Five months and some R5.5 billion down the line, South African Airways (SAA) is still under business rescue with no clear plan in sight and Public Enterprises Minister Pravin Gordhan is not impressed with the little the rescue practitioners have done.
Giving a presentation on state-owned enterprises in a joint parliament committee meeting on Wednesday evening, Gordhan said business rescue practitioners (BRPs) Les Matuson and Siviwe Dongwana should not make a move towards liquidating the airline when there are many alternatives that could still be explored.
Matuson and Dongwana have previously made it clear that without further funding from the government they would have no option but to implement a structured winding down of the airline or a liquidation. These plans have been placed on pause at least until May 11, to give workers a chance to accept wholesale retrenchments and for government to find the requisite funding.
The show must go on
But Gordhan told MPs there will be no “fire sale” of SAA assets and that despite the BRPs saying they will not be operating any flights from May 8, this will need to be relooked.
Gordhan said one of the issues government was contending with is the lack of a “proper and fully-fledged” rescue plan from the BRPs.
“At best what we had given to us yesterday morning is an outline, but much of it is about the history and not too much of it is about solutions,” said Gordhan.
Business rescue proceedings are instituted to rehabilitate financially-distressed companies so they can become solvent again. The Companies Act provides for these proceedings to last for a period of three months. In this period the rescue practitioners will convene with all stakeholders, and publish and implement the plan if it is approved.
The act also provides for the plan to be published within 25 days of the rescue practitioners’ being appointed, but allows for a longer time if allowed by the courts or creditors.
Since the rescue practitioners were appointed in December they have been given three extensions to publish the business rescue plan. There have been delays in the issuing of post-commencement funding and a legal challenge by the unions, with a second challenge to stop retrenchments expected in the labour court on Thursday. The BRPs have also faced public disapproval from government for shutting down all domestic routes barring one as a cost-saving measure.
Gordhan said in the next 48 hours government would be engaging with the BRPs on the specifics regarding the shape and design of a future new airline and how that transition will happen.
He said the department would also meet with the practitioners to examine the company’s finances to locate savings from the R5.5 billion that will fund the continued operation of the airline beyond May 8.
Another issue raised by Gordhan is the “sole discretion” the BRPs have had regarding how the R5.5 billion is used, saying more could have been done to save costs.
“The Company’s Act does prescribe that when there are important decisions to be made by the BRPs there must be adequate consultation with the shareholder. Our view is that that has not been entirely the case.”
For instance, a United States consultancy firm Alvarez & Marsal was appointed by the BRPs on the recommendation of the lenders who contributed to the post-commencement funding.
The work done by this firm resulted in a bill of around R35 million and Gordhan said government has “not seen the product of what has been done”.
“We want full access to that information so we can determine if there was value for money in that regard,” he said.
The BRPs were also supposed to present management accounts to the Standing Committee on Public Accounts in Parliament but have not done so.
Gordhan said the BRPs and the other consulting firms have been asked to reduce their fees by up to 40% “so they also contribute like the staff would be contributing to a proper outcome of this process”.
“We haven’t heard from them in this particular regard. We are engaging with one of the consultancies in the reduction on fees.
“Again it’s the trade unions who have come to the party,” he added, saying that the majority of unions have agreed to take salary cuts of up to 50% to keep the airline alive.
The unions and government have established a parallel process called the Leadership Forum, after labour rejected a retrenchment proposal from the BRPs asking workers to accept unguaranteed severance packages.
Last week labour signed a leadership compact with government pledging their cooperation in working towards a new airline, where all parties will have to make sacrifices.
Gordhan said one of the things that will be discussed in this forum is the retrenchment process, underlined by a mutual understanding that not all SAA employees will be employed in the new and leaner airline.
Brought to you by Moneyweb