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It’s probably too late to save SAA

Labour strike and business rescue proceedings may lead to liquidation.
If placed in rescue, financial statements showing the true state of affairs at SAA, which the auditor-general has not even seen, will need to be made available. Image: Supplied

The attempt by trade union Solidarity to save South African Airways (SAA) by applying for it to be placed in business rescue will most probably fail to prevent the liquidation of the indebted airline. The provisions in the legislation dealing with business rescue, Chapter 6 of the Companies Act No 71 of 2008, indicates that a court would probably refuse to allow business rescue and opt to liquidate SAA.

The ugly truth is that it is far too late to save SAA through a process of business rescue. A team of business rescue practitioners should have been called in years ago.

Read: SA won’t give SAA any further funding to resolve wage strike

A comprehensive overview of the relevant sections of the Companies Act by Werksmans Attorneys soon after the process of business rescue was introduced to SA highlights the fact that a company should commence with business rescue proceedings at the first signs of it being financially distressed. In the case of SAA, that would have been when it tabled its 2013 annual report.

Read: Goodbye, SAA

The airline was already insolvent then. The 2013 annual report showed that total liabilities exceeded assets by R849 million, but this figure included a subordinated loan of R1.3 billion from government as equity – the real figure was negative equity of nearly R2.2 billion. The income statement reported a loss of R1.2 billion in the year to March 2013.

That was the point at which management, the responsible minister or external management professionals needed to act. A year later, total liabilities exceeded assets by R4.8 billion and SAA reported a loss of R2.6 billion.

Management even raised the matter of the airline’s status as a going concern in the 2014 annual report, but neglected to take remedial steps.

SAA still had a chance of surviving if action had been taken in 2014.

The last time SAA published its financials was for the year to March 2017, when liabilities exceeded assets by R17.8 billion and it suffered a loss of nearly R5.6 billion.

The auditor-general issued a qualified audit opinion on the 2017 financial statements that included a long list of shortcomings in SAA’s financial management. He said that SAA could not be regarded as a going concern given six consecutive years of big losses and its huge debt burden. He mentioned that SAA couldn’t pay is debts when due.

 Information black hole

There is no way to tell what has happened since then. If losses continued at the same rate, SAA’s liabilities could exceed its assets by at least R24 billion now. Management has stated on more than one occasion that is cannot meet its commitments timeously.

The Werksmans report on business rescue says that a company should commence business rescue as soon it is reasonably unlikely that it will be able to pay its debts when due during the ensuing six months, or when it is likely that the company will become insolvent in the immediate ensuing six months.

The author of the report, Werksmans director Eric Levenstein, quoted a high court judgment that ruled that “business rescue proceedings are not for terminally ill corporations. Nor are they for [the] chronically ill. They are for ailing corporations, which given time, will be rescued and become solvent”.

Other options

This statement supports the contention that a company should apply for business rescue at the first signs of financial distress, says Levenstein. “Once a company is more than financially distressed, options other than business rescue become more attractive for ailing companies, such as liquidation or compromises.”

Levenstein’s analysis of the legislation shows that stakeholders other than management can apply for a company to be placed in business rescue. An affected person, including employees, credit providers and suppliers, can make a formal application to court for an order to place the company under supervision and commence business rescue proceedings.

He lists three reasons that stakeholders can offer to the court:

  • That the company is financially distressed;
  • That the company has failed to pay over any amount in terms of an obligation or contract with respect of employment-related matters; or
  • It is just and equitable to do so for financial reasons and that there is a reasonable prospect of rescuing the company.

Levenstein points out that any application to place a company in business rescue can be opposed as is the case with any other application to the court. The party needs to file a notice to the court of its intention to oppose the application and then needs to serve an answering affidavit on the applicant.

In this case, SAA management or public enterprises minister Pravin Gordhan, in his role as representative of the shareholder, could file the notice to oppose the application.

Compromise unlikely

Alternatively, the application for business rescue could be withdrawn if a compromise can be reached with the applicant, but that seems unlikely in this case.

Business rescue would do SAA good, if it is possible. A business rescue practitioner will do what management needed to do a long time ago.

Chapter 6 of the Companies Act prescribes four actions that a business rescue practitioner must take:

  • The practitioner must immediately investigate the affairs of the company;
  • The practitioner must convene meetings with the creditors and with the employees within 10 business days after being appointed to advise them of the prospects of rescuing the company;
  • A business rescue plan must be published within 25 days after the process started; and
  • The business rescue practitioner must convene a meeting of creditors and any other holders of voting interests to consider the rescue plan within 10 days of its publication.

The time frame to effect change is very short, but business rescue requires urgent intervention.

Unfortunately, Levenstein was not available to explain the process further and give an opinion on how it might play out at SAA. Neither SAA nor Solidarity answered questions from Moneyweb.

Full control

Legislation restricts the responsibilities and authority of directors when a company is put in business rescue. The business rescue practitioner will have full management control over SAA, effectively replacing the directors and management.

Directors can continue to exercise their functions, subject to the authority of the practitioner, and management can continue with its work in accordance with instructions from the business rescue practitioner.

In addition, SAA directors and management have a general responsibility to co-operate, assist and comply with request of the practitioner and furnish any information required. This includes financial statements that have not even been shared with the auditor-general, and which will show the true state of affairs at SAA.

Levenstein says in his report that the introduction of business rescue represents a move away from a culture of liquidation to a culture of rescue, if possible. If not, it will at least achieve a better result when winding up the company.

However, his explanation of factual insolvency (liabilities exceeding assets) and commercial insolvency (being able to honour commitments over the next 12 months) does not bode well for SAA, which has not been factually or commercially solvent since 2014.

Whatever the outcome of the application for business rescue, striking workers, Solidarity or management will be blamed for the closure or downsizing of SAA. Irresponsible lending by banks, lax oversight by politicians and the apathetic stance of taxpayers should be blamed as well.

The unwillingness to take action in 2014 will now have a huge effect on the airline industry as a whole, as well as on employees, credit providers, customers and suppliers.



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Mr.Kruger, you can blame who you want, but don’t blame the taxpayer. We have no say in these SOE companies.

Next thing they will blame the passengers.

I blame the passengers. They should’ve stopped flying with SAA years ago. I’d like to think the government would’nt have carried on bailing them out without pax onboard… but hey, this is the ANC after all. Who knows.

He actually means the RSA voter, voters who keep this construct alive out of ignorance. The Tax payer being in the minority has no say in this ANC/SACP/COSATU created mess

No. Most SA voters don’t pay tax. Not really.

Just liquidate and be done with it! – non apathetic taxpayer

Wow! Great armchair activism there. So brave to say that in an echo chamber. I am sure he is reading this. Totally not apathetic.

Anything adding massive value to the conversation, as per usual.

Did you have a point to make there? Or are you just feeling a little bit embarrassed by being called out?

When is Dudu Myeni going to account for her actions?

Never. Neither will Jacob ever go to jail. By the time he does go to court he will argue that he is too old for jail. He can always play golf with Shabir.

Good question! David Lewis of Corruption Watch said on TV it’s high time the NPA under Batoye PRIORITISE cases for prosecution….

I was wondering that myself. Clearly Adriaan is far less powerless that the rest of us.

Oh my dear, Chris. You woke up especially at 1 AM, tormented by loneliness and insomnia to give us this rather shortsighted, I better say wrong opinion. Or you wanted just to be the first keyboard warrior to release a simple one liner, just like below the article on BEE. And score a lot of upvotes.
All taxpayers have the right to vote, talk and influence to other above 18s to influence them to make them aware that this ANC Gov is clueless about running SOEs, and actually the whole economy, so they better vote something else. And taxpayers are not only the ones that are forced to pay PAYE, income tax or corporate taxes. Every person pays at least some money to Gov in the way of 15% VAT, very few more or less essential food items are tax exempt.
I am of the opinion that in many ways, SA got itself in this situation, because we deserved it. One cannot just blame it on the “Others “.
When pointing a finger to somebody. three fingers are pointing back to you.
“In a democracy people get the government and the leaders they deserve”- Joseph de Maistre (1753-1821)
Other favourite quotes :

The only thing necessary for the triumph of evil is for good men to do nothing. Edmund Burke

“Ask not what your country can do for you; ask what you can do for your country.”― John F. Kennedy
Have you ever engaged in a meaningful and constructive discussion with typical ANC or EFF voters on the Big issues of this country ?
I did, actually quite often.
Among them the uncontrolled Gov expenditure, the ignorance on how to deal with the economy, not one just focused on too socialist redistribution and “Transformation” ? How to create Real Jobs, not fake jobs, like people doing very little useful in EPWP temporary posts. The Expended Public Works Project.
Economic competitiveness, too high wages in the public sector, massive corruption.
Making comments here on MW for relatively well informed persons is in many ways like preaching to the converted.
Maybe more relieving your anger, and polishing your ego.
Possibly the experience of the author as a ward councillor taught him the need of talking to and convincing others of a certain point of view, or in the process learning that you were maybe not so correct after all, after listening.
SA is still, or maybe even more than a few years ago, a very divided, and because of that a very dysfunctional society. resulting in a rather dysfunctional democracy.

As seen on Gumtree : Boeings for sale. Slight oil leak. Staff fresh and rested after long strike, for free to good home. Includes newly added air routes to Damascus and Hondeklipbaai. Contact Pravin.

Except they are more of an airbus airline. Soz

Please change 1st line to: Take over leases on Boeings. Then add: A few dilapidated assets and mountains of debt for sale.

What also changes the status quo is the fact that Government has clearly indicated that there will be no more bail outs. Maybe loans.

Well it is more than obvious that SAA can never repay any new loans.

Not sure if creditors would like it liquidated. They will get absolutely nothing. Not even one cent to a Rand. Also keep in mind most of the creditors could be corrupt and would take instruction from current board members and even the shareholder as to how to vote should it come to that.

“apathetic stance of taxpayers”. Mr Kruger, an article on how to be not
apathetic taxpayers will be appreciated.

Making ‘brave’ comments in an echo chamber was the extent of the arm chair activism. Almost apathy.

Anything ….stop posting kiddie comments

Going to report you for trolling. Not for disagreeing, by all means disagree but dont be an idiot and go about insulting everybody

Don’t blame the tax payer. Legal systems cannot even bring Dudu or Zuma to book. You also suffer from socialist thinking to spread the blame. I did do something, stopped flying SAA, that is my middle finger to corruption.

Wow, so brave.

Thank you!

Personally, I’m looking forward to SAA’s annihilation.


Mr. Kruger, the money granted to SAA in the past came from the tax payers. It is the government who decides to rape the taxpayers wallets when they give money too SAA. You seem to blame the tax payer who does not take nor would take a decision to hand more loot to the gangsters running that SOE. Having a look at your credentials, you are suitably qualified to know where SAA’s failings come from. Corruption, dipping into the till, employing cadre at exorbitant costs, employing far too many people with little or no work just to give ‘pals’ work and a salary, overpaying suppliers where one or more middlemen get a kickback, unqualified CEO’s, appointing unskilled board members, these are just a few of the issues the courts and the liquidators will highlight. So Mr. Kruger, as a courtesy to what respect we the readers may still have for you, please retract your insinuation about the tax payers not coming to the looting party.

Leave me out of this debate Mr. Kruger.

I pay my taxes to these thieves and they do what they like with it.

This SAA debate needs closure, close it, arrest Dudu and her gang of corrupt garbage, sling them in jail and move on.

The other airlines all became a lot more profitable this last week. The unit cost per passenger dropped, no extra people were employed to cope with the extra passengers, so lets keep it that way.

What debate? The problem is that you think that moaning around a braai or doing the keyboard warrior thing counts as something rather than apathy.

Unfortunately voting is out since the social grant recipients outnumber legitimate taxpayers and armed insurrection is generally frowned upon. Give us a hint as to your solution to the debacle, assuming you actually have one.

Get out the wrong side of the bed today….


Since we have to pay taxes by law, the least one can do is vote with your wallet, and not fly SAA. That’s what I’ve been doing for many years and it seems I am not alone, Worlds_Smallest_Violin also doesn’t fly with them.

What is your goal here? You haven’t brought arguments or reasonable suggestions to the table, so what is it you think you are achieving here?

It is ironic how you call people that comment on the article, keyboard warriors and yet you are the one being the keyboard warrior commenting on their general comments.

Yip – called out slacktivists on the internet is my thing! Where else would you like me to do it? Should I come to your arm chair personally?

What an inane response. You are clearly just upset that you won’t be considered heros for having a ‘debate’ in an echo chamber.

I don’t care about SAA. It does not affect me in anyway whatsoever. I am not in SA nor do I pay your taxes.


Well since you are neither resident nor taxpayer in SA maybe you should just STFU. You don’t have a dog in this fight so you are not entitled to an opinion.

SAA is going bust, going for business rescue….don’t think so.

That would require a brave decision from the ANC and that’s asking way too much of them. So instead, expect the illusion of no more money for SAA – now we’re going to give them loans they can never repay instead.

Oh, and treasury needs a daily copy of their bank statement.

The only guys who understand all this nonsense are the unions who know that an 8% increase is coming at the end of the day.

And the taxpayers who understand that all the new loans and “onerous” conditions attached are just more neverending bailouts.

In this lovely country of ours, we have over centuries, developed the ability to talk a lot, and say nothing, which I personally believe we have inherited from our colonial 2019 RWC 2nd fiddle-players.

Post 1994, we combined lots of talk, and saying nothing, with lots of talk and doing nothing, and this runs like a golden threat through legislation, politics, policy statements, Whatsapps from our local councillor when the power is out again, etc.

Unfortunately, the fiscus and us as salary-earning taxpayers, can no longer afford the talking that paves the road to hell with good intentions.

So in this instance as in many other, the catalyst for action, hopefully, is this business rescue process.

A perfect example of a going concern capitulating to racist BEE policies……
Isn’t the first, won’t be the last.
If you want well run profitable concerns you have to employ the right people based on experience and knowledge NOT on the colour of their skin
Let this be a lesson

Indeed, this is a celebration for the achievements in the name of Transformation.

“apathetic stance of taxpayers” – this makes my blood boils – my question is: why the hell does saa has well overpaid directors in the first place????, excellent mangement and control should be their first priority – they may be called directors or managers, but due to goverment interference in almost every sphere (of which the anc knows less than nothing) but just for political points purposes, saa is now reaping the very direct financial result of an soe with overstaffed overpaid cadre employed people who simply is and was not the best canidate for the”job”. Please note: the taxpayer pay / entrust tax to this useless government to be managed by them and used to its full capacity/advantage which simply does not happen – the taxpayer can not do his own work, pay tax and do the work at of well paid 100% incompetent government cadre employees.

What does the feet-stamping employees thinking they are actually achieving/doing????? – they can not even work out that the salary income they have lost due to their strike over the minute % difference on what was offered and what is demanded will not be made up in the next year, if at all – its high time that the demanding unions learn the hard way, you strike at a critical point of the company financial crisis – now there is no company anymore

SAA has not submitted financials for past 2 years.
Had I completed my tax submission for 2 years ; I will be hauled over the coals.

Two sets of rules.

What also changes the status quo is the fact that Government has clearly indicated that there will be no more bail outs. Maybe loans.
Well it is more than obvious that SAA can never repay any new loans.

Not sure if creditors would like it liquidated. They will get absolutely nothing. Not even one cent to a Rand. Also keep in mind most of the creditors could be corrupt and would take instruction from current board members and even the shareholder as to how to vote should it come to that.

Again-another mess by Jamnadas Pravin. SAA should have been sorted out in 2014-when he was the Zuma finance minister. Now we are where we are so what is a solution?

1. How serious is the cross guarantee i e if SAA goes bust does Eskoms guaranteed debt become due? If so SAA HAS to be bailed out! I think that the unions know this.

2. Is there a turnaround plan? I do not think so and business rescue is too little too late.

3. So-like in most cases of this nature the creditors will need to be negotiated with so that the cross guarantees fall away-in return they can get more than what they would in a normal liquidation …but from whom-probably the PIC I am afraid!!

4. The business can then be bought out of the liquidated shell-the creditors will have been soundly shafted and a NEW SAA formed -just like Swiss air. Staff will have been fired and half can be reemployed in the new SAA-not so bad.

5. New SAA needs new management, new Board , new Strategy and a big brother ( emirates, virgin) and this mess can be sorted out

6. Jamnadas must retire and go read the books of Marx, Marcus Wolf, Mao etc and cry that 1994 didnt happen in 1954-he is frankly a hopeless case!!

Whilst I detest trade unions Nuumsa have some good points as far as corruption, wasteful expenditure in SAA. Savings from this alone could be huge. Then again who was responsible? ANC of course. No Govt department, SOE’s have any proper financial controls, even ESKOM had corrupt CFO’s.

As far as i am aware, trading recklessly while insolvent is a criminal offence under the companies act. When is this going to be investigated and the appropriate action taken against those responsible?

If this was a private company it would be forFed to close as it’s illegal to trade as an insolvent entity !
Government has truly lost the sense of what a Billion Rand is …… not sure if it ever had it though.

There’s absolutely no practical reason to have a SAA, I say, “let it go”.

Here is an “apathetic stance” for you Mr Kruger
I am sick and tired of the useless ANC government wasting/stealing my hard earned tax money.
I am sick of the useless and corrupt ANC plundering the SOEs to death only because they know next year there will be another bailout…

Well now… FINALLY the ANC is in a real corner. If they bail out SAA this time, Moody’s will surely downgrade SA in Feb and S&P will move SA further into junk.

I hope SAA fail and gets liquidated and then privatised.
Let this be a lesson for the arrogant ANC.
Let the SOE’s be run by industry experts, not ANC cadres.

Excuse me? Did you just blame the taxpayers for this fiasco? I suggest that when you write a serious piece on a SOE that has been ruined by a totally corrupt government you lay off whatever it is you smoke to get you through the day.

Any truth to the rumour that a previous unknown airline operating out of Dubai called GuptaAir will seriously consider coming to SAA’s rescue?
Apparently someone called Dudu made an urgent call to S.A.’s ex-president, A. Gupta, for assistance.

The beginning of the end for the SOE corruption ATM. Bring it on I say. Bring. It. On.

If it weren’t so galling, the Monty Python “Dead Parrot” skit would be appropriate: ”

Mr. Praline: ‘E’s not pinin’! ‘E’s passed on! This parrot is no more! He has ceased to be! ‘E’s expired and gone to meet ‘is maker! ‘E’s a stiff! Bereft of life, ‘e rests in peace! If you hadn’t nailed ‘im to the perch ‘e’d be pushing up the daisies! ‘Is metabolic processes are now ‘istory! ‘E’s off the twig! ‘E’s kicked the bucket, ‘e’s shuffled off ‘is mortal coil, run down the curtain and joined the bleedin’ choir invisible!! THIS IS AN EX-PARROT!!”

Substitute SAA for “parrot” …

”apathetic stance of taxpayers should be blamed as well” – Adriaan, are you suggesting between the lines that there should be a tax revolt by taxpayers ? If so, please elaborate.

No – you guys are doing great by just having a ‘debate’ in your echo chambers and around the braai. No need to actually do something to help yourselves.

For someone who claims to call out the slacktivists you are pretty short on suggestions. With nothing of value to contribute here maybe you should go back to your parent’s basement.

A lot of hot air from a deserter with huge chips on each shoulder. Make it beter wherever you are. Wherever that is, I’m sure the IQ of both that place and SA increased.

Indeed! Business Rescue doesn’t work when it’s activated too late; insolvent entities CAN’T be rescued!
So this application will hopefully once and for all show clearly SAA is NOT a going concern and therefore trading illegally.
Maybe a small past of it like Mango can survive – but NOT funded by taxpayers!

Definition of an “ANC loan”: i.e. a large amount of which the government gives to SOEs on request and which can be rolled over many times without payback.

Captain Obvious strikes again…

How can a company not file finacials for three years and there is no sanction applied to the directors?

I think you should sell bonds in SAA to the public at about R250 I’m sure they will raise enough money if they make the right choice.. Let the man in the streets make money if it’s a success…

End of comments.



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