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Cabinet indecision: DA calls on SAA business rescue practitioners to apply for immediate liquidation

It is clear that there is serious policy inconsistency within government about the fate of SAA and SAX.

This was again evident in Cabinet’s inability to make a final decision yesterday on the inevitable closure of these airlines, despite Minister of Public Enterprises Pravin Gordhan’s rejection of the latest bailout request from SAA.

The Democratic Alliance (DA) calls on SAA’s business practitioners to proceed and apply for SAA’s liquidation with immediate effect. The R50 billion bailouts to SAA, since 2009, have come at a great loss to the taxpayer and the country as South Africans had to endure cuts to essential public services to subsidise a failing airline.

As the Covid-19 lockdown process continues to wreak havoc on the economy, the money spent on SAA and SAX could have been useful in helping government absorb the economic shock. As things stand, the government is broke and has no fiscal space to pursue a wider economic bailout intervention.

It is only right that the ANC takes responsibility for the consequences that his will have for creditors and employees as it is the ANC, through the deployment and looting  of its incompetent cadres, that has brought a once proud airline to bankruptcy.

The liquidation of SAA and SAX must now proceed in a way that causes the least possible damage to the SA economy as well as to the well being of the innocent employees –  most of whom have likely not been involved in the massive malfeasance at both airlines.

The DA has been informed that the employees at SAX have not been paid since the end of February 2020. Worse still, management apparently failed to pay employees’ PAYE, UIF, SDL and pension contributions as well as the company contributions to SARS and other authorities. This means is that it is likely that the now jobless SAX employees may not be eligible to claim their unemployment benefits.

Also SAA employees facing the bleak prospect of unemployment may well face the prospects of having UIF, medical and pension claims partly or fully repudiated.

Pravin Gordhan and Finance Minister Tito Mboweni must take the necessary steps to ensure that the employees of SAA and SAX get the full benefits for their contributions of PAYE, UIF, Pension, Medical Aid and any other contributions that they have made.

I have written to President Cyril Ramaphosa  to request that he appoints a judicial commission of inquiry to investigate and report on all aspects of the malfeasance at both SAA and SAX express from 2009 to the point that the airlines were put into liquidation. The terms of reference for such an investigation must go much further than the Zondo Commission of Inquiry and must include a full forensic investigation to ensure that the persons who have been a guilty of wrongdoing are held accountable and lose their ill-gotten gains and, where appropriate, get jail terms.

One of the most egregious aspects that must be made fully public are the apparent enormous costs of the business rescue process conducted by Les Matuson and Siviwe Dongwana, the Business Rescue practitioners. These costs include the direct costs of the BRP’s, the costs of all SA and foreign consultants and the costs that have been incurred because of the apparent failure of the Business Rescue Practitioners to complete the required steps of the business rescue.

To this end I have submitted a parliamentary written question to Pravin Gordhan, the minister of Public Enterprises, in order to obtain the details of the full costs of the SAA business rescue process and associated consultants.

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DA welcomes labour court ruling on NUM and SACCA application

The Democratic Alliance (DA) welcomes the Labour Court ruling which rejects the application made by the National Union of Metalworkers (NUM) and the South African Cabin Crew Association (SACCA), to stop the South African Airways (SAA) Business Rescue Practitioners, Les Matuson and Siviwe Dongwana, from retrenching staff.

There is general consensus that SAA is overstaffed by at least 30% and with passengers abandoning SAA in droves, the overstaffing is probably much, much higher. There is absolutely no way that SAA can be rescued, if at all, without massive staff retrenchments.

The unions behaviour does not indicate their care of the welfare of workers, otherwise they would allow the SAA business rescue process to continue to save the airline. It was absurd for NUM and SACCA to have been under the impression that taxpayer bailouts would continue to be used to pour money into SAA to pay the bloated staff compliment.

The unions and Minister of Public Enterprises, Pravin Gordhan, must now remove themselves from this process and allow the SAA business rescue practitioners to continue with their work unhindered.

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SAA Business Rescue Practitioner, Les Matuson, should engage Parliament in his consultations

Now that the business rescue process for South African Airways (SAA) is underway and Les Matuson, the SAA Business Rescue Practitioner, has been appointed and is reported to be intending to meet with all stakeholders within the next 10 days – it is essential that Parliament’s Standing Committee on Public Accounts (SCOPA) be part of the proposed meeting with stakeholders.

As such, the DA has written to Mkhuleko Hlengwa, the SCOPA Chairperson, to request that he immediately write to Les Matuson to insist that SCOPA be included in the proposed meeting with SAA stakeholders.

This consultation process with all SAA stakeholders is clearly vital if Matuson is going to stand any chance of succeeding in the rescue of the bankrupt SAA.

Not only is SAA the property of all South Africans but on top of this over the past 25 years the South African taxpayer has been extorted by successive ANC governments to bailout SAA to the tune of R57 billion.

The SAA board of directors has refused to publish and submit to Parliament the Annual Financial Statements for SAA, as required by law, for the past two financial years and this has made it impossible for Parliament to perform its constitutional duty of oversight over SAA which is insolvent and a massive financial drain on the South African taxpayer.

In a display of the disdain in which the SAA board appears to hold Parliament, the SAA board declined to attend a SCOPA meeting on 27 November 2019. In a last ditch attempt to ensure that SAA account to Parliament and immediately submit its annual financial statements as required by the Public Finance Management Act, SCOPA had determined that on 5 December 2019 the committee would travel to the SAA Head Office in its massive luxury premises at Jet Park to meet the SAA board. This meeting was postponed when President Cyril Ramaphosa announced that airline would be put into voluntary business rescue.

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DA calls on government to stick to its guns on SAA business rescue, even if it means going against the unions.

The Democratic Alliance (DA) applauds the press release by the DA Member of the Standing Committee on Public Accounts, Alf Lees MP, which charts a potential strategy for South African Airways amidst the Business Rescue process.

In line with this, we welcome the belated move by President Ramaphosa to place SAA under Business Rescue – better late than never!

The DA believes this will, however, herald an upcoming battle with the unions which speaks to a central issue that bedevils all public enterprises. Under SAA’s Business Rescue, this nettle will have to be grasped and we hope that in doing so, the way will be paved for further interventions with other State Owned Enterprises (SOEs.)

The bankrupt state-owned diamond mining entity, Alexkor, needs to be next in line because it has for far too long been in a state of chaos, due to mismanagement and corruption which the ANC government has knowingly turned a blind eye. The labour issues in Eskom and Transnet also require concomitant action.

The drain on the fiscus by numerous SOE’s must be addressed and it cannot be over-emphasised that the decision to place SAA under business rescue needs to herald a desirable and overdue approach that must be extended to all SOE’s that add to the momentum driving South Africa Inc. over the fiscal cliff.

SAA’s financial woes, like many other SOE’s, has imperilled our economy. We are pleased that National Government has put its pride aside, to do the right thing, albeit that this course of action, championed by the DA, was only effected at the eleventh hour.

We hope that ANC government will take a stand against its alliance partner and stick to making tough decisions that are in the best interest of South Africa and the economy – without fear nor favour.

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Government must be realistic of its role throughout SAA Business Rescue

Now that the process of putting South African Airways (SAA) into Business Rescue has finally been put into motion by President Cyril Ramaphosa and the SAA board, it is critical that once Business Rescue is awarded that the outcome is one that removes all liability for SAA from the Government and the South African taxpayer.

There can be no equivocation on the part of government in ensuring that if SAA survives it must be as a private enterprise.

The financial status of SAA and its subsidiaries is largely unknown given that Annual Financial Statements for the past two financial years have not been published by the SAA board. This makes it impossible for a clear understanding of what the financial status of the different parts of the SAA Group, such as Mango are. Despite this delinquency on the part of the SAA board it seems clear that there are some parts of the SAA Group that are possibly profitable and have potential, whilst there are other parts that must be shut down forthwith.

Clearly it is highly unlikely that there will be a buyer who will be willing to purchase SAA and its subsidiaries as a whole, thus an unbundling of the SAA group, the sale of parts with potential and shutdown of those parts that have no future is required. The following is a possible strategy to be adopted:

  • Mango separated from the SAA Group and offered for sale preferably by way of a public offer and listing.
  • Mango to take over SAA domestic routes which are profitable.
  • Remaining SAA with international routes to be offered for sale.
  • SA Express to be shut down and Mango to take over profitable domestic routes if any exist.
  • Air Chefs Catering to be shutdown.
  • SAA Technical, given the levels of fraud and corruption, to be shutdown.

The DA will be writing to the Business Rescue Practitioner once appointed to request that we discuss the DA proposals with her/him.

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The most patriotic thing South Africans can do is help shutdown SAA

The following speech was delivered in Parliament’s debate on the 2019 Medium Term Budget Policy.

Chair,

The story of this budget and the circumstances that inform it is the story, repeated so often in so many parts of the world, of the inevitable collision between the vain ideology of state control, and what is fair and right for society.

Our country continues to suffer low growth, and a shrinking economy, as confirmed by StatsSA yesterday, and continues to suffer ever-growing unemployment lines, and growing poverty, but still, the government will not admit the truth that everyone now knows: the state control project has failed.

But our main objection to this budget has not been that it continues the lie of arrogant ideological stubbornness. Indeed, the Finance Minister is one of those who sees clearly the truth, and says plainly what needs to be done.

Our main objection is that the budget is so deeply and so indefensibly unfair to the 10 million unemployed South Africans, and to those living in poverty.

It is simply wrong to ask the public, and particularly the poor, to carry the cost of your failed dogma. It is ethically indefensible.

The truth is, we can build a fairer society. We can build a society in which public resources are used to care for the poor, grow the economy, and spread opportunity to all.

Let us assess it on that yardstick.

Over the course of this budget process, the Democratic Alliance has shown three things:

  1. This budget takes money from basic services on which the public at large, and the poor in particular, depend. It redirects those funds to the bailing out of zombie state owned entities.
  2. This budget takes money from the pockets of working families and redirects that money to bailing out zombie state owned entities.
  3. This budget does not present a credible plan to stabilise national debt. Indeed it sees a further explosion in national debt of R1.5 trillion over the next three years, which will burden present and future generations of taxpayers with higher taxes to pay off that debt.

Over the next three years, just under 3 million babies will be born in South Africa. They should be born into a country that offers opportunity, hope, and fairness. Instead, they will each be born with R500 000 in debt to pay off on behalf of the state, before they have even taken their first breath.

So, this budget pinches from the poor wrangles more from working families and burdens newborn babies.

Taken together, these three points show a budget which does not advance fairness in our society. If anything, it advances inequality and deepens poverty. It fails all of the basic tests.

That is why we will not support this budget. Neither should this House.

This House should not support any Budget that contains bailouts for zombie state owned companies.

Eventually, the stubborn ideology is confronted by reality. The fact is that the state should not run an airline, and I suspect that by the time we meet in February for the main budget, we will not have a state-run airline.

This is a key test of credibility for the government and for Treasury. If the government capitulates, prostrate themselves before unions and offer more guarantees to lenders, they will show themselves totally incapable of doing what is necessary to rein in government spending.

If they fail this test, the government will come here to present the main budget in February with no credibility left.

SAA must be placed into business rescue to prepare for break up and sale as soon as possible.

Not one further cent of public money, or a guarantee backed by public money, should be spent on SAA.

Minister Gordhan says all South Africans must support SAA. That shows that even now, after R20 billion in bailouts in recent years, the Minister still cannot pry himself away from his ideology, no matter what it costs the poor.

No, no, no, Minister. The most patriotic thing for South Africans can do is to help shut down SAA.

The public could force SAA into closure in a matter of days, by simply refusing to fly on it, so that it can be wound up and sold off.

Chair,

This will not be a restful Christmas for the Minister of Finance.

By February, he must deliver R160 billion in cuts to the public wage bill, he must get debt under control, he must present a plan to slash the deficit, and he must lead the government in shutting down SAA.

And he must do it without cutting services to the poor, and without taxing working families.

That is what we judge him on today, it is what we will judge him on in February, and it is why we will not support this budget.

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SAA Board finally acknowledges reckless trading

South African Airways (SAA) has this week submitted, to the Standing Committee on Public Accounts (SCOPA), a report outlining its plans to finally submit their long overdue annual financial statements to Parliament. At a 13 November SCOPA meeting, the board of directors admitted that the national carrier is insolvent and bankrupt, but denied that it was trading recklessly.

Despite the desperate financial circumstances of SAA, its board of directors have steadfastly refused to publish annual financial statements for the past two financial years and are clearly acting in violation of Section 55 of the Public Finance Management Act (PFMA). In addition to this, the board has essentially allowed SAA to trade recklessly for some time as the national carrier has not been able to pay its debts when they become payable and thus have acted in violation of Section 22 of the Companies Act.

When the Democratic Alliance (DA), at the 13 November SCOPA meeting, stated that the SAA directors were allowing the airline to trade recklessly, they vehemently denied this claim. Now, a mere two weeks later the board of directors, in its report to SCOPA, acknowledge that they are allowing SAA to trade recklessly, as:

  • “lenders were not willing to extend facilities even on the strength of government guarantees”; and
  • “In the circumstances it is clear that the uncertainty of not knowing whether shareholder’s funding is available to the Board and commitment to supply a suitable guarantee to the lenders means the Board can no longer rely on the Bowmans opinion and therefore it would be reckless for the company to continue trading.”

The time has come for SAA to be honest with the public and Parliament, and admit that the airline is at  a point of no return.

The DA will continue to hold the Minister of Public Enterprises and the board and executives of SAA accountable for the billions of Rands of wasteful expenditure on the failing airline all at the expense of service delivery and economic development that would give opportunities for all South Africans, but particularly the poor, to achieve their full potential and to pull themselves out of poverty.

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Aviation industry services should be declared “essential”

I have written to the Commission for Conciliation, Mediation and Arbitration (CCMA)’s Essential Services Committee, asking for certain aviation industry services to be declared “essential”. Employees engaged in essential services are prohibited from exercising their constitutional right to strike.

Section 213 of the Labour Relations Act, 1995,  defines an “essential service” as one which, if interrupted, would endanger the life, personal safety or health of the whole or any part of the population.

The DA’s call follows reckless statements at the weekend by the National Union of Metal Workers of South Africa (NUMSA), whose members have embarked on strike action against South African Airways (SAA).

The trade union’s spokesperson, Phakamile Hlubi-Majola, warned passengers not to fly on SAA, threatening them that their safety could not be guaranteed and that they were “putting their lives at risk”. She commented that “learners in the technical environment and other staff are being used to fly aircraft without having the requisite experience”.

This bullying brinkmanship is typical of NUMSA. The union is a destructive, intransigent menace to society and the economy. However, given NUMSA’shistory of violence and intimidation during industrial action, its threats should be treated with the utmost seriousness.

Both NUMSA and the South African Cabin Crew Association (SACCA) have indicated that they plan to bring the whole aviation sector to its knees by initiating a secondary strike that would involve the Civil Aviation Authority, the Airports Company South Africa, Mango Airlines, Safair, SA Express and Comair.

The regulation and control of air traffic in South Africa has already been declared an essential service (in 1997). It could be argued that since airports in South Africa have been designated as national key points under the National Key Points Act of 1980  (which means that any damage to, or disruption and immobilization of these facilities may harm the country) it would be in the public interest to ban all strike action at airports and indeed any national key points.

At the very least, pilots and all technical ground- and air staff who are in any way responsible for passengers’ health and safety should be regarded as performing an essential service.  Given the strict security provisions at airports, and the fact that many of the functions rendered by aviation logistics companies require specialised employees, it is difficult to find replacement labour in the event of a strike. This underscores the case for designating these services as essential in the aviation sector.

NUMSA has held SAA and the country’s air travellers to ransom for too long. It is time for decisive action against this economic wrecking ball. A designation of certain aviation industry services as essential would be a good first step in the right direction.

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DA to table “economic recovery plan” in Parliament’s upcoming debate on SA’s unemployment crisis

The DA welcomes the decision by the Speaker of the National Assembly (NA), Thandi Modise, to grant my request for an urgent debate of public importance on South Africa’s jobs crisis. The DA will use Parliament’s debate of national importance on the jobs crisis to table our “Economic Recovery Plan” – a comprehensive package of reform interventions that are unashamedly pro-growth, pro-investment, and pro-job creation.

This “Economic Recovery Plan” will include the following proposals, among others:

  • Splitting Eskom into two separate entities while allowing IPPs to come on board by passing the ISMO Bill;
  • Rejecting the National Health Insurance (NHI) Bill that threatens to collapse our health sector;
  • Immediately placing SAA under business rescue;
  • Beginning the rollout of a Voluntary Civil Service Year for young people;
  • Cutting the Public Sector Wage Bill; and
  • Creating an enabling environment for job creation by freeing up micro enterprise and relaxing labour legislation.

Our country’s economy is in a dire state and on the verge of passing the point of no return – which we may never fully recover from. Urgency is now more vital than ever, and I implore Parliament’s programming committee to set a date for this debate at the soonest available opportunity.

The ANC government has made history again – albeit for the wrong reasons – as the number of South Africans without a job has now crossed the dreaded 10 million threshold, with an expanded unemployment rate of 38.5%. Despite longwinded promises of reform from Mr Ramaphosa, we have seen no noticeable improvement in the economy, the unemployment rate, and the living conditions of ordinary South Africans.

Instead, since Mr Ramaphosa assumed the Presidency, 746 000 more South Africans have joined the ranks of the unemployed. Ramaphosa appears to either have no plan to fix this crisis, or no power to do so within his own party. We cannot continue along this path any longer, we need urgent and wholescale reform.

In the two weeks since the StatsSA confirmed that 10.2 million South Africans are now without a job, neither the President nor the ANC government has taken action and put forward a concrete plan. Two weeks ago I therefore also wrote to the President to establish an economic crisis recovery plan with relevant government stakeholders and political parties to reform the economy, Eskom and stem the jobs losses. I am yet to hear back from the President.

Parliament must now rise to the occasion and play its part during this leadership vacuum. The debate will need to address unsustainable levels of government spending; how to stop runaway bailouts to mismanaged SOEs such as Eskom; the size and growth of the Public Sector wage bill; and how to stimulate both local and foreign investment. Investors have lost all confidence in this government and are selling South African assets at an unprecedented rate. If we fail to stop this trend we will soon be staring down the barrel of an International Monetary Fund (IMF) bailout.

South Africa is fast running out of time. In order to avoid economic collapse, we need a clear, concrete plan for urgent reform. The DA will table such a plan during this debate, and will work hard to gain support for this plan across party lines.

Only the DA can manage the real problems South Africa faces. The DA’s governance track record speaks for itself. Where we govern, we govern well, get stuff done and have a solid agenda with workable solutions. Our approach to the economy is no different.

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SOE Review: R100bn lost in two-years

On Wednesday the Democratic Alliance (DA) wrote to the Minister of Public Enterprises, Pravin Gordhan, requesting a full-scale review of our failing and debt-ridden state-owned entities (SOEs), which have cumulative losses amounting to almost R100 billion. According to the National Treasury’s 2019 Consolidated Financial Statement report, loss making public entities raked up a consolidated loss of R50.65 billion in 2016/17 and R45.82 billion in 2017/18.

These financial losses increase on a daily basis and are proof that the status quo is no longer feasible. South Africa’s SOEs must, as a matter of urgency, be completely overhauled. Their insurmountable debt poses great risks to our economy and the functioning of our societies, as many of them are bankrupt and completely unable to provide the services they are mandated to deliver. Furthermore, several of these hundreds of SOEs duplicate functions and should not even exist in the first place.

The DA will continue to fight for this comprehensive review, which should be conducted to evaluate which SOEs are necessary, which SOEs need to be dissolved, which should be partially privatised, and which should be privatised in their entirety.

It is time to be pragmatic, and to stop playing politics. SOEs represent some of the biggest monopolies in the South African economy, and by conducting a comprehensive review, government would be providing citizens with a clear indication that they are willing to start the process of structural change to protect our economy from further financial losses.

We cannot be sentimental about SOEs when they add little to no value to the people of South Africa and the economy. The country’s is in crisis, it therefore requires urgent reforms, starting with Eskom.