Business Maverick

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DA drags Mboweni to court over pending R10bn SAA bailout

SAA is at a crucial juncture: its business rescue process, which was one year old on 6 December, is attempting to restart flight operations after SA’s aviation industry was grounded on 27 March due to the Covid-19 lockdown. (Photo: Flickr / Leah O’ Carroll)

The Democratic Alliance has launched a two-part application at the High Court in Pretoria. The first part seeks to block Finance Minister Tito Mboweni from using his ‘emergency powers’ to disburse any funds from the fiscus to SAA. In the second part, the DA wants Mboweni’s decision to rescue SAA to be reviewed and set aside.

The Democratic Alliance (DA) has approached the High Court in Pretoria to block Finance Minister Tito Mboweni from using his “emergency powers” under the Public Finance Management Act (PFMA) to transfer funds from the fiscus to SAA’s restructuring process.

On Thursday 16 July, the Department of Public Enterprises announced that it had secured the concurrence of Mboweni and the National Treasury to “mobilise funding” worth more than R10-billion to fund the restructuring and restart of SAA.

The department, which is SAA’s sole shareholder, estimated that the airline requires R10.1-billion to settle money owed to creditors, pay about R2.2-billion in retrenchment packages to 2,700 workers and fund SAA’s restart in January 2021. 

The department’s announcement was silent on the mechanism in which funding for SAA will be mobilised, or whether the government will appropriate the required funds from deteriorating public finances. The National Treasury has not yet clarified its role in raising money for SAA.

The DA’s finance spokesperson, Geordin Hill-Lewis, wrote a letter to Mboweni on Thursday requesting information on how he plans to mobilise funding for SAA – but it went unanswered. 

Hill-Lewis suggested that Mboweni might invoke section 16 of the PFMA, which gives him “emergency powers” to free up funds for SAA from the National Revenue Fund – or the public purse – without Parliament’s approval.

The party’s court application

The DA launched a two-part application at the high court on Thursday. The first part seeks an interim interdict to prevent the implementation of Mboweni’s “emergency powers” and any disbursement of taxpayer funds to SAA.  If the funds have already been disbursed to SAA, the DA wants the airline’s business rescue practitioners, Siviwe Dongwana and Les Matuson, to be prevented from using them.

The DA gave Mboweni a deadline of Saturday 18 July to indicate to the party’s lawyers whether he will oppose the application’s first part. The Treasury was not immediately available on Friday 17 July to comment on the DA’s application. Hill-Lewis told Business Maverick at the weekend that Mboweni’s lawyers plan to oppose the court application.

In the second part of its court application, which might be heard at a later stage, the DA wants Mboweni’s decision to rescue SAA to be reviewed and set aside.

Hill-Lewis said if the court doesn’t rule in the DA’s favour in the first part of its application, success in the second part “may be hollow”.  

“Once funds are disbursed to SAA, it would be difficult, if not impossible, to secure their return to the National Revenue Fund. In short, there may well be no practical and effective remedy for the Minister of Finance’s unlawful conduct,” he said in court papers. 

No Parliament process for SAA funds

For public finances to be used to rescue SAA, a bill for appropriations would have to be tabled in Parliament, debated by MPs, and ultimately enacted as an act. Appropriations are usually made at the time of the February Budget or the October Adjustment Budget, unless there is an emergency situation for which section 16 of the PFMA can be invoked. 

That the more than R10-billion for SAA was not included in the Supplementary Budget tabled by Mboweni on 24 June, means that the funding required for the airline does not constitute an emergency, Hill-Lewis argued. He said it was a common cause that SAA’s decline has taken place over several years, thus “there is no emergency”.

“Nothing about SAA’s decade-long decline or its current status in business rescue justifies this extraordinary short-circuiting of the usual appropriations process.”

The final SAA business rescue plan, which proposed that the government should provide more than R10-billion for a new and restructured airline, was published on 16 June, a week before Mboweni’s Supplementary Budget.  

“It [the government] must have known that the SAA business rescue would require government funding. It [the government] should not be allowed to shore up a case for emergency appropriations when it had ample opportunity to embark on funding during the ordinary appropriations process.” DM/BM

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