The Standing Committee on Public Accounts and the Portfolio Committee on Public Enterprises held a joint virtual meeting to engage with the Minister, Department of Public Enterprises and the Business Rescue Practitioners on the SAA Business Rescue Plan.
Members were informed that the whole purpose of business rescue was to create a value proposition within the restructured SAA which would make it an attractive proposition for a potential partner. The R10.5 billion allocation was not a bailout, had very specific uses and there would be some further allocation over the next two years to cover the costs. It was still the belief of Government that SAA in its new form had an important role to play in the aviation space both in South Africa and the African continent. The kind of capabilities that SAA offered, even in its business rescue stage, like repatriation, trade links and cargo links proved that SAA was crucial to the economy. There was an ambition to ensure that what emerged out of business rescue process was a viable restructured airline without dependence on the fiscus. The presentation also discussed the voluntary severance packages given to SAA employees. South Africa was in a process of rebuilding many of the institutions that were decimated by State capture. The restructuring of SOEs was a crucial part of the economic trajectory that South Africa had to undergo. It was stated that an interim board would be announced soon and that a core management team would be put together to ensure that there was sufficient experience within SAA. The R10.5 billion allocation to SAA was to be spent for the purposes outlined in the presentation. The process of restructuring was a much better option than liquidation.
Members asked who was the accounting officer for Mango, Air Chefs and SAA Technical. Some commented that a restructured SAA operating efficiently and on commercial principles would positively contribute to the economic recovery of the country. They asked about outstanding information that had not submitted to Parliament, the cost Government was paying for the rescue process because there had been conflicting numbers presented, the role of the Department of Public Enterprise in the whole process and the labour implications for the restructuring process.
Members noted that in terms of the law the business rescue should have only taken three months. and wanted to know how long the restructuring process would take before completion. When was the business rescue practitioner going to file a notice of substantial implementation of the plan?
Members noted with concern that the rescue practitioners did not know how much they had cost Government to date. The Committee stated that it needed more detail in the business rescue plan.
Some Members raised concern over the R10.5 billion allocation. Where was National Treasury getting the R10.5 billion from? Where were the adjustments and virements in the budget being made?
Members were also concerned about the workers of SAA who had not received their money and were not sure of their future. They emphasised that they would continue performing their oversight role on SAA.
Chairperson Hlengwa said that the Committee was meeting to discuss matters relating to SAA. The meeting was scheduled for two weeks ago but there was a request for further engagement and discussions on the finances of SAA. SAA was under a business rescue process. When the Committee last met with SAA there were a number of issues that had been raised. The Committee was disappointed that the responses to questions had not been forthcoming. There was a list of 18 items that needed responses which the Committee had not received. There was some correspondence that came through that may answer some of the important questions. Ultimately, the issue was about how SAA was going to move forward. The Committee was being briefed today on those matters. The Minister of Finance had said that the additional allocation to SAA was not a bailout. The Committee needed to be taken on board. It then needed to be explained what the R10.5 billion was. The way forward of the business rescue plan also needed to be explained.
Mr Magaxa, Chairperson of the Portfolio Committee on Public Enterprises, would be the Co-Chairperson of this meeting and would take over during the discussion part of the meeting. This was a follow-up meeting about SAA which remained on the Committee’s radar for the longest of time. There had been a number of developments at SAA which necessitated the need for funding. The Committee wanted to hear from SAA and the Minister. He invited the Minister to provide an introduction to the presentation. He noted that there was a notice that the Chairperson of the Board of SAA had resigned and so the Committee would like an update on the management structure of SAA. SAA was undergoing a serious process of change. It was still a valuable public asset that needed to go into a new shape, new direction and new business model.
Remarks by Minister of Public Enterprises
Mr Pravin Gordhan, Minister of Public Enterprises, said that SAA was under business rescue from 6 December 2019 until the present. The different phases of the process will be explained to the Committee.
He restated that in Government there has been an intention to restructure and intervene in as many SOEs as possible. This was particularly from the beginning of 2018. The President stated in the State of the Nation Addresses, that part of the State capture process was to take control of boards, management, procurement processes, Treasury functions and other processes within key commercial SOEs such as Eskom, Transnet, SAA, Denel, Prasa and many others.
This has led to a destructive process which was unfolding before the Zondo Commission. Over the last few days SAA has been in the focus again in the Zondo Commission because of the various role-players who have contributed to the mismanagement of SAA over a period of time. Even before the business rescue process started in December 2019 there were Government decisions which required, the Department of Public Enterprises as the shareholder representative, to start the process of restructuring SAA. It was still the belief of Government that SAA in its new form has an important role to play in the aviation space both in South Africa and the African continent. The kind of capabilities that SAA offered, even in its business rescue stage, like repatriation, trade links and cargo links proved that SAA was crucial to the economy.
SAA has over 10000 workers within the group and it was estimated that 60000 employees in various support industries in the aviation sector were impacted when something negative happens to SAA. Indeed this has happened and it affected the revenue both in the private sector, of suppliers, and public sector entities, such as ACSA and other entities that derive revenue from SAA. From the point of view of the tourism industry and trade connectivity with key trading partners within the African region SAA was crucial. There was often an argument put forward that those connectivity links can be maintained by the private sector. Essentially when tickets are being bought from foreign airlines South African cash is being lost to foreign destinations.
He then distinguished between a bailout, which was a term frequently used in a misleading way, and the business rescue process. There was an ambition to ensure that what emerged out of business rescue process was a viable restructured airline without dependence on the fiscus. A bailout refers to an ongoing business that was loss making, into which more money is being put. This has been the case of SAA as it has been badly managed and that was evident in the events unfolding in the Zondo Commission. The R10.5 billion and the process taken to restructure SAA under business rescue was not part of a bailout process. That was important to clarify. The next issue he clarified was the business rescue process itself. The restructuring component was sometimes not clearly understood. The business rescue practitioners will discuss this in detail in the presentation. The first phase of the business rescue process was the responsibility of the business rescue practitioners to evaluate whether the business was rescuable and this was the conclusion that they came to in December last year. Through the study of the business the business rescue practitioners were to develop and formulate, for the purpose of adoption by the creditors, a business rescue plan. This happened between June and July 2020. Once a business rescue plan is on the table the second phase starts. This included the implementation of that plan as it affected the restructuring of the airline.
In the airline there were 4000 employees and it was clear that it was unviable to continue with the employment with all of those employees. Through the Labour Consultative Forum and after months of constructive discussions SAA was able to come to an understanding about the kind of packages that would be made available to those who applied for voluntary severance packages. For those who did not apply for the voluntary severance packages, a section 189 process in terms of the Labour Relations Act will be implemented. That involved money and this was partly what the R10.5 billion was used for. The restructuring process has been missing over the past few months due to the lockdown. The restructuring process included paying employees their fair due, ensuring that creditors get whatever has been negotiated, attending to unflown revenue that has to be compensated for in some way, working capital to keep the airline afloat and to ensure that the principal subsidiaries like Mango, SAA Technical and Air Chefs are restructured as well.
None of the strategic partners that have expressed an interest in the new airline are interested in paying for the costs of the restructuring. It was Government’s responsibility, as the shareholder, to find the money and spend it in an efficient way so that the restructuring processes can take place. The new airline was phase three of the process. The process and where it was heading in the coming months would be explained to the Committee in the presentation. This was being done with the assistance of a transaction advisor. He then drew the distinction between restructuring and liquidation. There were many who have argued that SAA should be liquidated. This was telling the taxpayer that all the assets that have been built up in SAA has to be dispensed with. Liquidation entailed the following steps. Firstly, a court process determines whether a business goes into liquidation. Secondly, there are various meetings held with creditors. The liquidators take total control. Assets are sold. Money is recouped. Money is then distributed amongst the creditors of the business. Employees, according to the rules of the liquidation process, walk away after many years of service with a maximum of R32000. The key point around liquidation is that all the assets of the business are lost. If a new airline is going to be launched and those assets are required then Government need to purchase those assets again, having already paid for them in the past, and bid against any private sector entity that might want to cherry pick assets that came out of the liquidation process. The liquidation costs are approximately the same as the restructuring costs. The advantage of restructuring was that SAA continues to maintain its presence in the aviation industry. It was able to maintain the brand that it has built up over many decades. The shareholder would be able to honour its commitments to labour. The SAA should be seen as a competitor so that there is more competition so that the South African consumers were not just price takers. This happens when the aviation space is narrowed. Many airlines could raise their fares and the consumer ends up as the price taker. The restructuring of SAA would help minimise the domino effect that might impact other industries. Most importantly, Government was in agreement with all those who argue that South Africa was in a process of rebuilding many of the institutions that were decimated by State capture. Restructuring of SOEs was a crucial part of the economic trajectory that South Africa has to undergo. The task of restructuring that business and putting them on sound footing both in an operation and financial sense was a difficult task. Restructuring also included the changing of the business model. Government has every intention of ensuring that more momentum would be given to the structural reforms that are required in the SOE sector. Government wanted to remove the reliance on the fiscus.
There were a number of interested entities in the new airline. All of the relevant processes had been diligently followed by the transaction advisor. There were briefings once a week to the Department on progress that has been made. There were certain aspects of that process that the Department wanted to speed up as well. The direction SAA wanted to go in was the ‘Telkom model’. This meant bringing in an independent board, an experienced and skilled operating team. This team would train a new generation of Black South Africans who had not been given adequate opportunities within the aviation sector in South Africa. SAA wanted to reach a stage of multiple generations of experienced management. Where there were good people within SAA they were gotten rid of from the organisation in order for the malfeasance to continue.
The Department could not give any further information at this time as these were commercially sensitive details. More information would be provided in the weeks to come. SAA was undergoing a serious process of change. It was still a valuable public asset that needed to go into a new shape, new direction and new business model. This business model would include a ramping up effort where a viable capacity would be started at the beginning and as it gained greater market share it would increase its capacity. With the right business model and with the right capabilities it was possible to win back the market share that has been lost. The restructuring process requires the cash. Government will ensure that that cash will be spent in the right kind of way. There were discussions between the shareholder and the business rescue practitioner on mapping out the next few months in detail to ensure that the process, once the cash was available, is undertaken in an efficient and effective way. Cash preservation would be an important component in the manner spending takes place.
Within the next while an interim board would be announced and a core management team would be put together to ensure that there was sufficient experience within SAA. The R10.5 billion was to be spent for the purposes outlined and was a much better option than liquidation. The delegation would respond to questions as they arose. The representatives of the business rescue practitioners had provided the presentation and all relevant documents to the Committee secretariat which would provide information and answer some of the questions raised.
Mr A Lees (DA) raised a concern. In the replies that took six months from SAA, the business rescue practitioners had made it clear that they were not responsible for Mango, Air Chefs and SAA Technical. He wanted to know who in this meeting was acting as the accounting officer for the group as a whole. If the business rescue practitioners are not then who is?
Chairperson Hlengwa asked if that question could be answered and then the presentation would be made.
Chairperson Magaxa said that this process was an information seeking process. He suggested that the business rescue practitioners present and then raise any questions after the presentation so that the meeting could flow.
Chairperson Hlengwa agreed with the suggestion. The Committee would receive the presentation first and then the first question asked would be the one raised by Mr Lees.
Mr Lees expressed his discontent with the way the meeting was moving forward. This is what happens at these meetings. The right people are not dealt with and the Committee does not receive answers. The Committee had waited six months to receive half-hearted answers.
Chairperson Hlengwa clarified that the issue Mr Lees raised would be the first order of business once the presentation has been completed. The issue was not lost and would receive attention. The Chairperson handed over to the business rescue practitioners to deliver their presentation.
Briefing by SAA Business Rescue Practitioners
Mr Siviwe Dongwana, Business Rescue Practioner, thanked Minister Gordhan for his introduction. He provided an apology for the other business rescue practioner, Mr Les Matuson, for not being able to attend the meeting. He noted that the presentation sent to the Committee had received minor changes. He assured members that the changes were mostly spelling errors and formatting issues. No substantive changes had been made. The presentation outlined the business rescue process timeline since the last presentation. A summary of the business rescue plan was also given. In the restructuring of the airline the estimated severance packages cost was R2.2 billion. The issue of Unflown Ticket Liability (UTL) was discussed. This represented the amount owed for passenger booking that had not been honoured. This amount totalled R3 billion. The working capital, costs for restarting the airline, was R2 billion. Government had allocated R16.4 billion to repay the lenders over a three year period. The remaining amount payable to the Legacy Debt was R5.4 billion over the next two years.
The presentation then went on to discuss the conditions of fulfilment of the business rescue plan and the breakdown of the funding allocation. The R10.5 billion Government used to fund the plan was broken down as follows. Employee related payments totalled R2.8 billion. The amount set aside for PCF Creditors, repayment of creditors, totalled R0.8 billion. Working Capital cost R2.0 billion. Unflown Tickets Liability cost R2.2. billion. Recapitalisation of Subsidiaries cost R2.7 billion. This formed the grand total of R10.5 billion.
Chairperson Magaxa took over the Chairperson’s duties for the discussion section of the meeting. He indicated that he would take four questions and then have the delegation respond to the questions.
Mr Lees raised a point of order. The Committee agreed that it would deal with the question he raised first. He did not want the meeting to continue without the Minister responding to his question first.
Minister Gordhan responded to the question on who was responsible for Mango, Air Chefs and SAA Technical. The Board of SAA was originally responsible for those entities. The sole board member remaining was Mr Peter Tshisevhe. He would be joining the meeting later because of prior commitments. There will be an interim board in place and those would be the individuals who would take responsibility. He indicated that a core management team was being put together with the appropriate level of skills and experience to guide the SAA group through this next period. Regrettably the lockdown had impacted on the Department and SAA. He assured Mr Lees that the Department would check on what questions were responded to already and what was outstanding. The Committee would have the responses that they required within the next week.
Mr Lees said he was concerned that no one was accountable for the airline as a whole. Part of the bailouts that were requested, some R2.8 billion, was intended for employee related payments.
Ms N Tolashe (ANC) raised a point of order. She was concerned by the approach of Mr Lees. He raised a small technical question and then proceeded to ask all the questions he wanted to raise. The Minister has just provided him with an answer. He needed to allow everyone else to ask questions too. There was a list identified of speakers that needed to ask questions.
Chairperson Magaxa agreed with Ms Tolashe’s comment. Mr Lees could raise all his concerns when it was his time to ask questions.
Ms J Mkhwanazi (ANC) said that the importance of the aviation sector could not be emphasised enough in South Africa’s economic advancement plans. SAA needed to be understood with regard to its contribution to the broader economy. The funding of SAA will have strategic and sustainable benefits for communities that will be served in the future. The Sixth Parliament must not forget that it had a task to eliminate State capture and corruption. The governance and functioning of SOEs also needed to be normalised. That required a correct focus, effort and financial resources. A restructured SAA operating efficiently and on commercial principles will positively contribute to the economic recovery of the country. She had two questions directed to the Minister. What was the cost Government was paying for the rescue process because there has been conflicting numbers presented? In that answer could the Minister also clarify the role of the Department of Public Enterprise in the whole process? Lastly, what would be the labour implications for the restructuring process and how was it being dealt with?
Ms Tolashe appreciated the information presented to the Committee today. For a long time there had been conflicting statements about the things being done in SAA. She asked the Minister when the shareholder will take over from the business rescue practitioners.
Mr B Hadebe (ANC) said that in terms of section 132 subsection 2 (c) of the Companies Act it stated that the business rescue proceedings end when a business rescue plan has been adopted and when the practitioner has subsequently filed a notice for the substantial implementation of that plan. The plan was adopted on 14 July 2020 and there had been many extensions. In terms of the Act the business rescue ought to have taken 3 months. How long will the restructuring process take for its completion? How much has the business rescue process costed Government? The Committee wanted a sense of how much the business rescue process cost. He then moved to the breakdown of funding allocation that was presented on slide 9. There was an amount of R2 billion which was set aside for working capital. He wanted an explanation on what the working capital was and how it would enable the restructuring of the airline? How will the stakeholder Department take over? What plans were there for the initial stages of restructuring? Who will undertake the critical task of ensuring the successful restructuring process? When would the Committee be able to see the first flight on the restructured airline? It has taken forever for this process to be completed. The Committee fully supported all the initiatives behind the restructuring process but the Committee was waiting with keen interest to see the first flight of the restructured airline.
Mr G Cachalia (DA) said that there was much talk about restructuring expenses versus liquidation costs. The presentation simply talks to funding and the settlement of liabilities. The funding envisioned for the restructuring was over and above the R16.4 billion set aside to repay guaranteed debt and debt services costs. R6 billion of losses were projected over the next three years. When was the Committee going to have sight of these assumptions because, frankly, all of these routes to sustainability and profitability were assumptions?
Minister Gordhan delegated the responses between himself and Mr Dongwana. The Minister responded to Ms Mkhwanazi’s questions first. She made an important point about the contribution of SAA to the aviation industry both in the sense of airlines and the supporting businesses. If Government could successfully get the new airline going then it would be a huge advantage for the broader industry. The Ekurhuleni Municipality and other stakeholders have been describing it as the ‘aerotropolis’ around OR Tambo Airport. That would contribute to the industrialisation processes that were envisaged in the economic recovery plans as well. She also made an important point about the elimination of corruption and State capture. Some of that has been dealt with but clearly both Scopa and the Portfolio Committee will agree that what the public wants to see if consequences for the malfeasance that has occurred both in the board of directors, that were responsible at various stages, and the managers and other who collaborated with them. The businesses in the private sector, that were part of the syndicates and partners in the commitment of ‘crimes’ that brought SAA and SAA Express to its knees. The role of Public Enterprises was a difficult one in the current context because as a shareholder the Department has some responsibility for oversight over the remaining subsidiaries. That has continued but with great difficulty as the pandemic required that the officials could not operate from their offices. The Department was returning to some normality now. As the Department went through this process it needed to be the managers of the transition in a way which the completion of the restructuring process occurs and the successful partnership process, with an equity partner, takes place and gets off the ground.
He then discussed the labour implications of the business rescue process. It has been the Department’s intent over the past eleven months to ensure that the number of the people affected was minimised. However, the pandemic and the closure of borders had a major impact on all aviation companies. Internationally, there was a long list of interventions that Government’s were required to make to even support privately owned airlines. He provided examples of the Australian, Singaporean, German, Netherlands, French and American Governments supporting and assisting national airlines. The greatest impact has been on labour. It was for that reason that the Labour Consultative Forum was launched. Long discussions were held discussing affordable packages that could be offered to the employees at SAA. Government went one step further and developed a social plan. It was currently called the training and lay-off scheme. The idea behind it was to retain as many people as possible during this difficult transition. The revival of the aviation industry could take another few years. That timeline of recovery depended largely on the trajectory of the Covid pandemic. The virus was highly unpredictable. The numbers indicated that some people will lose their jobs and that was regrettable. Government has tried to provide, once the money flows, a soft landing for these employees so that they have money to rebuild their lives.
He responded to Ms Tolashe’s question on when the shareholder will take over. That depended on the timeline between now and the partnership being concluded. The business rescue practitioners would provide more information on that matter.
He discussed the comments made by Mr Hadebe. He was absolutely right with the comments he made. Mr Dongwana would be able to provide more information on that matter.
He responded to the question on when the Committee would see the first flight. Part of the R2 billion that had been made reference to, as working capital, was designed to support interim flying some of which Mango was undertaking at the moment. In a commercial sense it was important to retain as much of the market share as possible. The delays in getting the right amount of funding into the restructuring process has cost SAA market share. The incoming executive and board were therefore going to have a difficult task in broadening the market share. The Department was confident that with the right skills SAA would be able to manoeuvre itself in the current environment.
The distinction between restructuring and liquidation, that Mr Cachalia raised, was very important. The costs of both were approximately the same but the casualties were different. In the restructuring process there were huge benefits, as outlined earlier on, and in the liquidation process there were no winners except for those who were able to cherry pick assets that belong to the South African public. The R16.4 billion was legacy debt so part of the amount borrowed from the lenders, R2 billion for the Post-Commencement Finance, has been repaid. The R3.5 billion made available by DBSA had also been repaid. Part of the legacy debate has also been repaid and that gave the R10 billion that was mentioned earlier on. He then discussed the existing business plan and the losses that would be made. In the discussions with the potential strategic equity partners the equity partners made it clear that they were not going to pay for restructuring costs. At the same time Government was making it clear that it would not be putting money into this process apart from the various assets that it has. Those negotiations were ongoing. The different stages of the plan needed to be recalibrated towards the end of the year which took cognisance of the state of the pandemic, how many people were fearful of flying and whether there would be internal tourism taking place or not. The local tourism industry needed to be kept alive. The Department wanted to see some of the flights taking place as early as possible once the restructuring process was completed. Gradually the capital would be built up. It was crucial to note that no entity wanted to enter into a business partnership with another entity that was devoid of any value. The ability to negotiate the right business partnership deal would then be compromised. It was in the interest of SAA, the Government and the South African public that assets, the brand and intellectual capital of SAA were preserved. That would be an important part of the bargaining process of the shape the future airline takes in which Government might not be a majority shareholder. There was a lot of confusion and hopefully that could be all clarified.
Mr Dongwana responded to the questions raised by Mr Cachalia on the assumptions attached to the business rescue plan. It needed to be recognised that the restart of operations was going to be significantly dependent on how the broader aviation industry in the world opens up. It was dependent on how each country being flown into responds to the pandemic. This would be important in determining how the new airline restarts operations.
He then discussed the issue of working capital that was raised by Mr Hadebe. It was important to remember that airline operations were restarting on the back of the airline not flying as a consequence of the lockdown and the fact that it ran out of cash. In order for the airline to build up a pipeline of revenue for it to restart operations it became important that it invests some money in restarting the operations. This would ensure that it was ready to start flying. SAA needed to contend with two facts. The first, was that SAA owed R3 billion in unflown ticket liability. That meant that when flying resumed a significant number of the passengers flying would have already paid for their ticket and their money would have already been used. The working capital was quite important in bridging that. The second thing was that depending on how the aviation industry would open up it would take a while to build up adequate pipeline in order to fly profitably. Thus, working capital became critically important in giving the airline the best chance of success.
The labour implications for the airline were twofold. Firstly, the business rescue practitioners had to deal with the sins of the past which meant reducing the headcount of the airline to an appropriate size. Secondly, an appropriate cost line for the airline needed to be created. That meant that the terms and conditions needed to be revised. SAA had been negotiating with labour because the new terms and conditions of employment were significantly less than the current terms and conditions of employment. A lot had been said about certain categories of employees and the benefits. In the revised terms and conditions those have been reduced quite significantly which was important.
He then discussed substantial implementation. It was indeed important that there was first an adoption of the business rescue plan. There was a second part that needed to be fulfilled in order for the business rescue practitioners to file for substantial implementation and hand the company back to management, the board and the shareholder. This related to the definition of a business rescue. In section 128 it talks about the ability to restore the operations so that the business continues in existence on a solvent basis. He indicated in the presentation how the business rescue practitioners had compromised the debt and that combined with the amount paid by Government for legacy debt creates a basis for the airline to have a solvent balance sheet. That was only one part of it. The second part was liquidity. It was important for the funding that has been allocated and appropriated for the airline to flow into the airline so that when the business rescue practitioners leave they leave an airline that is both solvent and liquid. That process was very important. There was currently an allocation but the funds are yet to flow. The airline must not be put into a riskier position by exiting business rescue when the airline does not have the amount of liquidity that is necessary so that it can continue in existence.
He then discussed how the business practitioners were going to handle the handover process. The business rescue practitioners had already started working with the Department and the leadership of the Director General on a road map that was going to facilitate the transitioning from a business rescue process to a post-business rescue process. That road map considers quite a number of issues in terms of what needs to be done, who gets to do it and by when it must be done. At the core of that road map are the new structures of the airline that needed to be finalised so that the remaining 1000 employees can be allocated to the right positions. There were important post holders that the airline needed to have in order to retain its airline operating certificate. That process was critical. As part of the voluntary severance packages that have been signed one of the critical issues was to make sure that the SAA did not lose people who were key placeholders which would compromise the airline’s operating license. The Committee would recall in one of the previous presentations given the business rescue practitioners had spoken about implementing processes to make sure that there was a spotlight on how the airline manages its cash and manages the risk relating to cash. This was to ensure that the airline was spending the right amount and obtaining the right value for the services. It was important for the business rescue team to be able to handover that process to the appropriate management. The responsibility of putting together a new board and executive was the responsibility of the shareholder. It then becomes important to be able to transition and handover to that executive. He then discussed the issue of the business rescue cost. The business rescue practitioners would prefer to provide the Committee with a written response on that matter because he could not remember all of the costs.
Ms V Mente (EFF) asked National Treasury, as the sponsor of the funding, if it was looking into the real-time audit of this fund? If yes, were officials from both the Auditor General and Treasury going to be appointed? The Committee was not going to pretend as if maladministration and mishandling of funds has not been taking place. The Committee did not want history to repeat itself. What precautions were in place in order to make sure that the liquidity is kept afloat and that the working capital is allocated to the operation of the aircrafts of the SAA? Which components of the restructuring costs go to the workers? The workers of SAA Express were suffering. It was stated in the presentation that R2.2 billion was being put aside to deal with the 1000 employees. Were there precautionary measures to ensure that everyone receives their money and that money was not mishandled by whoever was in charge? She wanted Treasury to give the Committee an assurance that there were plans in place to see the allocation of funds were not going anywhere they should not be going.
Mr Lees pointed out that there were some significant changes made to the presentation. There was a completely new slide and arithmetic that did not add up. The paid amount change from R11 to R10 billion so he would like clarity on which was the accurate figure. It was disappointing that the changes were not properly highlighted. There were still many questions that were not dealt with in the presentation. Some questions were brushed aside as if Parliament could be treated with this kind of disdain. One of the short answers is to refer to the approach the BRPs made to Ethos. He was not sure who Ethos was? Could the Committee receive details about this approach to Ethos? He then asked how many aircrafts were left with SAA for its use. How many aircrafts were returned to the lessors? Could Minister Gordhan please tell the Committee whether the severance package that was being offered to SAA was going to be offered to SAA Express? If yes, when and how? If not, why not? Why were SAA employees being treated differently from SAA Express employees? He then discussed the process of reducing the numbers at SAA. What was the process to be followed to select the people to be maintained both in the cabin crew and the pilots? Why were severance packages being paid to people in jobs where the jobs are going to apparently continue? It did not make any financial sense at all? He then discussed the voluntary severance packages. Will the employees that get paid the voluntary severance package also be able to claim retrenchment benefits from the UIF? One of the reasons he wanted to get clarity on who was accountable for SAA was because why was the entity’s annual report still not available for the 2018/2019 year? This was long before business rescue and the Covid-19 lockdown. Why was that report that was due September 2019 still not available? It had not been tabled in Parliament. Much had been made by the Minister and Mr Dongwana about the uncertainty of the future of how the process was going to play out. Therefore, the question asked by Mr Cachalia was a valid one in terms of what the actual losses were going to be in the future.
Minister Gordhan raised a concern that Mr Lees was making snide remarks about himself and Mr Dongwana through the use of the term ‘much has been made’. Mr Lees was welcome to ask a question with the appropriate level of dignity that was expected in a Parliamentary context and those questions would be answered with the same decorum. Snide references like ‘much has been made’ can be avoided out of respect.
Chairperson Magaxa said that Mr Lees should focus on asking the questions that he wanted to ask and to not make snide remarks about the delegation that had been invited to the meeting. He asked Mr Lees to continue with his questions.
Mr Cachalia interjected and said that Mr Lees had been very measured in his response.
Chairperson Magaxa stopped Mr Cachalia from finishing his point. Issues were being raised and those issues needed to be responded to before the meeting ended.
Mr Lees responded that the use of the term ‘much has been said’ had normal use in the English language and it was not intended as a snide remark. If it was received in that way then he apologised but a lot has been said about those matters. It was a term used in normal language and he knows that Minister Gordhan understands that but he did apologise if it was received negatively. Minister Gordhan and Mr Dongwana stated that in a liquidation the creditors would receive no dividend. If that was the option, then why has SAA offered them any dividend at all in a business rescue situation? That included unflown tickets. There were billions of rands that were being given away when it did not need to be given away. Creditors have knowingly over a very long time done business with a bankrupt SAA. Creditors have taken that risk. It was public knowledge for years that SAA was bankrupt. Why was tax payer money now being taken to pay creditors? He then discussed the bailouts for SAA technical, Air Chefs and Mango. On what authority, because the BRPs were adamant that only the SAA Airline and not the group are in business rescue, do the BRPs have to include bailouts for the subsidiaries? On what legal authority do the BRPs have to intervene in the business of Mango, SAA Technical and Air Chefs? He did not understand. He wanted reasons why Mr Matuson was not present at this meeting. Mr Matuson and his firm have taken millions of rands in fees to conduct this business rescue process. There had only been one meeting since May. On what basis was Mr Matuson not present to account for what has happened under his management as a co-business rescue practioner? There seemed to be an assumption by Mr Dongwana that the money was guaranteed. The money was certainly not guaranteed and he hoped Parliament would use its wisdom to ensure that the money was either not appropriated or was tied up far more firmly than it currently was. He then went on to discuss the percentages paid to various categories of employees during April and May. Why did the chief pilot get 100% of his salary in April when no one else in the airline got 100%? How was that possible? Ground staff got 77.99%. Cabin crew got 76.32%/ Even for May the chief pilot received 77.7% of his salary whereas the ground staff got 16.8% and the cabin crew got 11.6%. Why was the chief pilot so important that he got such a high proportion of his salary? Mr Dongwana mentioned key place holders to keep the airline going. Who were they?
Ms O Maotwe (ANC) raised a concern. How many questions has Mr Lees asked and how many more was he going to ask? The rest of the members had questions that they wanted to ask but there was no indication if Mr Lees was going to end anywhere in the near future. Would the Committee be here until tomorrow?
Ms J Tshabala (ANC) appealed that the meeting was meant to finish at 9pm. All the members of Parliament were in the meeting to seek answers and this was a joint meeting. This type of behaviour of colleagues going on and on and asking lots of question might be a practice in Scopa. She asked Mr Lees to conclude his questions. The other members needed to asked questions and the questions also still needed to be answered.
Chairperson Magaxa appealed to Mr Lees to conclude his input because there were other members who still wanted to ask questions.
Chairperson Hlengwa said that categorisations about Committees should not be made which might not sit well. While there may be an issue with the length of Mr Lees’s questions he did not think it was wise to make generalisations about the practices of Committees which might cause a standoff between the two Committees. The two Committees shared a common interest. He did not think the characterisation made about Scopa was a fair one.
Mr Lees addressed the Chairperson of Scopa and said this was exactly why there should not be joint Committee meetings. They do not work and it was up to the Chairperson to judge the snide remarks made.
Ms Tolashe raised a point of order.
Mr Lees said that he had said nothing that was out of order.
Ms Tolashe said that it was not Mr Lees’s responsibility to tell her that he was not out of order. She was addressing the Chairperson and Mr Lees needed to respect that. She did not know what was wrong with Mr Lees today. She asked if the meeting could please proceed and was not sure what all the delaying tactics were for. Mr Lees cannot speak on everyone’s behalf. The Committees in Parliament were supposed to work as a team.
Chairperson Magaxa heard the concerns of the members and asked Mr Lees to round off his questions.
Mr Lees said that he did not speak on the behalf of any other members of the Committee. He spoke on his own behalf. The issue of SAA was gripping the whole nation. Many millions of South Africans were watching the outcome of this process.
Ms V Malinga (ANC) said that the ANC supported Government’s decision on the continued operation of SAA and the endeavours to fund the revival of SAA. SAA was an agency of multifaceted value-added economy for the country. What were the critical benefits of the business rescue process besides the large reduction of the liability which was definitely positive?
Mr Hadebe said that Mr Dongwana had indicated that he had a road map. Road maps had dates, timeframes and milestone projections. When was the business rescue practitioner going to file a notice of substantial implementation of the plan? The Committee needed to know because this process was supposed to take three months and it has exceeded that. When the Committee was not given dates it was quite concerning. The second concern was that as things stand Mr Dongwana does not know how much the process has cost to date. He wanted a straightforward answer. The law states that if the BRP had not completed the plan within three months they were compelled to provide a progress report on the proceedings. That progress report included timeframes. He wanted a direct answer on the progress report and the timeframes of the process. It was quite concerning that the rescue practitioners did not know how much they have cost Government to date.
Ms Maotwe noted the conditions of fulfilment of the business rescue plan. There were five conditions that were presented. She asked the Minister who was ceased with making sure that the conditions were met. At what cost was that entity or individual ceased with the responsibility? None of the conditions had a date attached to them. The fifth condition talks about cancellation of all aircraft leases. When were the aircraft leases going to be cancelled? The Committee needed to know how long the plan was going to take. She then discussed the suspension of operations because the airline had been under maintenance due to the funds for operational expenses being depleted. The funds were depleted and the operations were suspended so what was the plan? She discussed the R10.5 billion that Government pledged. How was that going to address the funding requirement as mentioned in the presentation?
Mr Cachalia had a follow up question on the assumptions contained within the business rescue plan. The Committee had been told that the assumptions had been dependent on the pandemic. A business rescue practitioner, worth his salt, needed to ‘nail their colours to the mast’. What are the other assumptions? What were the worst case scenarios and the best case scenarios? How did this govern investment decisions? Clearly load factors and cost factors were crucial. The Committee needed more detail and they were not receiving it. The detail needs to be mapped in terms of leases, trends and concomitant impact to ensure valuable monies were not squandered. These were the things that the Committee should be asking for and should have complete clarity on this matter.
Chairperson Hlengwa discussed the R10.5 billion that was being advanced to SAA. For the longest time it was said that there has been no money because of the economic climate. Where was National Treasury getting the R10.5 billion from? Where were the adjustments and virements in the budget being made? He told the business rescue practitioner that he did not accept the response on costs because in the last meeting the same question was asked and the business rescue practitioners said they would find out the information. In today’s meeting the response was the same. He asked the business rescue practitioner to source that information during the meeting so that the issue could be brought to rest. He did not think Mr Dongwana was engaging with the Committee in good faith on the matter. He then discussed Air Chefs, SAA Technical and the other SAA entities. He had studied the responses provided to the Committee from SAA. The Chairperson could not finish his comment as his connection was poor.
Ms Tshabala withdrew the comments she made about Scopa. She had no intention to divide the Committees. She was just shocked that Mr Lees was taking so long. She apologised for her remarks. She had questions for the BRPs. The Committees wanted to find out how much the business rescue process cost the State. What has been delivered? The Committees needed to see that there was value for money. The sooner the information was provided to the Committees the better. What did the BRPs understand of the airline’s capacity? Did the BRPs check the self-sufficiency of the airline? How much capacity did SAA have to generate money for the fiscus? What fees have the BRPs collected? What fees were still to be collected? Does the business model outlined by the BRP mean that the entity will reduce its dependency on the fiscus? The ANC supported the allocation and the restructuring of the new airline. She understood that this was not a bailout. The sooner that Government gets SAA right the better. She wanted to understand how the business rescue plan would preserve the few black pilots. Pilots were getting exorbitant salaries. How were the BRPs ensuring that in the new business plan the salaries of the pilots were not exorbitant? She wanted to know why it was important to provide employees with decent severance packages. It was important that SAA employees and their families should not be condemned to poverty because they have dedicated many years to building the airline. Their dedication should be recognised and rewarded. As the ANC, the policy on all SOEs was clear. All those who operate in important areas of the economy should be assisted to recovery. It was positive that plans were being created to help SOEs and these plans need to be given a chance. Going forward, these meetings were going to be very important. She wanted to know from the Minister why there needed to be a restructuring and a new airline? Why did he believe that this plan can work?
Chairperson Hlengwa said that hindsight was the best sight. Parliament needed to build on what the Zondo Commission was doing. There needed to be a Parliamentary inquiry into how SAA collapsed. An airline could not just collapse. If money was going to be pumped into a new airline without having taken stock of the set of circumstances which caused the collapse of the first one then the same mistakes may be repeated. This all needed to be done with the view of protecting the public purse from further squander. There was a general view that the old could be dispensed without having consequences. The corruption and mismanagement that has taken place cannot be escaped. It might be worthwhile to compliment the work of the Zondo Commission. Government needed to reflect on what happened in SAA. The role of the shareholder has to be unpacked and people need to be held accountable for what they did. There had to be some recoveries made. Some directors had been declared as delinquent directors. All of the issues within SAA needed to be looked at. Whether the structure of SAA was conducive for a sustainable and viable airline needed to be looked at. If time was not taken to look at the root cause of the collapse all the good intentions presented today may find themselves wanting in things were done in the same way. SAA needed to be cleaned first so that it could move forward.
Mr Dongwana responded to the questions asked by Mr Lees. Mr Lees referred to the R10 and R11 billion amounts in the presentation. The actual amount was R10.9 billion and that was round up to R11 billion. There was a typo in the presentation and he apologised for that. SAA owned 8 aircrafts and those were still in the possession of SAA. The remainder of the aircrafts were all leased from various aircraft lessors. All of those aircrafts were returned. There were onerous conditions to maintain the aircrafts even when they were not flying. Thus it was important to settle the debts owed by SAA to the aircraft lessors so that the penalties and other related payments were limited.
He discussed the severance packages offered to employees. The leadership consultative forum was critical in negotiating and agreeing what severance packages were to be paid to employees. Those were in line with the basic conditions of employment. The availing of the voluntary severance packages to all employees was a critical issue. In the new structure new terms and conditions of employment had been put in place. The new terms and conditions of employment reduce the salaries across all the levels of employees. There was a significant salary reduction and a reduction in a number of benefits accruing for employees. Thus the BRPs were advised from their legal advisors that they could not change the conditions of employment of employees unilaterally. It needed to be negotiated. Once the negotiations were over they offered the employees a place in the new structure with the new terms and conditions. Failing that the employees would have to be retrenched. The airline needed to reduce its debt and have a sustainable overhead cost going forward.
The BRPs had committed to sending the management accounts to Scopa. He believed that they did send the management accounts of the airline to the Committee.
He then discussed the issue of Ethos. He indicated that Ms Matuson was not present due to personal reasons. Mr Matuson was approached by Ethos because of issues related to funding. Mr Matuson directed Ethos to the transaction advisor. There was a transaction advisor who was dealing with the issues of SEPs and the process related to potential partners going forward.
He then discussed the issue of paying dividends to creditors. As the airline was being restructured and continued in existence it needed the support of the various suppliers and service providers to the airline. To ensure the continuation of the airline it became necessary to negotiate a reasonable compromise of the debt that the airline owed to the general body of creditors. It was on that basis, and taking into account the limited funds available, there was a negotiation that resulted in the R600 million for general concurrent creditors and the R1.7 billion for aircraft lessors.
He then discussed unflown ticket liability. This was essential for the airline to maintain its membership with IATA that the airline was able to refund the unflown ticket liability either through a cash refund or flight. It was very important with the agreements with the various individual airlines. For SAA to continue flying it was important that it honoured that agreement so that it was able to continue flying.
He responded to the issues on the chief pilot and the various salary percentages that had been paid. He was not in the position to answer that question. He was happy to respond to the unanswered questions in writing.
He then responded to Ms Malinga’s question on the benefits of being in business rescue beside the reduction of the debt. Beyond the reduction of the debt, a company goes into business rescue because it was in financial distress and the company was unable to meet its obligation as they were due. Immediately when the company goes into business rescue it had the benefit of a moratorium. The moratorium meant that SAA did not need to pay any amounts owed to various creditors. Another benefit was the ability to have a moratorium on all legal issues against the company. Essentially, the business rescue provided a safe space for the company to raise the necessary post-commencement funding to implement a business rescue plan, to restructure its affairs and to resize its overheads in a way that when it gets out of business rescue it can continue in existence on a solvent basis.
He then discussed the issue raised by Mr Hadebe on when the company gets out of business rescue. At the moment SAA had an allocation but it did not have cash. There was no funding that was in the company. If the company was to get out of business rescue with immediate effect the reality was that the company would not be able to meet its obligations. The business rescue process provides a safety net for the company because it was able to continue until it was able to receive the funding that had been committed in the plan. On the basis of receiving the funding then the substantial implementation of the business plan would be there and the practitioners could fine for notice of substantial implementation. Then SAA could get out of business rescue and at that point the company would have a positive bank balance. It would be able to make on its commitments as they fall due.
He discussed the roadmap. The practitioners and the Department have over the last few days agreed on putting together a roadmap. That roadmap would include very specific timelines including who does what. Meetings would be held on a regular basis to measure the progress. The practitioners did have an obligation to provide the monthly reports for a business rescue plan that exceeded three months. Those reports were being filed with the CIPC on a regular basis and all those reports were available online.
He responded to Ms Maotwe’s issue of the cancellation of aircraft leases. All the aircraft leases have been cancelled.
He then discussed what the plan would be around care and maintenance. The BRPs sought to preserve the airlines membership with the various aviation bodies. The infrastructure and systems of the airline were also to be preserved. The company assets were also going to be preserved. There was an allocation for the unflown ticket liability which the practitioners decided to reprioritise and use some of those funds to achieve the three objectives. The practitioners wanted to avoid a situation where when the funds finally start to flow the airline has collapsed. The practitioners were hoping to, with the assistance received from the Department and National Treasury, get some interim bridge funding in order to fund and continue with the airline.
He understood Mr Cachalia’s point about the assumptions made in the business rescue plan. He indicated that the issue around the assumptions made in the business rescue plan and the level of detail required had been a contentious issue for a while. The practitioners were seeking to make sure that they protected the interests of SAA in the competitive aviation space. The practitioners were reluctant to provide certain of the critical assumptions which have a bearing on the competitiveness of SAA. Members will remember that a competitor of SAA had taken SAA to court. It would be to the disadvantage of SAA if all of the assumptions were made available for the competitors to access and therefore when the airline restarts it would be in a significantly negative position from a competitive point of view. He asked the members to understand the situation. He asked that those critical assumptions that have a bearing on the ability of SAA being competitive once it restarts its operations be kept confidential.
He acknowledged the issue of BRP costs that were raised by various members. He committed to provide the information, through the Department, to the Committee the next day. It was not just the charge rate of the individual BRPs. The BRPs had teams that did various things. In addition to the team there were various levels of advisors that were involved in order to assist. SAA had been subjected to litigation from various quarters and had to negotiate with creditors for them to continue providing services to SAA to keep the airline operating. SAA did not have the funding to pay them. All of those matter required expert advice to augment what was in the BRP teams. He said the practitioners would provide a comprehensive, detailed document of the business rescue costs. He did not want to mislead the meeting.
He then responded to Ms Tshabala’s concern around the dependency on the fiscus going forward. This was going to be addressed in the business rescue plan by the creation of a stronger balance sheet through the compromise of the debt and its writing off. At the beginning of the business rescue plan a lot of work was done on the routes that the airline was flying. That analysis focused on what routes were loss making, whether or not SAA had the appropriate aircraft fleet to support those routes and whether or not SAA had the appropriate overheads in the airline. There was a revision of headcount and the revision of terms and conditions created a far leaner airline going forward. The practitioners believed that together with some of the processes that have been introduced in the business rescue plan around cash management and quote evaluations will assure that this goal was achieved. Once all of this has been done it becomes absolutely critical that the management team was committed in doing these things. He touched on the issue of exorbitant salaries. There had been a revision of the terms of employment and there would be a significant reduction in salaries. He then discussed the employees who had worked for a long time with SAA. That needed to be looked at in the context of liquidation too. Currently, all employees who had taken voluntary severance packages would be paid their severance packages. Those employees who were retrenched were paid their retrenchment packages. In the instance where the airline was liquidated, without these severance packages being agreed, the employees would only receive R32000 per month. Government was the ultimate shareholder of the subsidiaries of SAA. SAA was just a vehicle through which the subsidiaries received funding.
Adv Melanchton Makobe, Acting Deputy Director-General: Legal, Governance and Risk, Department of Public Enterprises, said that the severance packages were paid by the employer which in this case was SAA. The unemployed employees would also claim money from the UIF based on their contributions.
Minister Gordhan thanked Mr Dongwana for his responses. He discussed the controls that would be put in place for the R10 billion. Government, Treasury and all relevant parties would put special controls in place because there should be proper oversight over how every single cent is spent.
He then discussed SAA Express. SAA Express had followed a different path where it applied for business rescue. The business rescue practitioner there went to court and applied for liquidation. The current position was that the liquidator has been able to obtain several extensions from the court in order to ensure that those who have expressed an interest in purchasing SAA Express would be to do so. The liquidator has been granted another extension. The workers at SAA Express had to unfortunately suffer the consequences of the liquidation process. The Department did assist in making representations to the Department of Employment and Labour in order that the TERS benefits would be paid to the workers at SAA Express. Some relief was provided to the workers in that way. The Department was still exploring the possibility of whether the training and learnership scheme could include some of the employees from SAA Express as well. Given the limitation on flights and load factors there would be serious limitations faced by SAA in the next year or two. He reiterated that SAA Express did not go through a normal business rescue process as there was no money in Government at the time to undertake the process taken in SAA. The Department would continue to monitor the situation there and if opportunities arose to assist workers then the Department would do so. In selecting people for the new airline some of that responsibility would lie with the new board and management. Some of that responsibility would also lie with the new partner SAA enters into a relationship with. He noted that pilots would not be paid exorbitant amounts going into the new airline. An appropriate blend of experience, gender and racial demographics would be represented in the cabin crew, pilots and staff. Those factors including the new conditions of employment will have to be taken into account. The costs of a future airline needed to be managed in a way that the viability of the airline was not negatively affected. One of the lessons that needed to be learned was the SOEs could not be in a situation where the cost structure overwhelms and are greater than the revenue that they are able to generate for themselves. As SOEs were being restructured their cost and revenue factors needed to be balanced, operational efficiency needed to be at its maximum and that would improve the financial stability of the entity. If market changes occur the entity also needed to make changes to its business model. If more information was required about what could and could not be claimed from the UIF by the SAA employees it would be provided in writing. He made it clear that employees were not receiving double retrench benefits from the different entities.
He discussed the losses that were projected in the future. Part of the business model was worked out at a particular stage with particular commercial considerations and assumptions. He assured the Committee that the new airline, with its new partner, was not starting on a basis that was unaffordable nor was it going to be dependent of the fiscus. The public needed to be assured that Government was working on a solution so that SAA was not dependent on the fiscus.
The Minister reiterated that in a liquidation process the employees were worse off, all the assets were completely lost and those who wanted to bid for assets had the advantage. Those bidders would be able to buy the most important assets at a low cost. The whole purpose of business rescue was to create a value proposition within the restructured SAA which would make it an attractive proposition for a potential partner. There was the continued incorrect usage of the term bailout. The Minister assured the public that this process was not a bailout. This was not the old SAA with the ‘old crooks’ and corruption within SAA. The R10.5 billion allocation had very specific uses and there would be some further allocation over the next two years to cover the costs. There was a clear purpose for the R10.5 billion which was to undertake the restructuring of the airline in a business rescue context in order that a viable entity with a competent partner emerges. In the confusion that has been created in the public mind there was a common belief among some people that this was wasted money that would not have any benefits. As Ms Malinga pointed out there were critical benefits in undertaking restructuring which the legal provisions in the business rescue process provide for. Those benefits mean that Government was able to preserve competition within the aviation sector to ensure that for trade and tourism purposes South Africa was able to connect itself to the rest of the continent and the rest of the world. SAA would also be able to keep its commitment to labour and fulfil its obligations under the business rescue plan. There was a wider aviation industry that was dependent on ACSA, on an airports company. The presence of a new airline in a restructured form, together with an effective partner, would have a positive domino effect across various sectors. The Department would work with the business rescue practitioners to create the roadmap and the obligations that everyone had. Sooner rather than later the Department would like the business rescue process to end. He restated that the R10.5 billion allocation must be spent diligently and it needed to be properly audited. He discussed the assumptions in the business rescue plan. What the business rescue plan did have is a flight plan and it needed to be amended in an appropriate way depending on the conditions at that specific time. When any changes were made to the business plan Parliament would be informed. The business rescue process gave SAA the opportunity to renegotiate contracts which included the leases. It was important to note that there was now an abundance of aircrafts in the world and much better deal could be obtained now compared to the commitments made in the past. The Minister hoped that the business rescue practitioner would provide the costs to the Committee soon. The funds that were obtained from the post-commencement finance and the revenue generated from the repatriation flights and how those funds were deployed should be accounted for by the business rescue practitioners send the Committee a written statement. He then responded to the Chairperson’s question on where the R10.5 billion came from. Currently, the money came from adjustments that were made to various parts of Government. There were other options that were also being explored at the moment but those matters were being discussed with Treasury. When the matter was finalised the Department would make it known to the Committee. He agreed with the Chairperson that the root causes of the collapses of SOEs needed to be understood. Lessons could be learned from the Zondo Commission so that mistakes could be avoided in the future. There needed to be the right level of controls within each entity and a diligent and courageous board. It takes courage and integrity to fight corruption and hold people accountable. The issue of greed in society needed to be addressed. It seemed that stealing a few million rand was no longer good enough for people to satisfy their particular greed. The role of the shareholder was one where there needed to be greater diligence and the Department acknowledged that. There was an interesting precedent set in 2017 where the Portfolio Committee on Public Enterprises interrogated the situation in Eskom. The Minister did not see any reason why Scopa could not do the same with the culprits in SAA to publicly account like in the Zondo Commission. He assured the Committee that Government was absolutely committed to ensure that SOEs had a different kind of future than their past. The Committee would hear more about this in the coming weeks. It was hard work to get a SOE to some level of stability and to become a dynamic entity. Government understood the limitations and possibilities that came with the business rescue process and was willing to support the restructuring process. Government had committed to structural reforms. Part of the structural reforms would also affect the fiscus. A lot of attention has been given to removing the dependence on the fiscus. For effective financial stability there needed to be the correct balance between the cost structure and the commercial revenue generated by the SOEs. Those who argue that liquidation was a better option needed to think about two things. The first was if the entity was able to leave people with some more money than just the R32000 per individual. The second was that loyal customers at SAA who had already booked tickets would lose out on their money. SAA would then have to find a way of compensating those customers for their losses. He restated that this was not a bailout. This was a restructuring process which was a legal process under the Company’s Act. It was a commitment that needed to be completed with the minimum amount of costs. Making sure that the R10.5 billion and the other amounts that would be used over the next two years was a commitment that could actually be met. The ultimate aim was to remove the burden of the old SAA from the fiscus and to emerge with a new airline to have a different kind of life in the future.
Chairperson Magaxa thanked the Minister and the business rescue practitioner for the responses. The Committee appreciated the process that was being engaged in. Certain concerns were raised and would be monitored as the process unfolds. The Committee was also concerned about the workers of SAA who had not received their money and were not sure of their future. The Committee supported this process and would continue performing its oversight role on SAA.
The meeting was adjourned.
Hlengwa, Mr M
Magaxa, Mr K
Cachalia, Mr G K
Dirks, Mr MA
Gordhan, Mr PJ
Gumede, Mr SN
Hadebe, Mr BM
Komane, Ms RN
Lees, Mr RA
Lubengo, Ms ML
Malinga, Ms VT
Maotwe, Ms OMC
Marais, Mr EJ
Masualle, Mr PG
Mente, Ms NV
Mkhwanazi, Ms JCN
Somyo, Mr SS
Tolashe, Ms N G
Tshabalala, Ms J
Van Minnen, Ms BM
Zibula, Ms BT
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