A memorandum of understanding between the Department of Public Enterprises and South African Airways’ (SAA’s) business rescue practitioners (BRPs) have put a freeze on the unilateral sale of the airline’s assets at least until June 30.
In the document seen by Moneyweb, the two parties commit to a ‘defined interim period’ where the department will be given an opportunity to formulate proposals that will go into the final business rescue plan, either for a restructured SAA or the new airline.
During this period which, at the latest ends on June 30, the BRPs and the department agreed that there will be “no sale of assets nor negotiations in this regard without consultation with and the involvement of the department”.
The two parties also agree to work together in the development of the rescue plan, that the objective of the process should be a restructured new airline and that as many jobs as possible should be saved.
Three workstreams will be established in the work towards a new or restructured airline.
- The financial workstream will be responsible for determining how much money is still available at SAA and what will be needed to ensure the continued operation of SAA until June 30.
- An asset workstream will determine what assets will be needed in the new national carrier.
- The workstream for labour aims to streamline the retrenchment process initiated by the BRPs and the parallel compact that government and labour entered into.
The agreement follows discussions with the BRPs following DPE Minster Pravin Gordhan’s presentation in a joint parliamentary meeting last week, where he criticised the practitioners for only delivering an “outline” of a business rescue plan in the five months since the process started. He also questioned the way that Les Matuson and Siviwe Dongwana spent the R5.5 billion in post-commencement funding, stating that not enough was done to realise savings.
The BRPs have said that without further government funding the only options left were a careful wind-down of the business or liquidation. In the wind-down option, all workers would need to accept a severance package agreement that would be founded through the sale of selected assets.
Speaking to the committee, Gordhan said there would be no “fire sale of assets” or liquidation of the airline when there are many alternatives which could still be pursued.