NEWS & ANALYSIS

Provisional liquidation may be imminent for SAA – Ghaleb Cachalia

DA MP say there is a spoke in Gordhan’s plans to bail out the carrier yet again – there’s no money

Provisional liquidation may be imminent for SAA

29 June 2020

Six months after South African Airways (SAA) was placed under business rescue the process has not been completed and if the plan is rejected as appears imminent – SAA will be placed in provisional liquidation.

The plan, supported by the Department of Public Enterprises (DPE) requires National Treasury to confirm that it will provide funding for the new SAA. However, the spoke in the wheel of DPE and the Minister’s plans are the absence of any money set aside in Finance Minister, Tito Mboweni’s supplementary budget.

Add to this a breakdown of Minister Parvin Gordhan’s much touted Leadership Compact, involving labour and the DPE, and the road to liquidation, delayed in the vain hope that a new airline would emerge – with additional support from the fiscus after decades of bailouts –  now appears to be firmly on the cards.

The Democratic Alliance’s (DA) call for the liquidation of the bankrupt entity which predates the many additional millions spent on Business Rescue Practitioners (BRPs), consultants and subsequent bailouts appears now to be the only responsibly practicable way forward.

Years of delay and throwing good money after bad could well have been avoided if the DA’s advice was heeded – still, better late than never.

Hitherto profitable private sector players in the local aviation industry that have been severely impacted by Covid-19 would be better candidates for financial support, allowing them to fill the gap, absorb and provide skills and jobs as the sector cautiously embraces a return to some normality.

Of course, this would remove the dead hand of state control and ownership of an airline, which accounts for Minister Gordhan and the DPE’s reluctance to let go as they oppose a diversion of support to players that have more than a fighting chance to deliver sustainability and progressively expanding services as the market reopens.

The Minister has instead staked his credibility on an irrational commitment to flight a new airline out of the ashes of SAA, tarnishing his previous record at the South African Revenue Service (SARS) and his sensible opposition to attempts to embark on a costly nuclear power programme.

In doing so he has become the weak link in Treasury’s programme of reform as as two major ratings agencies warn that South Africa could be on track for further downgrades if it does not deliver on its promises to rein in debt.

It is clear that South Africa Inc is living on borrowed time and that tough decisions need to be made. The liquidation of SAA is but one necessary step. The DA will continue to make the case for pragmatic prudence in the face of fanciful forays that further falter any steps towards sustainability.

Issued by GhalebCachalia,DA Shadow Minister of Public Enterprises, 29 June 2020