IN TURBULENCE            

South Africa: Fight to death for SAA  

By Xolisa Phillip, in Johannesburg

Posted on May 11, 2020 14:26

South African Airways (SAA) was set to “drop dead”, but public enterprises minister Pravin Gordhan wants to salvage what is left of the airline.

Gordhan gave a presentation last week on 6 May to South African lawmakers. The minister remains resolute that a revamped airline can emerge from a restructuring process and jobs can be saved.

The minister’s stance is at odds with that of the flagship carrier’s business rescue practitioners, who have effectively pronounced its date of death as 8 May 2020.

READ MORE South African Airways set to be carved up by competitors

On the eve of this death deadline, labour unions at the airline instituted urgent proceedings at the Johannesburg labour court, challenging the impending retrenchments of all SAA staff.

Gordhan told parliamentarians that a new restructured airline would be viable and competitive.

READ MORE South Africa’s Comair lands into business rescue

Furthermore, a restructuring could save jobs and wean SAA off its dependence on the fiscus. Most important, the government would consider bringing in a strategic equity partner.

Winding down not in national interest

The minister oversees South Africa’s state-owned enterprises, including SAA, Eskom and Transnet. Out of the three, SAA is on life support and effectively insolvent.

The carrier’s troubles are many and have been exacerbated by the grounding of its fleet to observe the government-instituted COVID-19 lockdown. In contrast, Eskom and Transnet have leadership stability following the appointments of new CEOs at both entities.

READ MORE Amidst coronavirus crisis, retrenchment consultations are underway at SAA

Gordhan bemoaned the fact that the business rescue practitioners had spend R5.5bn given to SAA by the fiscus with little to show. He branded the practitioners’ bid to wind down the airline’s assets as “not advancing the national interest.”

The relationship between Gordhan’s ministry and the business rescue practitioners has turned sour. As a result, the minister has written several letters to the business rescue practitioners ordering a stop to the “fire sale” and liquidation of SAA.

At issue are the business rescue practitioners’ plan, or lack thereof, the section 189 retrenchment process and consultations with the shareholder representative. In this instance, Gordhan’s ministry is the shareholder representative for the South African government.

READ MORE Inside the SAA crisis: airline needs more than R2bn to stay afloat

Gordhan told lawmakers he is seeking legal advice on an “alternative transition process.”

Labour pains

Labour unions the National Union of Metalworkers of South Africa and the South African Cabin Crew Association are challenging the retrenchment process, citing the absence of a business rescue plan. The unions are of the view that this is in contravention of section 189 provisions of South Africa’s labour legislation.

“From the time the … [business rescue practitioners] took over at SAA, they have never acted in the interests of workers. They never engaged us meaningfully in all our engagements, and it was clear from the onset their agenda was the mass retrenchment of workers,” the unions said in a joint statement.

Practitioners’ case

A source representing the business rescue practitioners recently told The Africa Report they were attempting to engage meaningfully with all seven represented unions at the airline.

In a retrenchment agreement document sent to SAA staff nearly three week ago, the business rescue practitioners wrote: “The company’s sole shareholder unequivocally confirmed that it would not be providing any further funding … to assist with the business rescue of the company.”

Understand Africa's tomorrow... today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.