Business

SAA keeps financials under wraps

2020-02-23 15:27

SAA dares not publish its financial statements of the past two years because it would almost certainly be liquidated if it did, Public Enterprises Minister Pravin Gordhan has told Parliament.

This week, at a joint sitting of the standing committee on public accounts (Scopa) and the portfolio committee on public enterprises, the department was chastised for the airline’s outstanding financial statements.

The failure to publish the statements means SAA is in contravention of the Public Finance Management Act (PFMA), which requires a state institution to make its annual report available within a month of its figures being audited.

However, Advocate Melanchton Makobe, the acting deputy director-general of public works, said there was a clause in the legislation that allowed a state-owned enterprise (SOE) to withhold its financial results if the minister can give good reasons for it.

ANC secretary-general Ace Magashule recently said the alliance partners had the final say over the airline, and that government would not hesitate to intervene if necessary.

He said Gordhan had indeed provided valid reasons and that SAA would be immediately liquidated if it dared to publish its figures because it has not been operated as a going concern for some time.

Since the 1990s, the national carrier has received cash injections from government totalling more than R57 billion. It has not been profitable since 2011, and has made a loss of more than R10 billion over the past two years.

MPs appeared to be dissatisfied with the department’s explanation, which led to Gordhan spelling out exactly what the consequences of liquidation would entail.

“There is the reality of a failed SOE and liquidation,” he said. “That means everything stops working tomorrow. Aeroplanes don’t take off and personnel are told to go home.

“Creditors will be lining up and trying to get their hands on the few assets that are left over.”

Apart from the issue of SAA’s long overdue financials, the airline’s delegation – which included its two business rescue practitioners, Les Matuson and Siviwe Dongwana – were also questioned about the business rescue process and SAA’s finances.

MPs who were hoping get answers directly from Matuson and Dongwana were disappointed. Gordhan made it clear from the get-go that the two business rescue practitioners could not answer any questions while the business rescue plan was still being finalised.

It is expected that the plan will be presented on March 6.

Gordhan admitted that government had found itself in unknown territory since SAA was officially placed in business rescue on December 6 2019.

“As far as I know, SAA is the first state-owned institution that has been subjected to business rescue,” he said.

The thorny issue is that a company that is placed in business rescue is subject to the Companies Act, which gives business rescue practitioners exceptional powers. The practitioners are officers of the court and are only accountable to the court.

However, because SAA is a state institution, the PFMA is also applicable to the company.

In addition, the PFMA takes precedence, which means the responsible minister (Gordhan) is still the executive authority.

SAAs financil records are currently under wraps Picture: Fedor Selivanov / Shutterstock.com

“Even if a company is in business rescue, the PFMA takes precedence and the shareholder is entitled to change the business plan that is presented,” said Makobe.

Makobe’s comments come amid tough questions about the extent to which government can interfere in the business rescue process.

ANC secretary-general Ace Magashule recently said the alliance partners had the final say over the airline, and that government would not hesitate to intervene if necessary.

President Cyril Ramaphosa also recently criticised a decision by the business rescue practitioners to scrap certain routes.

This week, Jacques Jonker of the Free Market Foundation said in an opinion piece that even if government was not required to keep quiet during the business rescue process, this did not mean that the business rescue practitioners reported to government.

Meanwhile, an application for leave to appeal, lodged by the National Metalworkers’ Union of SA and the SA Cabin Crew Association to prevent layoffs, has failed. The labour court ruled that the application had no prospects of success.

This comes after the unions’ previous legal bid to obtain an urgent interdict against job cuts, lodged on February 14, failed.


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March 29 2020