Will Gordhan adhere to court order over Mango? – Irvin Jim

NUMSA SG condemns Minister for deliberately attempting to sabotage the airline

NUMSA demands to know whether Public Enterprises minister Pravin Gordhan will adhere to the court order over Mango airlines.

20 September 2023

The National Union of Metalworkers of South Africa (NUMSA) condemns Minister Pravin Gordhan for deliberately attempting to sabotage Mango airlines. It seems doubtful from the tone of the recent statement issued by the Department of Public Enterprises, whether the minister has any intention of respecting the court order of the High Court, regarding the sale of Mango airlines as provided for in the approved business rescue plan. The so-called concerns raised by the minister in his statement, which he claims are preventing him from making a decision, are nothing more than desperate and unnecessary delay tactics, because these issues were thoroughly ventilated in court. NUMSA is demanding to know whether Gordhan intends to adhere to the court order, or, whether his goal is to collapse Mango, like he did with SA Express.

NUMSA filed an application to intervene in the court proceedings on the grounds that it is an affected party, as a registered union representing employees of Mango Airlines in terms of section 128(1)(a) of the Companies Act. As a union we have a direct and substantial interest in the outcome of the business rescue processes or proceedings by virtue of the retrenchment agreements that were concluded between NUMSA and the Business Rescue Practitioner (BRP) which govern the preferential re-employment of Mango Airlines’ employees that were retrenched.

NUMSA welcomes the judgement which found that the DPE’s failure to consider the section 54 application in respect of the disposal of Mango, is unlawful and constitutionally invalid. The court has now directed that DPE and Gordhan must take a decision on the transaction and must give a response within 30 days. If the sale goes through, Mango will be wholly owned by a private equity partner, and will no longer be owned by SAA and the DPE will cease to be the shareholder.

Mango Airlines has been grounded since July 2021 to date. On 25 November 2021, the BRP, Mr. Sipho Sono published an amended business rescue plan. On 2 December 2021, the revised business rescue plan was adopted by the creditors of Mango Airlines with the supporting vote of more than 75% including SAA in terms of sections 152(2) and (4) of the Companies Act. In line with the demands of SAA and DPE, the amended business rescue plan envisaged that Mango Airlines will not resume its operations, and will not form part of the SAA group.

Since 2021 when the BR practitioner tabled the business plan to be adopted, SAA and DPE refused to adopt the plan unless Mango got an equity partner. Now the equity partner has been obtained, the minister does not want to make a decision. It is DPE and SAA that insisted that Mango must be sold and they placed a condition that in order to release the R800 million needed to fund business rescue, the plan must be amended, and an equity partner must be found.

Below we deal with the statement issued by minister Gordhan in detail:

NUMSA has noted the statement issued by Gordhan in response to the court judgment which was handed down. In the statement Gordhan arrogantly claims that he will not be “bullied to act in a manner that will compromise the work of government in this regard”. Is the minister trying to say the court is bullying him? What an outrageous claim! The court has directed him to do his job as the final accounting officer - a job which he has consistently failed to do.

The minister also claims that he cannot make the decision without certain documentation being provided, and he is requesting the following:

1.     The detailed business plan to assess the consortiums viability

2.     Comprehensive due diligence

3.     Foreign ownership details to comply with South African laws.

None of what the minister states in the DPE statement is new. His demands for information which the BRP plainly told him is not available are nothing but a poorly disguised attempt at frustrating the sale of Mango.

For example, the BRP rightfully informed DPE and the Minister that it is the function of the Air Services Licencing council to interrogate business plans of airlines before licenses are amended for changes in ownership, and not DPE’s role.

Furthermore, DPE does not need a business plan of Mango to decide whether it should be sold or not. The business plan of Mango has nothing to do with government, because they will not be a shareholder at the end of this process. And for them to demand the business plan is suspicious. Government will no longer be playing any role in Mango, therefore why do they want to review the business plan of a competitor to SAA? After the transaction is finalised, SAA will be a competitor to Mango therefore, it would be very inappropriate for the DPE to be given access to the business plan of a competitor.

On the demand for a ‘due diligence on the buyer, that process has been completed by the buyer. The BRP has invited the minister to specify what further information is needed and the scope of the due diligence, that he is requesting, which the minister failed to do. This behaviour clearly suggests that the minister himself does not know what he is looking for and is using big words like “comprehensive due diligence” to mislead the unsuspecting public. The BRP has provided the minister with sufficient details of the bidder and there is no need to insist on due diligence process on the bidder. All of this was dealt with in court, so it is surprising to see the minister demanding the same information even though he lost the application in court. It seems he is trying to re-try this case in the media and for this he must be strongly condemned.

The demand for “foreign ownership details” is absurd because the DPE has been furnished with the South African ID of the purchaser, and there is no foreign owner involved in this transaction.

It is clear the minister is still obfuscating and delaying and he is refusing to make a decision. It is our view that the DPE has no interest in a viable Mango. And we are not surprised because throughout the business rescue process the DPE has preferred to wind down Mango because this was the process they attempted to impose from the beginning, but it was rejected by the BRP. The BRP, has done everything that has been asked of him, but the minister keeps finding lame excuses to block the process from being finalized. This is why in January this year, the BRP was forced to lodge an application with the High court to compel the minister to do his job, and make a decision on the transaction. It is important to note that the minister opposed an application by NUMSA and other trade unions to be placed in business rescue, only because he preferred to be in charge of the selection of the BRP. Now that the BRP has resisted the attempts of DPE and the Minister to manipulate him, the minister is now doing everything under the sun to frustrate the process.

The court described Gordhan’s behaviour as ‘irrational’ because its failure to act has placed Mango, the BRP, and the preferred bidder, and workers at the airline, in an indefinite limbo. Section 54 of the PFMA makes provision for automatic approval should the executive, in this case, Gordhan, fail to respond within the prescribed timeframe.

NUMSA generally does not support the privatization of state assets and we are on record for opposing the privatization of SAA and all its subsidiaries. However, it is clear that if Mango is not sold, then it will be destroyed because DPE does not want it to be a viable airline. One only has to look at the state of other SOE’s to know the fate that awaits Mango if it continues to be controlled by the DPE. SA Express was liquidated because of Gordhan’s failures, and it seems Denel and Eskom may suffer the same fate because of Gordhan’s disastrous track record. If the minister gets his way then all those workers who are hoping to be re-employed by the airline when it resumes operations, will be permanently unemployed. That is a far worse outcome for the union which is why we support the sale of the airline to a private equity partner. We will always prioritise defending jobs because it seems clear to us that the DPE, as no interest in preserving any jobs in any of the entities it oversees. What has been experienced by workers at SA Express, SAA, Denel, and now Eskom, is massive job shedding, and it is clear that as long as Gordhan is in charge that will always be the outcome. Gordhan has become an expert butcher of jobs in all our SOE’s and the ANC-led government, will not intervene to stop him.

When Mango resumes flights its role will be to challenge the low cost market. Currently, there are no challengers to FlySafair and Airlink in the domestic low cost market, which is why, some of its tickets are grossly inflated, because these airlines have a total monopoly on the domestic airline market at the moment. The absence of Kulula and Comair in the domestic space has created a massive opportunity for them and Mango should be given an opportunity to participate in that space. NUMSA is demanding that minister Gordhan must just do his job and approve the application for the disposal of Mango to an equity partner, so that we can save the airline and save jobs.

Issued by Irvin Jim, NUMSA General Secretary, 20 September 2023