The more than 4 700 employees of South African Airways (SAA) are faced with a big dilemma.

By this Friday afternoon, they have to choose between an employment termination agreement proposed by the state-owned airline’s business rescue practitioners, Les Matuson and Siviwe Dongwana, or whether to take their chances on a “Leadership Compact” agreed to in principle between Minister of Public Enterprises Pravin Gordhan and unions at a meeting held this past Saturday.

The practitioners’ severance packages would be funded from the proceeds of selling some SAA assets. Given the current dismal state of the aviation industry due to the impact of the coronavirus (Covid-19) pandemic, it is unclear just how much could be raised. It’s a process that could take as long as 24 months to finalise.

On the other hand, the compact with Gordhan’s ministry foresees all parties working together towards establishing a new airline – “a national asset which is internationally competitive, sustainable and profitable.” Of key consideration, saving jobs.

Even the possibility of employees ending up owning equity in such a new airline is hinted at. It is as yet unclear where the funding for such a process would come from. Last week, Finance Minister Tito Mboweni spoke about a new airline “rising from the ashes of SAA”.

READ: SAA liquidation postponed for now

What the legitimacy of such an envisioned “leadership compact” and its decisions would be, remain in question, since the business rescue status has placed the power in the hands of the BRPs.
 
Furthermore, they are obliged to act in the interest of all affected parties – including creditors – and not just employees.

The DPE has recently rejected a request by the BRPs for further funding of about R10 billion to complete the business rescue process. This led to the BRPs indicating that they currently do not have enough money to continue with the running of the airline after the end of April.

If their proposed termination of employment agreement is not accepted, the business rescue practitioners say their only other option would likely be apply for liquidation.

All of this has left many employees confused and anxious about which option would put them in a better position, according to a senior employee at SAA, who spoke to Fin24 on condition of anonymity.

“It seems many individual employees, across a wide spectrum of the company, do not really understand their rights in the event that their unions reject the section 189 termination of employment proposal put forth by the BRPs,” said the employee.

“With no more government funding, they worry about their situation if they don’t sign the BRPs’ proposal and find, in the case of liquidation, that other creditors are in a far better position than they are.”

The unions weigh in

The National Union of Metalworkers of SA (Numsa) and the SA Cabin Crew Association (Sacca), which together form the largest union representation at SAA, reject the retrenchment offer from the practitioners.

Numsa spokesperson Phakmile Hlubi-Majola says they regard the proposal as “an empty and conditional package”. The union even questions the lawfulness of the current section 189 process and claims it is placing employees under “duress” to accept.

Numsa and Sacca have even threatened to go to court in an attempt to have the BRPs removed.

Captain Grant Back, chairperson of the SAA Pilots’ Association (SAAPA), says they are keen to work with the DPE and other unions to find practical solutions to save the airline.

SAAPA has advised its members not to sign the retrenchment deal but say members are free to sign it as individuals if they so choose.

As for the National Transport Movement (NTM), its president Mashudu Raphetha calls upon members “not to act desperately and to exercise patience.

“We seek common ground. Eventually we believe SAA will not be liquidated, but a better deal for our members is our priority,” he said.

In the view of Werner Human, deputy CEO, legal affairs of Solidarity, employees have much more certainty under the Basic Conditions of Employment Act, than under the mutual separation agreement proposed by the practitioners.

At the same time, the union is concerned that the process envisioned by Gordhan’s collective leadership compact may delay the business rescue process, with time running out.

What the law says

The reasonable prospect of success with business rescue is the key issue when the BRPs must decide to keep a business running or if they should liquidate, explains Gideon Slabbert, managing director and business rescue practitioner at Turnaround Rescue Solutions.

He says the challenge faced by the BRPs of SAA is not due to incompetence or poor decision making. By law, they are required to continually assess the reasonable prospects of the business.
 
“I believe the employees cannot make a decision based on what is tabled unless they know what they will probably receive, understand what the timing of payments is and how much they are going to receive compared to if the business is place in liquidation,” says Slabbert.

“They need to understand how the proceeds will be distributed with regards to the master of the court and liquidator, VAT payable on all assets sold, how much money will be spent on secured lenders and what will remain for employees.”

For Slabbert it remains an open question whether, if there is not enough money from the assets sold, whether the state will then provide funding for the section 189 packages.

So, whether SAA’s unions and individual employees opt for the practitioners’ proposal or the as yet undetermined leadership compact under Gordhan, one thing is certain, the clock is ticking.

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