SAA business rescue plan thrown into a tailspin
JOHANNESBURG - The multi-billion rand proposed business rescue plan for South African Airways (SAA) has been thrown into a tailspin after the National Treasury indicated that it would not inject more funds into the cash-strapped national carrier.
This as the Department of Public Enterprises (DPE) is trying by all means to get workers unions’ to support SAA’s proposed rescue plan to be voted on by the majority of creditors on July 14.
Treasury told Parliament on Friday that there was “no further action” planned to bailout SAA except to settle guaranteed debt as attempts to revive the airline facing liquidation are now at a critical stage.
Finance minister Tito Mboweni did not allocate new bailouts for the loss-making state airline in an emergency budget last week and declined to outline reasons why.
In a joint meeting of finance committees, Treasury presented its response to written and oral submissions by civil society groups and economists following its supplementary budget.
“No further action required in terms of bailouts except to settle guaranteed debt as the entity is insolvent and business rescue practitioners have not released turnaround plans,” it said.
Treasury said calls for more government spending were based on the incorrect assumption that South Africa suffers from short-run cyclical demand challenges rather than long-run structural weaknesses in the economy.
It said that some state-owned companies (SOCs) had been running negative cash balances well-before the emergence of pandemic owing to their poor financial performance.
It said some reforms planned for these companies included rationalisation, the closure and merger of some SOCs, and incorporating certain functions into the government.
Treasury said equity partnerships were also among planned reforms, as well as stronger policy certainty and implementation.
“Planned transfer from the fiscus will be conditional on improving their balance sheet,” Treasury said.
Meanwhile, the DPE this week said that four unions and staff representatives had approached it to indicate that they were ready to sign the voluntary severance packages (VSPs).
The government has offered VSPs to 3 700 SAA workers which can be offered immediately after the creditors vote on the rescue plan as part of the business rescue and restructuring process.
But some unions - the National Union of Metalworkers of South Africa (Numsa), the SA Cabin Crew Association (Sacca), and the SAA Pilots Association - have rejected the offer.
“The unions and staff representatives said they supported the VSPs which include one week calculated per year of completed service, one-month notice pay, accumulated leave paid out, a 13th Cheque and a top-up of severance packages calculated on a back-dated 5.9 percent wage increase which was agreed to in November last year,” it said.
SAA business rescue plan has requested that the government sets aside R2.2 billion for voluntary severance packages, as part of the overall R27bn bailout, in order to reduce SAA employees from 4 700 to 1 000.
SAA rescuers Les Matuson and Siviwe Dongwana are expected to table a revised business plan on Tuesday, which will be voted on by creditors a week later.
A vote in favour of the plan by 75 percent of the voting interests and 50 percent of the independent voting interests would be required to carry the vote.