Gordhan: BRPs, consultants should slash their fees for SAA - it's unions who came to the party

Minister Pravin Gordhan (GULSHAN KHAN/AFP/Getty Images)
Minister Pravin Gordhan (GULSHAN KHAN/AFP/Getty Images)

Minister of Public Enterprises Pravin Gordhan has made no bones about the fact that he is questioning the way the business rescue practitioners of South African Airways have been spending the R5.5 billion post-commencement funding received after the state-owned airline went into business rescue in December last year.

Gordhan briefed the joint Portfolio Committee on Public Enterprises and the Select Committee on Public Enterprises and Communications during a virtual joint meeting on Wednesday evening.

Referring to a "matter of contention" between the shareholder and the BRPs, Gordhan said government took issue with the BRPs over accountability for the money spent. Various consultancies had been brought in without evidence of what they had actually done, Gordhan said.

'Unions came to the party'

"We want full access to all of that information so we can evaluate whether we are getting value for money," he said.

For instance, he questions millions that was paid to aviation consultants brought in from the US and he wants that fully evaluated.

"We have called on the business rescue practitioners themselves and all the consultancies that they have brought in ... to reduce their fees by anything up to 40% so that they also contribute like the staff have been contributing to a proper outcome of this process. We haven't heard from them in this particular regard.

"Again it is the trade unions that have come to the party," he said. 

Gordhan said he is not happy with the deadline of 8 May the BRPs have put for unions to sign a proposed termination of employment agreement. He referred to a labour court case being heard on Thursday, brought by the unions Numsa and Sacca against the BRPs and the airline.

The unions say a Section 189 retrenchment process started without the BRPs having submitted a business rescue plan setting out what a restructured airline would look like and, importantly, the staff component that would be needed.

Avoid liquidation

Gordhan believes the liquidation of SAA should be avoided, although it is within the power of the BRPs to apply for it if they feel the airline cannot be saved.

"We are not privatising [SAA]. A national airline is not necessarily 100% owned bY the state. We will entertain strategic equity partners," Gordhan responded to a question.

"In the next 48 hours we will meet with the BRPs to examine the finances and to give as much continuity after the 8 of May deadline. There should be no further sale of assets and no move to liquidation if many alternatives can be pursued," he added.

"In our view, the winding down process that the BRPs seem to be on at the moment will not serve the original purpose we set at the start of the business rescue process and that has been a contention between us and the BRPs.

"We believe an alternative transition process is possible and we will put those proposals to the BRPs in the next 48 hours. The business rescue plan ultimately is to see how the business can get to be viable in future. The varioius classes of creditors must vote on it and banks in SA are the main creditors."

Gordhan, for his part, foresees opportunities in the current challenging, pandemic impacted airline industry "if someone has money". He indicated, however, that government does not have more money to provide.

There can be huge opportunities on the cargo side for the airline to get income, in his view.

"The key issue is how to transition from the old [SAA] to the new. Current conditions may mean a slow take off, whether of the existing airline or a new one," he said.

Although it lies within their power to do so, he would like to see the BRPs avoid liquidation and hopes the airline can be restructured or "a new type of airline" can emerge."

Gordhan said that according to the Companies Act, BRPs must consult with the shareholder on important decisions.

The ideal was a "constructive outcome", he said, where the "old SAA as it exists" does not exist into the future.

"We want to engage in a constructive way with the BRPs on alternative routes for a constructive outcome of the shape of a new airline. We have gotten experts to give us ideas and what the migration route can be from where we are now," he said.

"We want to talk about a more consensual approach. Not every employee will be employed again in a new airline. We need to, in a responsible way, put together a social plan with various dimentions, which, in essence, will look at the welfare of labour, but also the change way business is done."

An international consultancy recently appointed by his department is looking for strategic equity partners for a restructured or "new SAA". Gordhan said there has been some interest, some of which seemed questionable. A panel of experts will evaluate any proposals in this regard.

Going forward, he said there will be further consultations with the unions and industry experts on what a restructured or "new SAA" should look like. He will report back on that in due course.

* Earlier on Wednesday five international air transport and tourism bodies, including the Airline Association of Southern Africa (Aasa) and the International Air Transport Association (IATA), launched an appeal to international financial institutions, country development partners and international donors to support Africa's travel and tourism sector which employs some 24.6 million people and contributes $169 billion to Africa's economy combined.

"Now, more than ever, countries need to come together to help those communities that are most vulnerable. The survival of our industry and its allied sectors has serious ramifications for Africa's entire air transport system," said AASA CEO Chris Zweigenthal.

IATA's director-general and CEO Alexandre de Juniac, emphasised that airlines are at the core of the travel and tourism value chain, but without a lifeline of funding to keep the sector alive, the economic devastation of Covid-19 could take Africa's development back a decade or more.

ZAR/USD
17.54
(+0.10)
ZAR/GBP
22.98
(+0.04)
ZAR/EUR
20.66
(-0.01)
ZAR/AUD
12.59
(+0.05)
ZAR/JPY
0.17
(-0.04)
Gold
2034.54
(+0.03)
Silver
28.27
(+0.11)
Platinum
961.50
(+0.38)
Brent Crude
44.55
(-1.53)
Palladium
2166.01
(+0.63)
All Share
56757.73
(-1.56)
Top 40
52435.65
(-1.72)
Financial 15
9897.96
(+0.10)
Industrial 25
74671.49
(-1.98)
Resource 10
58948.78
(-1.89)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Results
Yes. We need the money.
11% - 937 votes
It depends on how the funds are used.
74% - 6259 votes
No. We should have gotten the loan elsewhere.
15% - 1286 votes
Vote