State irked by SAA’s ‘insensitive’ R10bn request

The R10 billion cash injection request by the SAA joint business rescue practitioners – in the middle of the Covid-19 coronavirus pandemic – has irked government.
The R10 billion cash injection request by the SAA joint business rescue practitioners – in the middle of the Covid-19 coronavirus pandemic – has irked government.

The R10 billion cash injection request by the SAA joint business rescue practitioners – in the middle of the Covid-19 coronavirus pandemic – has irked government, provoking sentiments in the highest echelons that the practitioners were being “rogue”, “naughty” and “insensitive”.

It’s been almost five months since the ailing national carrier was placed under business rescue, but the business rescue practitioners, Les Matuson and Siviwe Dongwana, have yet to present a financially viable plan to government, creditors and the public.

Earlier this week, the department of public enterprises shot down the airline’s request for R10 billion, saying it could not provide any future funding to sustain the business rescue process and would also not provide any further guarantees to SAA to increase its foreign borrowing limit.

Asked on Friday what the plan was, the business rescue practitioners’ spokesperson, Louise Brugman, said: “We don’t know now.”

She added that, since the letter of decline from the public enterprises department on Monday, the business rescue practitioners were focused on managing the retrenchment process.

The insider said the current environment with the outbreak of coronavirus actually provided an opportunity to liquidate SAA and start a new airline, which was the Treasury’s preferred way forward

“The business rescue practitioners have been busy this week with the section 189 [retrenchment] process, which would possibly provide a better outcome for employees.

“The business rescue practitioners’ job, as per the government backing when SAA was placed into business rescue on December 5 2019, was to try to rescue the business. Government promised financial backing for the process,” she said.

On Wednesday, Cabinet tasked Public Enterprises Minister Pravin Gordhan with presenting another report on SAA in the coming week.

A department insider said the business rescue practitioners were “creating an impression that they had gone rogue”, suggesting the SAA turnaround process was starting to look like a money-making scheme.

The insider said the business rescue practitioners had chosen to restructure SAA, but to date had not provided a plan for executing that process.

“They should bring a plan, rather than holding a gun and demanding R10 billion in this hard economic environment when the public expects hospital beds.”

Read: ‘Liquidation only option’ as govt denies SAA funding request – experts

Another individual with detailed information about the running of SAA said the department’s anger was understandable. “What’s inescapable, though, is that the airline’s in a hole and needs cash to lift it up. It doesn’t matter how you slice this one, a cash injection is needed.”

The person said the section 189 process was running concurrent with every other issue and that it remained unclear “whether there was an allocation for this initiative”.

An executive member of government who may not be named said a recovery plan had been expected from the business rescue practitioners at the end of February, “but there’s still no plan on the table – yet they want more money. And the approach they’re taking isn’t what was agreed upon in terms of cutting costs. They were given money in February. Now they’re being naughty and very insensitive.

“In this current economic climate, they can’t ask for more money when they haven’t met their target of even giving government a viable plan,” said the person, adding that no explanation for the delay had been provided either.

A Treasury insider said government was expecting a plan from the business rescue practitioners “a while ago, but they have not done so because they have a very weak aviation capacity and knowledge”.

“They have sourced some capacity for aviation because they do not have internal capacity, but it does look like the outsourced capacity was also weak and inexperienced.”

Said the person: “And then they jumped in and say they want money and everybody said: No. We cannot just give you money when you are not giving us a clear plan on what you are supposed to do.”

The person said: “It does look like they have serious challenges because everyone was supposed to take a decision on the basis of the business rescue plan, including funders and government.”

The business rescue practitioners said they were reviewing the situation following the government’s decision to turn down the request for help

The insider said the current environment with the outbreak of coronavirus actually provided an opportunity to liquidate SAA and start a new airline, which was the Treasury’s preferred way forward.

“For you to restructure SAA, you need to have a road map and these guys seem to be failing to enable government to take such a decision.”

SAA was placed in voluntary business rescue in December and government announced that it would avail R4 billion to the airline to deal with its short-term liquidity problems until January 31 2020. But of the R4 billion package, government was only able to secure R2 billion and SAA ran out of money in mid-January, forcing it to halt operations.

The joint business rescue practitioners said in a letter to affected parties that the national Covid-19 coronavirus lockdown, which banned air travel, forced the airline to request an extension of its foreign borrowing as it now had no income.

The business rescue practitioners said they were reviewing the situation following the government’s decision to turn down the request for help.

The letter, sent to banks and creditors and others, said the business rescue practitioners were keeping the airline operational, conducting charter flights to bring South Africans home and repatriate foreign nationals to various countries.

Its cargo division operated unhindered during the lockdown to deliver critical medical supplies to the country.


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