BUSINESS NEWS - The South African Airways’ (SAA) business rescue plan has experienced another delay till 14 July 2020 after its business rescue practitioners (BRPs), along with the Minister of Public Enterprises Pravin Gordhan met with the airline’s creditors and stakeholders on Thursday to vote towards a rescue plan.
According to the Democratic Alliance (DA), SAA’s bailout funding of R26.3 billion has reportedly been agreed to by the stakeholders and the department of public enterprises (DPE).
In a statement on Friday, the party said any changes to the business rescue plan that required additional funding would be unfunded.
DA MP Alf Lees said: “If this is true it would indicate a violation of the public finance management act (PFMA) as the DPE cannot make decisions for parliament about the appropriation of funds. It is astounding that affected parties were being asked to vote for a SAA business rescue plan that requires a total of R33 billion in funding, but which funding has not been sourced.”
Lees said it would be irresponsible for parliament to give SAA further funds for a “dead duck project”.
“The adjournment of today’s SAA meeting with creditors, employees and other stakeholders until 14 July is yet another pointless delay. The whole SAA business rescue plan is based on obtaining a further R16.25 billion in bailout funding.”
The DA MP said it was clear that SAA would receive further taxpayer bailouts as the funding was unlikely to be obtained from private investors.
“It is impossible for the approval of parliament to be obtained for the appropriation of a further R16.25 billion in bailout funds for SAA by 14 July. All the delay achieves is to extend the inevitable for unpaid employees who are unable to claim UIF retrenchment benefits because they have not been retrenched,” he added.
Lees further said the DA would oppose any attempt to obtain parliamentary approval for further funds to bail out the airline.
Meanwhile, the ministry of the presidency confirmed that Cabinet has received a progress report on the SAA’s business rescue process from the inter-ministerial committee chairperson, Gordhan.
“Cabinet maintains that a positive vote from creditors to finalise the business rescue process is still the most viable and expeditious option, for the national carrier to restructure its affairs which include its business, its debt and other liabilities,” the ministry said in a statement.
The ministry said that Cabinet believes a restructured airline will pursue the transformational agenda such as the lack of opportunities for the advancement of black pilots after 26 years into South Africa’s democracy.
“It supports the proposal for a new airline and the concerted effort to mobilise funding from various sources, including from potential equity partners for the uptake of the new airline. This is the only realistic pathway from which a new viable, sustainable, competitive airline that can provide its services,” it added.
The airline’s BRPs, Les Matuson and Siviwe Dongwana, were required by the Companies Act to produce a business rescue plan with 25 days to present their business rescue plan to creditors.
However, the process was supposed to be finalised on 5 March 2020, which means their rescue plan is nearly six months overdue. The BRPs sought for an extension until 15 June after the court had initially granted the BRPs an extension on 8 June to present its rescue plan.
The BRPs who said the airline was out of cash, having spent the R5.5 billion given to it in post-commencement funding, had also intended to stop all operations from May 8. However, following discussions with Minister of Public Enterprises Pravin Gordhan, the decision was rescinded.
The idea of privatising SAA has been in conversation in recent months after the DPE opposed provisional liquidation of SAA.
The Pretoria High Court had dismissed SA Airlink’s application to place the airline under provisional liquidation after claiming that the proposed turnaround plan for the airline was “a sham and a fraud on the creditors”.