan’s interests, as a member of the executive responsible for overseeing state-owned entities, to demonstrate efficacy.

As such, Gordhan will be assessed on the outcome of the business rescue process – no matter which way it goes.    

The road leading up to the plan has been paved with chaos, confusion and turmoil. There have been high-intensity skirmishes between the BRPs and the two unions through the courts, and elsewhere.

The events leading up to SAA crash-landing into business rescue are well documented and the company is a textbook case of the perils of State Capture – otherwise known as white-collar crime.

The stakes are sky-high, and the Department of Public Enterprises’ active involvement in the saga has added another layer of complexity.

Some of the key questions which remain unanswered are why it has taken so long for the plan to materialise and how funds flowing from the successive state bailouts and government guarantees have been spent.

Could it be, then, that another bailout or government guarantee is in the offing for SAA? Or will the government be brave, as Finance Minister Tito Mboweni implored his colleagues in Parliament last week, and institute the urgent reforms required to get the fiscus back in shape?

The BRPs have countered that they can account for the money and their efforts have been stymied or undermined elsewhere. Furthermore, business rescue is an expensive undertaking.

The events leading up to SAA crash-landing into business rescue are well documented and the company is a textbook case of the perils of State Capture – otherwise known as white-collar crime.

What this type of criminal conduct lacks in brute force, it more than makes up for in the misery inflicted on those caught in its crosshairs: In this instance, thousands of SAA workers whose livelihoods have been adversely affected.

The national carrier’s nearly 5,000 staff are counting the cost of corporate misdeeds perpetrated by higher-ups. In its current state, SAA is a case study of what constitutes bad corporate governance and its dire consequences.

The skeleton staff operating repatriation and cargo flights are earning an hourly wage, while the rest of SAA employees have not been paid for May 2020.

Given the Department of Public Enterprises’ sceptical posture on the plan and reluctance to provide further funding to aid the SAA business rescue, it is curious to note one of the preconditions stipulated by the BRPs for the plan to be realised.

The BRPs state that the plan needs: “Confirmation of government’s support and commitment to providing the requisite funding for the various commitments stipulated… in the business rescue plan. This is to be evidenced by way of a letter of support from the Department of Public Enterprises with the concurrence of the Department of National Treasury.

“Such letter is to be received on or before 15 July 2020.”

Could it be, then, that another bailout or government guarantee is in the offing for SAA? Or will the government be brave, as Finance Minister Tito Mboweni implored his colleagues in Parliament last week, and institute the urgent reforms required to get the fiscus back in shape?

The situation is fluid and evenly poised. DM/BM

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