SAA only has one option – liquidation

The Democratic Alliance (DA) notes the latest ‘notice to affected persons’ by SAA’s Business Rescue Practitioners stating that the provision of timeous short term funding from government has not materialised and that the creditors will be asked to consider the future of the airline.

Tomorrow’s meeting with SAA affected persons, called by SAA’s Business Rescue Practitioners, should have one item on the agenda: the groundwork to begin the liquidation of SAA. It has become clear by now that no one is coming to rescue the bankrupt SAA.

Quite clearly the promises made to SAA creditors on 14 July 2020 by the Minister of Public Enterprises, Pravin Gordhan, and the Minister of Finance, Tito Mboweni, that the additional funding of R10.4 billion over and above the R16.2 billion taxpayer bailout already budgeted for was wishful thinking and they have not been able to find any suckers willing to provide the R10.4 billion funding required to attempt the resuscitation of the “dead duck” SAA.

Ministers Gordhan and Mboweni would seem to have only one option left to them and that is to include a further taxpayer bailout in the Medium-Term Budget Policy Statement (MTBPS) in October 2020. Our information is that:

  • The Department of Public Enterprises has made a formal application to the National Treasury for the R10.4 billion required to bail out SAA as required by the Business Rescue Plan;
  • Before the creditors make any decisions on Friday, 18 September 2020, Minister Gordhan will make a plea to the creditors to extend the life of the Business Rescue Plan to about 21 October 2020, the date of the MTBPS. This request will probably be motivated on the basis that negotiations with funders are at an advanced stage without divulging that the funders will yet again be taxpayers;
  • The creditors who have nothing to lose and some, such as the employees have everything to gain, will agree to such a further extension;
  • Minister Mboweni and National Treasury have not agreed to this taxpayer bailout being included in the Medium-Term Budget Adjustments;
  • The ANC will instruct Minister Mboweni to include the R10.4 billion bailout in the MTBPS and Mboweni will have no option but to capitulate; and
  • The ANC will ensure that taxpayers are burdened with increased sovereign borrowings and associated interest costs to pay back.

If President Cyril Ramaphosa’s government is serious about structural economic reform, the liquidation and closure of bankrupt entities such as SAA is a good place to start.