DA believes it is imperative that SAA be placed into business rescue
19 July 2016
The DA believes that the Minister of Finance take the next logical step and place SAA into Business rescue pursuant to section 131(1) of the Companies Act of 2008 by applying to a high court for an order to place SAA under supervision and commence Business Rescue proceedings as the shareholder representative, an affected party.
This is to further prevent SAA Board Chairperson, Dudu Myeni, and her dysfunctional board from driving the airline deeper into the ground and threatening our economy.
SAA, at the hands of Ms Myeni, has been plagued with financial problems with assessed losses of R18 billion to date and little sign of a turnaround in sight.
On the 14th of July 2016 National Treasury issued a media statement to the effect that the 2015 annual financial statements of SAA could not be issued on a going concern basis until the guarantee requested by SAA from the National Treasury was put in place. There is no doubt that SAA is not a “going concern” which clearly indicates that, as contained in the 2014 annual report, SAA has continued to trade on an insolvent basis. Furthermore the Financial Statements should be tabled forthwith, irrespective of whether they can be tabled under a going concern or not.
The Directors Report for 2014 emphasised that SAA was trading at a loss. That the government guarantee had been increased by R 6.5 billion and that this guarantee had been used to raise cash of R3.2 billion to fund operating losses, makes it clear that without further cash injections SAA will not be able to pay its debts as they become due in the ordinary course of business.
When the Act is applied, the continued trading by SAA constitutes reckless trading in terms of section 22(2) and SAA is “financially distressed” in terms of section 128(f)(i) of the same Act. Consequently the SAA board directors are in breach of the following sections of the Act:
- section 76(2)(a)(ii) in that they have knowingly caused harm to the company.
- section 76(3)(b) in that they have not exercised the powers and performed the functions of director in the best interests of the company.
- section 129(1) in that there have been no proceedings for liquidation initiated and the directors have not resolved that the Company voluntarily begin business rescue proceedings and consequently also in breach of section 129(7) as the board has not delivered a written notice to each affected person setting out the criteria as per section 128(1)(f) that are applicable to SAA and the board’s reasons for not resolving as contemplated in that section.
Section 77(3) of the Act will apply to the directors of SAA and stipulates that a director of a company is liable for any loss, damages or costs sustained by the company as a direct or indirect consequence of the director having acquiesced to carrying on the company’s business despite knowing that it was being conducted in a manner prohibited by section 22(1).
The Minister of Finance, Pravin Gordhan, has not been able to implement the turnaround plan that he announced in February 2016. This plan included the restructuring of the SAA board, the possible part privatisation of SAA and the amalgamation of SAA with SA Express. Consequently the Minister has resisted the attempts by SAA to obtain further funding guarantees from the State. This stalemate between Minister Gordhan and Ms Myeni is rapidly driving SAA to total collapse and simply cannot be allowed to happen to the national carrier.
The DA will continue to fight for a clean and well-functioning SAA that is competitive, privatised, self-reliant and well governed. As our economy slides ever closer to recession and unemployment rises, the time for inaction is over. The DA will vigorously seek to bring SAA back to financial health and root out all causes that have led to its insolvency.
Issued by Alf Lees, DA Deputy Shadow Minister of Finance, 19 July 2016
