Gordhan stakes his reputation and SA’s on airline

South Africa seeks clout in new national carrier.
Pravin Gordhan. Image: Halden Krog/Bloomberg

Pravin Gordhan, South Africa’s Minister for Public Enterprises, is staking his own credibility and that of President Cyril Ramaphosa’s government on the creation of a new airline out of the ashes of the bankrupt national carrier.

Hit by the loss of the country’s last investment-grade rating on its sovereign debt and the Covid-19 pandemic, Ramaphosa has said hard choices will need to be made as the country restructures its economy. What the state decides to do with South African Airways could be a litmus test for that resolve.

Read: Salary cuts at SAA to keep airline going until June

SAA hasn’t made a profit since 2011 and was surviving on state bailouts and government-guaranteed debt even before the coronavirus forced the grounding of almost all its planes. Both Gordhan and the team of business-rescue experts currently running the airline have suggested a strategic investment partner could help restore the airline, but with carriers worldwide expected to burn through $61 billion in the second quarter alone the list of potential buyers looks thin.

And while South Africa’s National Treasury has found money for SAA in the past, the state’s finances have been severely stretched by efforts to contain Covid-19. The economy is forecast to contract as much as 16% this year and lose as many as 7 million jobs, and Ramaphosa last month announced a R500 billion support package to contain the fallout.

“We’ve got our backs totally against the wall,” Cas Coovadia, chief executive officer of Business Unity South Africa, said in an interview. With regard to Gordhan, “we have the greatest respect for him, we just can’t see, given the facts of the matter, how SAA can be saved,” he said.

SAA’s board placed the airline in a local form of bankruptcy protection, known as business rescue, in December. The appointed administrators, led by Siviwe Dongwana and Les Matuson, were expected to propose a recovery plan to creditors by the end of February, but requested an extension due to delays to promised funding. A further postponement was granted after the coronavirus reached South Africa in March, and a final plan still hasn’t been presented.

After a request for further government funding was refused last month, the administrators said the best option was an orderly winding down with severance packages offered to all staff. While the proposal was blocked in court after an appeal by labor groups, it remains the business-rescue team’s preferred course of action, a spokeswoman said, declining to comment further.

SAA’s almost 5 000 workers are currently on unpaid leave. They are receiving some compensation from the Unemployment Insurance Fund.

Gordhan, 71, has criticised the administrators, accusing them of wasting money and lacking transparency. His plan is to create a viable airline that isn’t reliant on state funding, while saving as many jobs as it can, the minister told lawmakers on Friday.

“These aren’t individual decisions,” he said. “It’s government decisions the department is implementing.” A spokesman for the Department of Public Enterprises declined to answer further queries.

Obstacles to Gordhan’s plan, which has the backing of unions, include the lack of state funding. Finance Minister Tito Mboweni has repeatedly made clear he’s reluctant to put more money into SAA and said he isn’t averse to the airline closing. Attracting an equity partner to invest in a perennially loss-making operation is also complicated by the government’s desire to retain control and a law that limits foreign ownership to 25%.

“There are not too many people at the moment that can invest, certainly not too many foreign airlines that can,” said Linden Birns, managing director of Plane Talking, a Cape Town-based aviation advisory service. “Who is going to put money in if they do not have a decent say on the board, or voting rights?”

Gordhan’s insistence on saving the airline comes at the expense of a reputation built on prudence and pragmatism.

Imprisoned and tortured for his role in the struggle against apartheid, Gordhan boosted South Africa’s revenue collection as head of the tax service and twice served as finance minister. In his last stint, during the rule of former President Jacob Zuma, he opposed attempts to interfere with the tax-collection service and embark on a costly nuclear power program.

“It’s very strange to see Pravin Gordhan coming out as dragging his feet. I didn’t think we would be negotiating about an airline that’s already dead,” said Ralph Mathekga, a political analyst and author of books about South African politics. “I thought logic would be dictated by current circumstances.”

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I am afraid that between Mr Gordhans Eskom delivery( remember how he destroyed the previous CEO who dared to suggest freezing salaries-in an election year!) as well as this debacle at SAA his reputation has been totally obliterated.

SAA lost R5bn for two years in a row, gobbled billions more since being placed in business rescue and has no real assets(the good aircraft are leased the rest can only be firesold in a very dead market) . The industry is in real trouble( see Comair) and tourism will be one of the last recoveries.

At 71 the ANC should thank Jamnadas for his services as a tax collector and wish him a pleasant retirement( preferably playing endless games of bowls wit NDZ, Ebrahim Patel and Gwede)

Here we are in the midst of a depression, caused by the ANC , SMME’s who might disappear forever, normal hardworking citizens who cannot go to work , people who have no toward, and here is a Government Minister dressed in a tailor made suit who’s going to resurrect a dying horse so he may leave a legacy!!

The ANC used our Tax money to keep SAA floating and they have the audacity to go on record to restructure an airline which they want to abuse again with our money whilst there is no more money!

They think by putting a new shirt on a criminal he’s a new person! All the while corruption continues unabated whilst we wait with anticipation for the useless Zondo Commissions verdict!

People are starving, at their wits end, no work, no money and Ministers prance around arrogantly talking about SAA while people are dying!

So typical, so ANC!

You mention politicians (Gordhan) talking about saving SAA – a novelty-while people are starving.

I agree. But even worse is that Gordhan and his cabinet colleagues (except the sober finance minister) has referred to SAA in public addresses as the “national carrier for the people!”
The irony that “the people” don’t have working trains and buses to get to work, school and other places of critical importance, is lost on this ANC/SACP government.

Because of everything you said, when things return to anything normal I will still refuse to fly with SAA.
Gordhan is turning out to be the biggest disappointment.
His ‘connect the dots‘ speech was cute, but everything he touched afterwards was destroyed by his primitive socialist ideologies.

Yes. Girdhan is helping prop up the patronage system.

This move will purge the last of the competent workers left at SAA. There will only be cadres left in the new airline.

No personal malice towards Pravin, but the man is a communist at heart and I’ve never understood the public’s positive impression of him. Perhaps because he is articulate and persuasive but actions speak louder than works. He actions are consistent. He remains ideologically incapable of taking prudent financial decisions. What sort of person would invest in this bunch, especially now.

If communists understood economics they wouldn’t be communists.

Running an airline requires different skills to fighting against crooks. Maybe he wants a retirement job running a company that moves freight instead of people.

Another feeding trough for the over privileged and those strategically placed to dip into the till.

Whenever Gordhan and SAA is mentioned in the same sentence, that sentence never makes sense and it will always be unachievable.

It beggars belief that having so spectacularly failed in their management of SAA for a decade or more, Gordhan and his fellow travellers now have the barefaced arrogance to demand a second chance – as if previous gross incompetence and grand corruption can simply be written off and forgotten. No prudent business will support such folly (who would, given SA’s and SAA’s appalling labour record – it was only a few months ago that SACCA and NUMSA were gleefully threatening to bring SAA to its knees if their “demands” were not met). So does Gordhan expect the taxpayers to fund this insane gambit? Surely he can’t be that out of touch…

This kind of behaviour should be a crime against taxpayers with severe punishment. When you do not really know what a real job is, you have no understanding of your responsibility to taxpayers. Parasites

It’s very magnamonius of Pravin to try resuscitate SAA, but there are many precedents worth studying globally- airtravel is a commoditized and brutal industry with thin margins. The SAA carcass does have some juicy bits to divide amongst the cadres.

Reputation? The good reputation or the bad reputation?

Idijit is hell bent on using his frequent flyer miles — No matter the cost !!!!!

It’s hard to believe that there is no way in law for taxpayers to protect themselves from this obvious stupidity. It is not rational and how is it possible that there is no legal way to challenge it?

Yes it is hard to believe the SA taxpayer has no say in how their hard earned funds are spent.
This is why so many are voting with their feet and emigrating where they see results on how their tax contributions are dealt with…

@Narchie: Unfortunately that is the only real say the taxpayers have in how the country’s finances are handled. The problem is that it is such a disruptive process from many people’s personal perspective. But the tipping point is becoming steeper and steeper and so will the number of emigrations. Sad for those stuck between a rock and a hard place.

There is…Emigrate (If you can).

On their fruits shall you recognise them. Gordhan is just another Commie destroyer.

New airline is a crime against country and taxpayers.

Seriously, what is the state of Pravin Gordhan’s mental health? Some of his recent behaviour & statements do point to potential health issues that may or may not have been diagnosed yet.

What credibility? He oversaw the grotesque looting during the Zuma years.

@incitatus . Have you forgotten how PG was hauled back and then sacked by JZ when he said that SA could not afford nuclear power generation. He was touring the world to get funding and had to cut back his presentations. Which other ministers in JZ and CR’s cabinet has credibility to obtain private foreign funding apart from PG? NONE

This is why PG is still around. PG was ready to retire; but was brought back by CR. He works hard (ask anybody that has worked with or under him) and has credibility.

Having said all this; I too have serious doubts about SAA II

I have to agree. At SARS he was just Zuma’s bagman.

This is not about the airline – it is about the ANC that does not want to be known as the party that destroyed the national airline – it is always about the party.

Virgin laid off more than 3,000 people, including 600 pilots.

– Virgin Australia files for bankruptcy.

– Air Mauritius entered administration proceedings

– _ South African Airways_ is bankrupt.

– Finnair returned 12 planes and laid off 2,400 people.

– YOU parked 22 planes and laid off 4,100 people.

– Ryanair parked 113 aircraft and “dumped” 900 pilots at the moment, 450 more in the coming months.

– Norwegian has completely discontinued its long-distance activity !!! The 787 were returned to the lessors.

– SAS returned 14 planes and sacked 520 pilots … The Scandinavian states are studying a plan to liquidate Norwegian and SAS to rebuild a new company from their ashes.

– Ethiad canceled 18 A350, 10 A380 and 10 Boeing 787 orders. It laid off 720 employees.

– Emirates parked 38 A380s and canceled all orders for the Boeing 777x (150 aircraft, the largest order of its kind). The company “invites” all employees over 56 to retire.

– Wizzair returned 32 A320s and laid off 1,200 employees, including 200 pilots, another wave of 430 planned layoffs in the coming months. The remaining employees will have their wages reduced by 30%.

– IAG (parent company of British Airways) abandons the acquisition of Air Europa (and will pay compensation of € 40 million for it).

– IAG Park (Iberia) 56 aircraft.

– IAG (British Airways) parked 34 planes. All employees over the age of 58 must retire.

– Luxair reduced its fleet by 50% (and associated layoffs)

– CSA has abolished its long-distance sector and maintains only 5 medium distance aircraft.

– LGW (who operated on behalf of EuroWings), filed for bankruptcy.

– Brussels Airlines reduced its fleet by 50% (and associated layoffs).

– Lufthansa plans to park 72 planes (in two installments).

– Hop is studying the possibility of reducing its fleet and personnel by 50%.

Above was taken from a post on Reddit

Also, Zoom, the video software company is called at more than the 7 biggest airlines combined right now. Take that money and invest it in software Pravin. Maybe then you won’t have people hacking parliamentary meetings.

“Gordhan, 71, has criticised the administrators, accusing them of wasting money and lacking transparency.” Well there is a case of the pot calling the kettle black for you. Mr Gordhan, remember that pointing a finger results in three fingers pointing back at you. You stood and watched your fellow cadres for how many years while they did exactly that – wasting money and lacking transparency. Where does all this bravado come from now? Surly the past ten years would have afforded more than a few opportunities to boast of setting matters right at SAA? Any luck at Eskom? Transnet? Denel? No sir, I do not believe you – simply more waffle dripping with syrup – same as dished up by the president. I guess, as usual, the majority will buy it.

It’s really time to call a spade, a spade, no matter HOW well-spoken and honourable Minister Gordhan might be. If he can’t take the heat he must get out of the kitchen! But he is in fact a misguided fool who has been acting most recklessly with SA’s very limited financial resources for many years, as best illustrated by his continuous goverment guarantees to malfunctioning SOE, SAA being the most bizarre of all.
For this, and the fact that Mr Gordhan has consistently chosen to ignore sound advice and warnings by the auditor general, ratings agencies and the informed part of the public, he no longer deserves to continue to serve in the SA cabinet. In fact, if he is as honourable as what he is made out to be, he can think about financing some of SAAs losses from his own pocket! It is afterall HIS laughable pet project of which unlike investors in other airlines, Mr Gordhan has not invested a penny of his own money into this financially unviable scheme that has contributed generously to the current impoverishment of people of SA!

Very good article!
It captures the minister’s increasing obsession with what seems to be his misguided drive to leave behind some sort of legacy…

Let THE albatross go.

Saving SAA is a front. This is a play to totally destroy all the other local airlines that ran as a profit, when that is done who ever needs to fly will have only SAA. They are going to drip feed SAA till the others are dead.

Remember 1 Time and Cemair, between SAA and the CAA they killed 1 Time and grounded Cemair for no reason at all. See the court ruling.

he has lost his reputation as a pragmatist resulting in the destroying of Escom and the utter stupidity of clinging to the idealised socialist dream of a National Airline, where all the cadres and their wives and children can travel free. Shame on you, Mr. Gordhan.

Any private sector person who even considers buying into any state owned entity where they do not have the majority say are throwing away investors money. This and other actions show that the politicians are incapable of keeping out of the running of these enterprises. They continually interfered before business rescue, which has resulted in the airline being where it is now and even while in business rescue they want to continue interfering. As for Gordhan I can’t say I have that much respect for him. The countries finances and taxes deteriorated while he was finance minister. He may have done a good job at SARS but even there he oversaw some illegal practices by SARS, the one I have previously mentioned, being the inflation of the basic amount, without the requisite laws being in place.

Dear fellow commenters, please read between the lines. The current regime (meant in the worst way possible) is upgrading the gravy train to the gravy plane.

Exactly, no deep thoughts required to see this for what it is. I believe they simply do not want to lose the free flights in retirement, the scum.

So quit your job, go and raise some capital and start an airline. I hear there will be a gap in the SA market shortly.

Mr. Gordhan must retire immediately. It’s his fault the wage bill of the state spiralled out of control and now he wants to give CPR to a corpse who’s already 6ft underground!

End of comments.

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