Minister of Public Enterprises on liquidation process in SA Express

Meeting report

Opening Remarks

The Chairperson said the meeting on SA Express (SAX) was a continuation of the meeting held on the 15 May, where the Committee did not have time to deal with the SAX liquidation matters thoroughly. The questions posed by Members had been forwarded and the responses should have been in their inboxes two days previously. This undermined the Committee and was totally unacceptable.

He welcomed Mr Phumulo Masualle, Deputy Minister: Public Enterprises, and his delegation. He said he would be very strict with time because there was going to be a House meeting at 2 pm.

Deputy Minister Masualle introduced the Departmental team, including Mr Kgathatso Tlhakudi, Acting Director General (ADG), and Ms Nonny Mashika, Acting Deputy Director General (ADDG). Some members from the legal team and support staff were also present.

Absence of liquidators

The Chairperson asked where the liquidator, or the liquidator’s team, were, and added that the Committee had not been given a presentation in advance of the meeting so it was waiting to hear a briefing from the liquidator.

The Deputy Minister said that the liquidator was not present in the meeting, though not from lack of trying on the Department’s part to ensure that the liquidator was present. His final information regarding the liquidator’s absence was that it was largely due to a lack of readiness. Based on the provisional liquidation order made on 25 March, the date on which the final order for liquidation was be made was today, 9 June. He had learnt that the liquidators had since approached the court with a request that it extend the period by another three months. They had said that within three months, they l would be more abreast with investigating the assets and liabilities of the company and be better able to articulate and explain the path which they had undertaken.

The Chairperson thanked the Deputy Minister, but said that this disclosure compounded their problems as a Committee. On 15 May, the Business Rescue Practitioners (BRPs) had come to the Committee to field questions, as it was they who were ultimately responsible for SAA. The Committee had correctly held the expectation that the liquidators would be present at today’s meeting. Regarding the extension sought, the Committee would have wanted to engage the liquidators on the reasons why the extension was sought, amongst other things. This meeting was meant to be an update on how far the processes had progressed, and was not intended to be a briefing on the final situation. He would have preferred for them to communicate with the Committee, so that it could decide whether or not it was still worth it for them to appear or not to appear. Coming to the meeting, the Committee was in the dark and the absence made matters worse as it darkened the issue further. He asked the Members for their reaction and comments on how the Committee ought to proceed.

Discussion

Mr A Lees (DA) said that he was lost for words, as today was the date for the final liquidation. For the liquidators to seek a three-month extension on the last day and not pitch up at the meeting was absolutely bizarre and outrageous. He asked the Committee to subpoena -- if that was the right word -- the liquidators to appear before the Committee the next day or as soon as possible, as Parliament’s schedule allowed them to account for basis on which they were applying for an extension, given that the Department had indicated clearly on a number of times that there was no further post-commencement financing for the business rescue. From this, he assumed that there was no further financing for the liquidation and that this extension would drive the company even further down the drain. He concluded that this was completely unacceptable, and could not happen this way.

Mr S Somyo (ANC) agreed with what the Chairperson had said -- that this was not a new meeting. There had already been a meeting about these matters, where the BRPs and liquidators had been present. Since that meeting was intended to deal with both SAA and SAX concerns, the Committee had been unable to finalise the SAX issues, which was why the Deputy Minister and his team were here today. He expressed surprise that the liquidators were not present, as the Committee was merely seeking a briefing as to the processes which the liquidators were involved in. The liquidators’ absence made matters difficult, as it did not provide the Committee with a final understanding of the situation at SAX -- the previous meeting had not allowed enough time to address matters in detail.

The liquidators needed to take the Committee into their confidence on the route they were currently taking. Although the Department was present, it could not deal with matters that were in the purview of the liquidators, so the meeting would be a very futile exercise without them. He agreed with Mr Lees that they should be subpoenaed to appear, but suggested that to be fair, the Committee should give them a reasonable time – say, seven days -- to have a presentation ready. The meeting had not been called to see the finality of the liquidator’s work, but rather to understand its progress,

Mr G Cachalia (DA) said that he was partly covered by his colleagues’ incredulity about the non-appearance of the liquidators and the extension being sought. He seconded wholeheartedly the proposal that they should be summoned -- or if that was not the right word -- that they appear forthwith before the Committee. Although he did not know how feasible this was or how this could be done, he suggested that not a cent of further payment be made to the liquidators in respect of the work to be done from this day onwards, as it was the final liquidation date and the extension was self-sought. In respect of the reasonableness of their non-appearance, he emphasised that they could not have chosen not to appear without preparation, and they needed to appear forthwith.

Mr Lees said that he had just received information that the three-month extension had been granted. He was appalled to hear this. The Committee should have been informed and been given the opportunity to be a part of the application. He said that his patience was running very thin, and agreed with Mr Cachalia. He asked the Deputy Minister whether he or his Department had had any knowledge of the application for extension, and whether it had participated in the arrangements in extending the liquidation date, or played a role in any way.

Ms B Swarts (ANC) she said that she had no words, because if what Mr Lees said was true, then she did not know what the point of the Committee was, as the liquidators seemed to be continuing on their own volition and without consulting the Committee. She she would prefer to comment after hearing the Deputy Minister’s response.

Ms V Mente-Nqweniso (EFF) said that when the Committee last met with the Department, the Committee had had access to some documents pertaining to SAX. The Committee was now interested in receiving a roadmap of where the problems came from, and how the company had ended up in liquidation. She asked the Committee to recall the issue of the court hearing, and questioned why the liquidation was not opposed in court. These had been among a number of questions that were not answered at the previous meeting. Most importantly, the liquidators were the ones who ought to be answering to the Committee today. Whatever the Deputy Minister may now say was already known to the Committee. What the Committee now wanted to know was what the way forward was -- how employees were going to be paid their three-months of salary, and how employees would be retrenched fairly before liquidation. After receiving responses to these questions, the Deputy Minister would then be able to present on what had happened to the people who caused the chaos. The primary focus at the moment, however, was to receive a detailed roadmap from the liquidators. She asked what the cost of this would be to the State.

The Chairperson said that it must be understood very clearly that the absence of the liquidators was taken with the utmost seriousness, as they were now responsible for the affairs of SAX. As such, the liquidators ought to understand that they were accountable to Parliament. Their absence was totally unacceptable, particularly because the liquidators did not have the courtesy to communicate with the Committee. It was clear that they had no intention of being present and such action undermined Parliament, the workers of SAX and the people of South Africa. He emphasised that the liquidators were raking in money. If a Parliamentary response was sought regarding how much had been paid to the SAA BRPs, one would find that the amounts were astronomical. Therefore, delays and extensions were designed to milk the taxpayer, which was unacceptable. He fully underscored the comments made by the Committee. He would give the Deputy Minister a chance to respond and then he would present a plan for the Committee going forward.

Deputy Minister’s response

The Deputy Minister sympathised with the position that the Committee found itself in, describing the circumstances as regrettable.

In response to Mr Lees’ questions of whether Department had participated in any way in the application made to court for the extension, he said the Department had not. On whether the Department was in any way aware of the course followed, the Deputy Minister said that the only thing he could say was that to the best of his recollection and as far as he knew, in the meetings he had been present at, he had met with the liquidator at an introductory meeting covering the appointment of the liquidator. The liquidator had informed the Department that it was about to enter the premises and begin its work, and the Department had offered support if needed. Since then, there had been no other meetings until the Department met with them to discuss the importance of the current meeting with liquidators.

The Chairperson said in previous years, Parliament had been asked why it was so hard on business practitioners, and as he was sure that the same question would now be asked about the liquidators, he wanted to make it clear that when business rescue practitioners and liquidators came into an entity, they were responsible for the affairs of the entity and were duty bound to appear before Parliament as and when they were called upon to do so. Failure to do so was a dereliction of duty that was reckless and irresponsible, and was something which needed to be noted with the seriousness which it deserved, as coming to Parliament was not negotiable. No-one came to Parliament on their own terms, or set the parameters for the discussion, as this was Parliament’s job.

The Committee was quite clear when they last met, that owing to time constraints the matter may have to be deferred, which was why this meeting had been convened. The Parliamentary schedule was packed - he would try to find a date to move the current meeting. Meetings on Fridays had been taken off Parliament’s schedule. In the mean time, they would consult with the Parliamentary legal services, the House Chairperson responsible for Committees and the Speaker of Parliament’s office, for the preparation of subpoenas as a parallel process so that in the event the liquidators did not appear, they would be subpoenaed. The same processes would apply to the SAA BRPs. The subpoenas would be a two-pronged legal approach because the Committee had still not received any information about the business rescue plan from the SAA BRPs.

He commented that the granting of an extension by the court did not mean that the Committee must stave off its oversight responsibilities, as reporting to Parliament formed part and parcel of their responsibilities. The Committee would not suspend its own Parliamentary responsibilities and obligations. It reserved the right to subpoena, and would exercise it should the need arise.

With the approval of the Committee, he suggested the way forward so that they could set up their next meeting. He emphasised that the kind of behaviour which the Committee was witnessing did not inspire confidence, as it was gambling with the livelihoods of workers on the one hand and testing the already fragile South African economy. This behaviour was unprofessional and unacceptable and the fact that the Committee was seeing this kind of behaviour again today was indicative of people who had an allergy to oversight and accountability. The Committee needed to dig in and not be deterred in performing their constitutional duties. He undertook to keep the Committee updated, and asked for further comments.

Mr Somyo said that it was very good summary and roadmap.

Mr Lees said that the DM had said that he was not aware of the situation, and this was disappointing. Since the BRPs had consulted with the unions, he had received a copy of a message at 09:03 this morning, where he had learnt that this application was being made at some point today. He expressed concern, as he did not understand why no-one in the DPE was monitoring the issue as closely as he was, and he had been aware of it since 9 am that morning.

Ms Mente-Nqweniso said that the unnecessary extension was a way of gaining undue salaries on the part of the liquidators. If they had begun the liquidation processes at all, there would have been reasons informing this decision, so what was it that they did not know today that would prevent them from finalising what they had already begun? In the meantime, the workers and the SAX facilities were in danger, as access had been given to the SAX premises of people who were not SAX employees. She said the damage was growing larger, so that by the time they were ready to liquidate, there would be nothing left of SAX. She asked why the extension had been given, as the reasons provided did not sit well with her at all. The liquidators should know why they were liquidating, and she did not understand why an extension had been sought. She asked whether payment could be withheld, as the work was meant to have been finished within 25 days as BRPs, and before they turned themselves into liquidators. The liquidators must not be paid at all for extending their own scope of work and exceeding the time-frames stipulated in the policies of the Department.

The Chairperson said that these matters would be raised, and although they were not easy to deal with, he was sure the Committee was equal to the task. By the looks of things, there was a slot for a meeting at 12:00 on Wednesday next week. The process of preparing the subpoenas would continue regardless, so that things did “not go south.”

Mr Tlhakudi said that there had been a misunderstanding of Mr Lees’ question. As the Deputy Minister had explained, the Department was not involved in the court application, although it had been aware of it, as the final hearing on the liquidation was to take place that day.

Regarding the question of the schedule of payments to the liquidators, the ADG said that payments were not handled by the Department. Since the BRPs and liquidators took control of the business, they were essentially paying themselves, therefore no list of payments made could be given by the Department. This may be an additional question of oversight the Committee may want to pose to the liquidators and the BRPs.

The Deputy Minister thanked the Committee for the opportunity to engage meaningfully with the Committee the following Wednesday. The Department would endeavour to ensure that all the information was presented to the Committee in advance so that they could be prepared for the meeting.

He added that new terrain was being traversed, as none of what had transpired had started at the instance of the Department. It had begun with the BRPs, as a consequence of an interested party taking the matter to court. The courts had concurred with the business rescue process. Whilst the Department was looking into the business rescue process, the BRPs had gone back to court to apply for liquidation. The liquidation had been granted provisionally and the court had appointed the liquidators. The Department was dealing with a process which was circumscribed by the laws of the country and it was trying hard not to be obstructive. Where it could, it was trying to influence the process.

Responses to the rest of the Members ‘comments could best be handled when the liquidators were present at the next meeting. He apologised again to the Committee for the inconvenience.

The Chairperson said that the Committee needed to vote on whether Members were in agreement to subpoena the liquidators and business practitioners. The Members voted in favour of issuing a subpoena.

The meeting was adjourned.