LETTER: SAA: Facts and the truth do matter

Aldous Huxley said “facts do not cease to exist because they are ignored”. Carol Paton failed to live up to the basic requirement of presenting credible facts in her recent column on SAA and the announcement of a preferred strategic equity partner (“Pravin Gordhan’s breathtaking manipulation of the Treasury over SAA”, June 21).

The actual facts are:

• The mandate to restructure SAA was provided by both the governing party and the cabinet. It was not developed by an individual minister.
• This process was then pursued in business rescue. The decision to place the airline into business rescue was made by the former SAA board, a decision that was supported by the government.
• The historic debt owed by SAA to lenders was approved by the National Treasury over the years.
• Throughout the last 19 months the department of public enterprises, on the basis of its mandate, has made it clear that the fiscus will not be called upon for further cash or guarantees, in recognition of the state of our national finances.
• Each of the parties that expressed an interest in SAA once it was in business rescue, made one demand and were to meet one condition. The demand: the strategic equity partner must have control of the airline and will not accept any political interference. In addition, the government must take responsibility for all historical liabilities. The department’s condition: the partner must fund all operations from the restart of the airline.

Paton states that public enterprises minister Pravin Gordhan “has pulled off what can be described either as a cynical manipulation of the Treasury or the work of a master political operator, admirably single-minded in getting what he wants”. But what is wrong with executing a mandate, and successfully finding a strategic equity partner for SAA?

She also says “the Treasury was sidelined at every decision point in the process, with circumstances created such that money was so suddenly and urgently needed that the decision was a fait accompli”. It is a plain, unmitigated falsehood to suggest this. Her conclusion is baffling. There is a difference between sidelining and a lack of willingness to accept a particular, ill-considered injunction.

There was nothing “breathtaking” nor was there “cynical manipulation”. All decisions were democratically taken. Paton fails to provide any credible facts to support her contentions. In a time of fake news and misinformation, she seems to rely on gossip. For example, the Treasury was well aware of the process to select a strategic equity partner — after all, it approved the appointment of the transaction adviser that screened, and advised on, the expressions of interest.

The restructuring that preceded the engagement with potential partners was a governmental project, to be executed where appropriate with government funding. Historic debt and the cleanup that needed to be done at SAA were the product of years of state capture, mismanagement and corruption at the airline.

It is also incorrect that “Gordhan approached the Development Bank of Southern Africa and persuaded it” to grant a loan to SAA in December 2019. The Treasury approached this institution and made the necessary arrangements. The R14bn required to fund the business rescue process was always on the radar screen. The immediate requirement was for R10.5bn and the additional R3.5bn was required over three years to pay aircraft lessors and unflown tickets. This is an International Air Transport Association obligation.

Section 54 (2) of the Public Finance Management Act provides that before a public entity concludes certain transactions the accounting authority must promptly and in writing inform the  Treasury of the transaction and submit particulars to its executive authority for approval. Formal notification is then made to the finance minister.

When the above process is concluded the final agreements and details of the transaction are shared with the Treasury. The department has followed the requirements of the law and will continue to do so until the purchase and sale agreement is signed.

An important point to note is that SAA was the first state-owned company (SOC) in business rescue. This is both a public finance and commercial matter; and even the Companies Act does not adequately deal with the special circumstances of an SOC in business rescue.

On post-commencement funding for the business rescue process, the department has explained from the beginning that the funding required is to restructure the airline and not to fund operational shortfalls (bailouts). Support and sourcing funding for a business rescue plan cannot mean “agreed to the bailout” as Paton believes.

Since the 2008/09 financial crisis adjustments to departmental budgets were undertaken almost every year to fund one or other requirement or contingency. In Paton’s universe, 2020’s reprioritisation now represents “a raid on departmental budgets” because fundamentally she probably believes SAA must be liquidated. There are several parties that would, and still want, SAA to be liquidated: some pilots, competitors and some on ideological grounds. The government differs with them.

There are many negative implications of liquidation. One is that a majority of the 4,700 employees would have received a maximum of R28,000 each, irrespective of years of service, subject to available funds in the liquidation process. This is wholly unfair. The alternative offers a decent retrenchment package that enables them to support families while they seek alternatives or are rehired in the new SAA as it gets off the ground. 

Paton has conjured up a feud between public enterprises and the National Treasury to support her unfortunate narrative. For the record, the minister has done more than most to protect the integrity of the Treasury at the height of state capture — even facing fake criminal charges. 

Melanchton Makobe, Acting director-general, department of public enterprises

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