EDITORIAL: SAA is in an intractable bind
The restructuring was started too late and there is not enough time to make changes before the money runs out
The business rescue of SAA is turning into a slow plane crash. Having done next to nothing to cut costs for the first two months of the rescue process, when the business rescue practitioners finally took strong steps last week to cancel domestic flights they were reprimanded by no less than the president himself.
Can it really be that President Cyril Ramaphosa did not realise that when the state handed over the company to the business rescue practitioners it relinquished control of its affairs? Or that the government really expected that no drastic changes would have to be made? Since there is abundant evidence of political influence in the rescue process before this intervention it could be, at best, that the legal constraints of business rescue were not well understood in the government. At worst, though, it was an attempt at intimidation of the business rescue practitioners.
The government should be reminded that it is only the fact that new and independent people with expertise are placed in authority over a company in business rescue that makes it an acceptable option for creditors who could otherwise apply for liquidation. This relinquishing of control is part of the deal even if it is, as in this case, solely government or government-guaranteed money that is being used to fund the business rescue process.
Worse than misunderstanding what it is and isn’t possible in a business rescue situation, perhaps wilfully, the government is being deliberately vague on what it will cost to “save” SAA and where it will get the money. To get it, it also seems prepared to drag down well-respected development finance institutions in the process.
After the R5.5bn that has been committed to fund the first stages of the rescue, a lot more money will be needed to finance the new SAA before it can get on its feet.
The Development Bank of Southern Africa (DBSA), which says it stepped in last time on sound economic developmental grounds, has tied up 30% of its annual disbursements for half the year in providing the R3.5bn loan to SAA. The bank says that the loan will not harm any other project, that it will get the money back by July 31 and that it will get a commercial return.
But in 2012 the DBSA lent Eskom R15bn with a 12-month repayment date. That loan has been rolled over every year since and there is every possibility that the same request will be made in this case.
There is talk that another development finance institution — the Industrial Development Corporation — is being lined up to provide the next tranche of funding, which will suck up more scarce resources that are intended to finance viable companies where entrepreneurs cannot easily raise all the money they need in the commercial sector. It all smacks of the worst kind of short-term thinking.
Assuming that the government can persuade enough people to throw enough money at SAA, there is still a troubling timing issue for the business rescue practitioners. The existing funding will run out at the very latest by the end of March, quite possibly much earlier. As part of the rescue process, informal discussions have begun on retrenchments. These must be done under section 189 of the Labour Relations Act, a process which requires a minimum of 60 days of talks and consultations. By agreement with labour, management can vary this time frame and expedite the process.
At this point it is not looking as if all of the seven unions at SAA will agree to the variation. The National Union of Metalworkers of SA (Numsa) and the SA Cabin Crew Association (Sacca) are incensed that retrenchments are being entertained without the final plan on the table. Without their co-operation, fixed staff costs will not be cut even though operating capital is draining away and revenue is shrinking as the volume of flights declines sharply.
It is more than obvious that the restructuring of SAA was started years too late and there is now an impossible amount to do in a very short time, in an atmosphere of uncertainty over where new funding will come from. It does not look as if it is a solvable problem.