Liquidation is not an option for South African Airways and is a matter of “national interest”, according to Minister of Public Enterprises Pravin Gordhan.
“We are not having a garage sale I hope, where things are taken on the cheap so to speak,” he said during a briefing of Parliament’s Standing Committee on Public Accounts (Scopa) on Friday.
“We don’t want people to just pick up assets, but to pay a fair price if or when a particular asset is put on sale.”
SAA hasn’t made a profit in about eight years and has cost the state almost R30 billion in bailouts over the past decade as maladministration and corruption weighed on the 86-year old airline, amongst the oldest in the world. The airline was placed in business rescue in December last year, a process that has been hindered by lack of financial commitment by a reluctant National Treasury.
Draft annual financial statements submitted to Scopa indicate that SAA’s financial losses total more than R10 billion over the past two years. According to the documents, SAA reported a net loss of R5.4 billion in 2018, and a R5.04 billion loss in 2019. The restated losses for 2017 came to R5.3 billion.
The Covid-19 pandemic and the subsequent lockdown of the South African economy since the middle of March has grounded airline traffic, burning a deeper hole into SAA’s finances. The owner of Kulula.com and operator of British Airways locally, Comair, has also fell onto hard times as it has moved into business rescue. State-owned regional airline SA Express has been placed in provinsional liquidation after its business rescue process failed.
Without funding commitments from Treasury, joint business rescue practitioner Siviwe Dongwana told the Scopa briefing that the only other option before them was winding down the airline.
Gordhan rejected all talk of dissolving SAA, calling on the practitioners to put “…forward various options so that government can decide what it wants to support financially”.
“Winding down is not an option for [government]. The purpose of providing R5.5 billion post business rescue commencement funding was to complete the business rescue process, which must end with a cost effective and stream lined airline,” said Gordhan.
The business rescue practitioners sought an additional R10 billion in April, which the practitioners argue was central in delivering a viable business rescue plan.
“We prefer [to see a business rescue plan] as then we know the money is used to achieve the object of the business rescue exercise,” Gordhan said, adding that his department was committed to placing a business rescue plan before Scopa as soon as possible.
In their presentation, Dongwana and his joint-practitioner Les Matuson said they had submitted a draft business rescue plan in February, but due to the Covid-19 pandemic, they had requested an extension until the end of May to submit a new proposed plan.
Scopa chair Mkhuleko Hlengwa of the IFP said there was an “…unhealthy relationship” between the practitioners and Gordhan’s department.
“There must be a meeting of minds, otherwise the chaos of musical chairs will continue. This is not a money-making scheme.” said Hlengwa.
“Taxayers cannot afford to continuously pay for something whith no end in sight. We want a timeline so we can speak from certainty and not continue on speculation. The bottom like is either you shape up or you ship out. South Africans cannot afford an airline that will bleed it dry.”