SAA: Will Mboweni loosen purse strings to rescue South African Airways?

By Xolisa Phillip, in Johannesburg

Posted on July 14, 2020 17:24

With Pravin Gordhan sure to back the plan, the rescue of South African Airlines needs the Treasury to provide funding commitments on Wednesday for the rescue plan to take off.

South African Airways’ (SAA’s) business rescue practitioners (BRPs) are awaiting a letter of commitment from the department of public enterprises (DPE) after creditors voted in favour of the airline’s rescue plan.

During a virtual meeting held on Tuesday, SAA’s creditors voted overwhelmingly for the national carrier’s business rescue plan to take effect.

READ MORE South African SAA staff not paid for May, desperate for answers

Now, the BRPs expect to receive a letter of funding commitment from the DPE on Wednesday.

The letter requires concurrence from the National Treasury. The DPE reports to minister Pravin Gordhan, while Tito Mboweni is the political head of the National Treasury.

“That [letter] needs to arrive tomorrow [Wednesday]. We are relieved the first phases of the plan … [are] approved. But, of course, it’s all funding dependent. So we are looking forward to receiving the letter tomorrow,” Louise Brugman, spokesperson for the business rescue practitioners, told The Africa Report late on Tuesday.

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

“We are looking for their commitment to the funding. …They’ve indicated … support,” according to Brugman.

Brugman, who attended the virtual meeting, described it as process driven in that most of the important decisions had already been made and most positions were known.

“The meeting was adjourned the last time such that relevant stakeholders could supply further information and understanding of the plan. In the … amendments, a layoff scheme was determined which impacts about a thousand people at SAA,” she explained.

“The acting DG [director-general] of the DPE came on and he spoke around what the DPE were trying to achieve. Why they supported the plan and what the funding process will look like,” added Brugman.

Road to restructuring

A total of 86% of the flagship airline’s creditors have voted for the plan to be implemented.

The DPE, the shareholder representative for the South African government which owns the carrier, has welcomed the development.

READ MORE South Africa: Mboweni budget raises more questions than answers

Phillip Saunders has been appointed interim CEO. An interim board will be put in place. Once in place, the board and Saunders will hire an interim management team that will be tasked to restructure SAA.

Saunders was the chief commercial officer at SAA.

Prior, Saunders served at the International Air Transport Association.

The interim board will be announced in coming days, said DPE acting director-general Kgathatso Tlhakudi.

The National Union of Metalworkers South Africa and the South African Cabin Crew Association late on Tuesday noted the approval of the plan, saying it needed a break from previous management which was responsible for the airline’s “demise”.

“[Saunders] … is part of the disastrous management team which brought the airline to the brink of collapse. We need fresh ideas and visionary, dynamic leadership without the baggage of the past,” the unions said.

READ MORE South Africa: Fight to death for SAA  

“We believe the restructuring being proposed for SAA is fundamental and will create a solid base for the emergence of a competitive, viable and sustainable national airline for South Africa,” Tlhakudi said during the virtual meeting.

Funding final step

“The Cabinet has expressed its support for the concerted effort to mobilise funding from various sources to finance the business rescue plan, including from potential equity partners for the uptake of the new airline,” added Tlhakudi.

The National Treasury, whose agreement is required, has been silent. In June, finance minister Mboweni’s adjusted budget was also silent on SAA.

READ MORE South Africa VS Coronavirus: Public finances looking prickly

However, President Cyril Ramaphosa and the governing African National Congress (ANC) have made no secret of the fact that a flagship carrier is a national imperative.

The South African Communist Party (SACP), which is in alliance with the ANC and a vocal supporter of Gordhan, on Tuesday welcomed the latest development at SAA.

Furthermore, the SACP said the favourable outcome of the creditors’ vote “dealt a blow to unpatriotic elements.”

LISTEN “The ANC today really is about access to government jobs” – Moeletsi Mbeki

Attention will now turn to the DPE and the National Treasury to see if both will meet Wednesday’s deadline to provide written commitments to fund SAA’s approved rescue plan.

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.