How was R5.5bn spent by SAA BRPs? Gordhan wants answers

Minister says government has seen little progress and has been in the dark on the rescue process.
A US consultancy was paid R35m for services in SAA's rescue process but the report on its work is a 'mystery', says Public Enterprises Minister Pravin Gordhan. Image: Andrew Harrer, Bloomberg

Five months and some R5.5 billion down the line, South African Airways (SAA) is still under business rescue with no clear plan in sight and Public Enterprises Minister Pravin Gordhan is not impressed with the little the rescue practitioners have done. 

Giving a presentation on state-owned enterprises in a joint parliament committee meeting on Wednesday evening, Gordhan said business rescue practitioners (BRPs) Les Matuson and Siviwe Dongwana should not make a move towards liquidating the airline when there are many alternatives that could still be explored. 

Matuson and Dongwana have previously made it clear that without further funding from the government they would have no option but to implement a structured winding down of the airline or a liquidation. These plans have been placed on pause at least until May 11, to give workers a chance to accept wholesale retrenchments and for government to find the requisite funding. 

Read: Last chance saloon at SAA for labour and government, say BRPs 

The show must go on

But Gordhan told MPs there will be no “fire sale” of SAA assets and that despite the BRPs saying they will not be operating any flights from May 8, this will need to be relooked. 

Gordhan said one of the issues government was contending with is the lack of a “proper and fully-fledged” rescue plan from the BRPs. 

“At best what we had given to us yesterday morning is an outline, but much of it is about the history and not too much of it is about solutions,” said Gordhan.  

Business rescue proceedings are instituted to rehabilitate financially-distressed companies so they can become solvent again. The Companies Act provides for these proceedings to last for a period of three months. In this period the rescue practitioners will convene with all stakeholders, and publish and implement the plan if it is approved.

Read: SAA: Government and labour agree to work towards new airline

The act also provides for the plan to be published within 25 days of the rescue practitioners’ being appointed, but allows for a longer time if allowed by the courts or creditors. 

Since the rescue practitioners were appointed in December they have been given three extensions to publish the business rescue plan. There have been delays in the issuing of post-commencement funding and a legal challenge by the unions, with a second challenge to stop retrenchments expected in the labour court on Thursday. The BRPs have also faced public disapproval from government for shutting down all domestic routes barring one as a cost-saving measure. 

Gordhan said in the next 48 hours government would be engaging with the BRPs on the specifics regarding the shape and design of a future new airline and how that transition will happen. 

He said the department would also meet with the practitioners to examine the company’s finances to locate savings from the R5.5 billion that will fund the continued operation of the airline beyond May 8. 

Clarity 

Another issue raised by Gordhan is the “sole discretion” the BRPs have had regarding how the R5.5 billion is used, saying more could have been done to save costs. 

“The Company’s Act does prescribe that when there are important decisions to be made by the BRPs there must be adequate consultation with the shareholder. Our view is that that has not been entirely the case.”

For instance, a United States consultancy firm Alvarez & Marsal was appointed by the BRPs on the recommendation of the lenders who contributed to the post-commencement funding. 

The work done by this firm resulted in a bill of around R35 million and Gordhan said government has “not seen the product of what has been done”.  

“We want full access to that information so we can determine if there was value for money in that regard,” he said.

The BRPs were also supposed to present management accounts to the Standing Committee on Public Accounts in Parliament but have not done so.

Read: South Africa opposed to liquidation of SAA – Gordhan

Gordhan said the BRPs and the other consulting firms have been asked to reduce their fees by up to 40% “so they also contribute like the staff would be contributing to a proper outcome of this process”. 

“We haven’t heard from them in this particular regard. We are engaging with one of the consultancies in the reduction on fees.

“Again it’s the trade unions who have come to the party,” he added, saying that the majority of unions have agreed to take salary cuts of up to 50% to keep the airline alive.

Leadership forum

The unions and government have established a parallel process called the Leadership Forum, after labour rejected a retrenchment proposal from the BRPs asking workers to accept unguaranteed severance packages.

Last week labour signed a leadership compact with government pledging their cooperation in working towards a new airline, where all parties will have to make sacrifices. 

Gordhan said one of the things that will be discussed in this forum is the retrenchment process, underlined by a mutual understanding that not all SAA employees will be employed in the new and leaner airline.

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One wonders what part of ‘no rescue is possible’ does Mr.Gordhan not understand?
For R35 milliion the government was told no rescue is possible when the writing was on the wall for years. But still they spend 35mil’ to be told the obvious?

Is it not ironical that now all of a sudden Pravin requires an explanation on what the BRP’s spent the money on but explanations were not required from the SAA management on the multiple and numerous previous bail outs?

Ironic that this could have been analyzed 10 years ago by a grade 10 learner…FOC.

ANC 1
You guys 0

There was never a Business Rescue to begin with.The was never a cigarette unbanning ever.

You must start respecting Comrades. I wouldnt want to be in a country that doesnt own an airline even if it’s loss-making. A serious undermining of the State (security) if that was the case.

Time for Pravin to be put out to pasture.

It is so sad but brutally obvious that Pravin is both complete ill equipped for his role and devastatingly hampered by his communist ideologies.
So sad to see that SA tax payers will have to pay for his foolishness.

Can someone please beat it into his apparent thick skull that eventually he will run out of taxpayers money?

Debacle with capital D. The funniest part is Gordhan’s expectation that the BRPs and the other consulting firms might reduce their fees by up to 40% “so they also contribute like the staff would be contributing to a proper outcome of this process”.” Like asking a great white off Seal Island not to take a seal silhouetted against the surface.

So – Govt enters a BRP on a hopeless SOE only to have it confirmed and then they ask that the BRP folk, and the consultants they have used, to take a 40% reduction. I’m sure if these parties had been told up front to quote but only to expect a 60% payment they would have still volunteered. Talk about alternative universes…

Oh, lest I forget – I’d luv to know what is meant by “proper outcome”!

Proper outcome = one acceptable to the unions.

I have always had a smidgen of hope left that there is a tiny bit of common sense among the ANC corruption and stupidity which CR will use to save the country. No more . ANC corruption and stupidity reigns. like everywhere in Africa.

I mean government is basically saying “We screwed up and allowed this ship to sink, we need you to help us save this ship from sinking, but since it is sinking and must be saved it is only fair that you yourself perform the rescue at a reduced fee because we screwed it up in the first place and cannot really afford to pay you more.” Talk about lunatic.

The ANC is pre-analog tech trying to cut it in a digital age, and thus…

The more that things change, the more that they remain the same!

Pre-analog? – yes very much so, that being the Iron Age

Amazing how they give R35m to an overseas company.
You would think SA have smart competent people that can point out the obvious, but how do you hide the forensic trail of corruption then…too close to home.

Most of the money is being eaten up by politicians anyway, while the hard working SAA staff is being left on the edge.

Seems like it’s time for a commission of enquiry

Nothing short of amazing how Pravin still can’t see stealing ?

Oh, I see what’s going on. So the ANC wants to pin the blame on the business rescue practitioners in arder to absolve themselves from blame for years of mismanagement. Nogals clever, but not clever enough.

Moneyweb, please publish my comment, I will say something nice about the ANC next time, I promise.

Many years ago Russell Loubser former director of SAA and CEO of the JSE did an interview on Fin24 on SAA and the conclusion was basically the following: “SAA is regarded as a pot of money for the Zuma Administration to dispense largesse and enrich politically connected cronies. The
result of this malevolent incompetence will force taxpayers to keep
pumping in billions of Rand annually – until such time as voters
eject the plunderers from office.” Well, nothing has changed since then.

Gordhan has lost any credibility he may have had;

For him to tell BRPs what they must do is akin to him telling a judge to reverse his decision.

Last night he cited as reason for having a natioal carrier – “to be able to repatriate sutdents from Wuhan, or to fly donated freight back to SA”
With charter always an option, at rates that will be low for years to come,he insults the intelligence of even the unions he is so desperate to please.

He bleats on about R38m, for informed advice around a decision that will save many many billions he is now putting at stake – he should man up and tell the country what it costs to keep the floors open for just one day.

Instead of abusing his position this way, he should also have the courage to declare to the nation his true agenda in all this.

Quite agree. Also looks like he’s been sitting in an ivory tower all along while the rescue practitioners were trying to come up with something.

He could have popped in to see how things were going, give them a call maybe?

No. Here’s 5 billion odd and 3 months later, shock and horror. Where did it all go? What’s happening down there?

Well. That’s the way we’re running the whole country too

I too feel that PGs time is long overdue to retire. The man is tired, fighting too may fires and carrying a lot ANC cadres (passengers) on his back.

When you sleep with dogs you bound to pick up lice. I have not heard the clip for his reasons for a national carrier; but if this is genuine then it ranks with the firepool at JZs homestead.

Mr Gordhan has no clue what business rescue is about. He should read Chapter 6 of the Companies Act before making ludicrous suggestions. He just shows his total ignorance of how businesses operate.

Good luck to him and the unions, of all organizations, to create a new airline. As long as it is not with tax money.

Seems Gordhan has a “vested interest”!

Commie minister Gordhan wants to re- animate a overdead zombie airline. Perhaps he should not have appointed business rescuers and should have gone straight to Dr. Frankenstein , a expert in such matters.

For years SAA was plundered and used as an ATM for ANC cadres. The BRPs arrive and after 4 months its all their fault that the place is bust? Come on Jamnadas-the airline is broken like the rest of the country’s SOEs and only because of two reasons:
1. ANC stealing
2. ANC incapable management

While you have long lost all respect( and any sense of dignity) get the message and liquidate it.

That is good money spent after bad.

In facr rgeANC turns all money into wasted money.

COVID 19 is the clean sweeper, the ANC Government must use this appropriate window of opportunity… All apartheid SOE’s must be shut down… we need new post-COVID 19 state run enterprises. No such other opportunity will present itself in our lifetime.

Yes, the more the better! Let’s start with new money, not everybody has had a chance to “eat” yet.

Personally I’m deeply disappointed in COVID-19 as a Darwinian event, promised much, delivered nothing

If Mr Gordhan had all these ideas about “alternatives” on how to save the airline, why appoint a BRP in the first place?

This is a classic case of finding a suitable scapegoat for the failure that has been in the making for many years.

Because they only placed SAA in business rescue to prevent it being liquidated outright.

In my view the BRPs should just apply for liquidation and be done with it. Between the communists and union zombies, further negotiation is a waste of time. And just a reminder to all: this is personal – it is OUR money at stake.

Gordhan says he wants plan, he hasn’t seen a plan. OK – here goes. Revenue is zero. The costs are salaries, insurance, rentals to ACSA. Total of those 3 items are your net loss per month FOREVER – until you close. Too many in government incompetent and lack the common sense to literally think beyond tomorrow. What a waste of time and money

Even with a 40% cut on salaries. it will take ages to save enough to save saa – the whole anc government seems to have common problem and that is to simple math calculations – accounting wise they not what they are talking about either

Give me one reason why saa is so unique and wonderful that whilst airlines 10x bigger and financially stronger can not cope, why wil the sa p–willy airways survive without more help and be able to stand on its on legs

Face it – the anc cadre pals job allocation was the last straw to run the once operating saa into the ground

gordan seems to be an expert on brps nowadays = what did he do in the last 20 years with this knowledge?????? now want to be helped but all for free – dream on

I am surprised NDZ has not proclaimed that business rescue is prohibited along with alcohol, tobacco and exercise.

This is the ANC’s biggest and easiest giant ATM to rob.

They need it to carry on a little longer, as long as there is a glimmer of hope of more money to steal they will waffle like this guy did last night on TV. it was nauseating.

Mr. Gordhan you can resuscitate a decomposed corpse with mouth to mouth if you want but not with my lips, not with my tax money.

I fail to understand Gordhan’s standpoint – surely when he called in these BRP’s he knew their credentials and knew their modus operandi. The issue is simple can they restructure the SAA successfully in terms of a plan of action or is the shareholder told the unpleasant truth that it can’t be saved and liquidate.
Somehow I also think that these BRP mandates are probably a very loosely structured document and surely should have checks and balances and feedback sessions – but it seems that the government because they like to be secretive in all their actions have been hoisted by their own petard

Without SAA life is meaningless – Karl Marx

Another 5.5 billion down the drain

Pravin the public would like to know when those in parliament implicated in criminal activity are going to be brought to account. Also, when the billions stolen, which has contributed to this crisis are going to be recovered.

If you had heeded the writing on the wall many years ago the bits of SAA could perhaps have been worth something but now, with airlines folding everywhere it is unlikely that anything can be realised. And the public would like to know why billions was squandered on the airline when it was clear that it was not viable while being run by a Zuma appointee whom the ANC continued to support through numerous votes of no confidence.

Finally, you and the ANC expect everyone to give up a major portion of their income. Why don’t you show us the way and give up 40% of your income to support SAA and the other failed ANC projects. After all, if there is anyone that bears responsibility for the lost cause that is SAA, it is the ANC. They cheered Zuma and mocked the oppositions protestation at Zuma’s excesses, even producing a video to try and sell the rediculous idea that the pool build at Nkandla was a for fighting fires. Now the staff of SAA and other SOE’s are reaping the whirlwind that the ANC sowed.

And while we are about it, why don’t you show the way by giving your property away, seeing that the ANC is pursuing EWC. It is easy with the force of the state to take away other peoples property in pursuit of an outdated communist dream. You and your other overpaid ANC comrades show us the way and show how generous we should be.

Seems like Government is operating backwards and asking the wrong question. They operate from the assumption that the airline deserves to be saved and therefore must be saved and thus the question is how to save it.

The question should be whether it deserves to be saved and I think the people of SA who have been paying decades to keep a failing company alive unequivocally vote NO.

Why does it cost 35 million rands to tell the government that the pot is empty when they already know this? Where did the 5,5 billion go? Looted?
What sort of competence is there handling this matter, which a could be done by a four-year-old child?
My respect and belief in Pravin disappeared.

blah blah blah…everyone’s fault but not the ANC..blah blah blah

I wonder which course at pharmacy school was “How to save a bankrupt airline?”

We dont have a National Shipping Line (Thank God) so why do we need a National Airline : If anything the Former is far more essential for the countries survival :
I admired Pravin for Standing up the the EFF in the past , but he has now lost so much credibility that he may as well join the EFF !

How on earth anyone still views this disastrous Minister as “competent” is really beyond me

So when is this “Honorable” Minister and the SAA Board complying with the PFMA and publish the annual financial statements of this company owned by the SA public? When are they accounting for the recent R3.5 Bn loan from DBSA? Where did all that money go? Where did this R5.5 Bn go?

Are people really that blinded by this Minister that no one asks him and his cronies to account for public money? Only because it is “Pravin the Honorable” ANC cadre?

How gullible people are…

Pravin Gordhan is a Communist! Rest my case!

BRP;
1. Liquidate the airline.
2. Pay creditors.
3. Use the excess funds from taxpayers that’s not pumped into SAA for the economy.
Clause: “The government is not allowed, nor will ever be allowed to create, own or run an airline, or have a controlling stake in any airline now or in the future.”

Gordhan wants answers now? Garbage-he must have known what was going on. If he didn’t then he is not fit to be in this role. Terms of engagement would have been agreed to up front by the parties involved.To now start ‘demanding’ answers is a bit late. I would guess that these consultants negotiated to be paid in dollars ( say when at R15) and with the tanking of the rand that bill just got a lot higher. Perhaps what the consultants and BR practitioners are saying is not what Gordhan and the unions want to hear? And now he is backing SAA 2? Dodo airlines would be a good name

Good Morning mr Gordan, did you just wake up today and smell the coffee brewing? What planet are you on? You and your cabinet cadres sat and slept while the Myeni’s, Molefe’s and the others milked the coffers of all SOE’s under your watch. Now the unions take a 50% cut in salary! They all, with you, stood idly by and watched the raping and pillaging of all SOE’s! your entire cabinet should take a 50% cut (minimum) in salaries! What do you and he ANC cabinet NOT understand? the ANC killed the Golden Goose (SAA and others) let it die instead of dreaming! Too late Sir!

I thought he was one of the good guys! It’s time him and many of his contemporaries in the ANC retired they are long past their sell by date. Us oldies have been told to stay at home while they run around achieving nothing but more confusion.

THE POLITICS OF CRIME.

Maybe i am just cynical, but Covid 19 has presented governments around the world with a once in a multi-generational opportunity, to seize unbelievable power and control, under the cover of pretending to save lives. With this power comes the ability to ‘authorise’ unlimited budgets to do whatever they want, what would once have been dismissed as impossible, is now very much ‘justifiably’ guaranteed – and it will come with the blessing/ demands of the whole populace, they will give anything for a crumb of freedom, a crumb of food, a crumb of a donation of a pittance of their own tax money, just to buy critical food and medicines.

Every day that passes this desperation grows exponentially and government/s know it.

As for SAA i think it has become obvious what is happening. They are already preparing the scape goat/ sacrificial lamb in the BRPs. If they were not why ask such a GLARINGLY STUPID question – where do you think the R5,5 billion has gone. You have at least 10 years of financial records to peruse. Add the daily average cash burn at SAA over those 10 years and now combine it with ZERO income, due to self inflicted Covid 19 economic suicide – VOILA!

The 2 decade SAA fiasco will likely play out as follows, with cringingly ‘appropriate’ statements from government –

1. The covid 19 pandemic has crushed our good people and our economy, as such and at this time it is IMPERATIVE that the jobs which can be retained and kept must be at all costs.
2. With this in mind it has been decided that the jobs of 5,000 employees of SAA are just to important to lose, as such we in government have allocated an ‘SAA revival fund’ – however, we cannot allow (uhu) the same mistakes and poor management/ governance (uhu) that led to its demise to be repeated.
3. To this end we will set up a special SAA revival oversight committee, to ensure all funds channelled into this national symbol of pride are not again used for nefarious purposes.

I am sure we can all think of another dozen missives, that can be added to this in the weeks and months ahead to justify the retention of SAA, pacify the unions and keep that specific ATM alive and well for some time to come. Maybe they will even create a new name.

You see something has dawned on them, it always takes time but it does happen. Hey this is the new Covid 19 world, we can do what we want.

They must have jumped for joy with the COMAIR statement, effectively going to the wall (they now have no major competition to show them up) – hence they can justify the country needs a national carrier, as there is no other. There is no universe that exists where a private company with the name BRITISH AIRWAYS on it will ever receive R1.00 in bail out money, although they are wholly deserving of same.

It is pretty much a given and various leaders have said the same, that globally airlines will have TO BE SUBISIDIZED FOR SOME TIME TO COME – lest air travel with the new rules and much higher costs, airlines either charge airfares only the rich can afford, or shut down.

This OPPORTUNITY was not missed by Luthuli house nor will it be wasted. Imagine a world in which the ongoing bail out of an airline on an annual basis is part of the ‘new normal’ and perfectly acceptable. What group of politicians) would let this slide ever – none!

So in my opinion – SAA was never going to be allowed to fail anyway, with or without covid 19. Now however, the R20 billion that SAA flushed down the toilet in the last 10 years, will become an additional R50 billion+ over the next 10 years – and every new infusion of cash due to ongoing sustained losses, will be completely justified in the new covid 19 world.

At that stage who will care or even notice, as likely it will be a drop in the ocean of the trillions that will be getting spent, to try and salvage what is left of the fabric of South African society. Our daily lives will be filled with pictures and news headlines of horrific poverty, starvation and violent civil unrest being equally violently suppressed. We will care too much for our own well being, homes and safety to give a toss about what SAA might or might not be doing.

We are already living in a police state, hold on tight. I will leave you with this missive from NEWS24 – ” Police Minister Bheki Cele says some South Africans are not obeying lockdown regulations and warned Level 4 regulations could be reversed as Covid-19 has the potential of “wiping off humankind”.”

Just my opinion of course.

So he gave them R5.5 billion and didn’t demand a weekly report? Yet more proof that they are all incompetent.

Careful with your communist anc glasshouse, gordhan!

If he’s the cleverest of the lot, God help us!

Gordhan does not seem to know whether he is coming or going and from my perspective maybe he should be ‘going’. He instituted the BRP process and then interfered in typical ANC fashion. What he should realise is that what he is accusing them of occurred for decades under the Government, namely, nothing to show for massive amounts of money. When one’s ideology contradicts the actual system in which one operates – the competitive airline industry – here can only be disasters.

When is everyone going to realize these guys are all clueless. Even Cyril gets too much credit. He is oblivious to what is going on around him. He actually has no clue as to what to do and is a powerless puppet that is a yes man to the machine that is the ANC. These guys are all just carrying on and holding onto their jobs until they can reach retirement and receive their paychecks. None of them would ever be hired by the private sector, with their skill set. So basically all they have is their jobs that they have to hold on to at all costs, even if it means destroying the economy. They don’t have a desire to think long term at all.

End of comments.

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