It is baffling and more than a little worrying that our former finance minister and current public enterprises minister, Pravin Gordhan has apparently so little understanding of what constitutes a viable and successful business.
The dynamics are simple: your assets must exceed your liabilities and your income must exceed your expenses. If the former is not true you are bankrupt already, if not but the latter is true you are on your way to bankruptcy.
To save a bankrupt company you must have an injection of funds, either as a loan by banks or an injection by shareholders. Then to restructure to have a sustainable business you have to ensure that your expenses do not exceed your liabilities (including the servicing of debt). A company has more control of its expenses than its income as the latter is largely determined by market forces. So you have to cut your overheads, which in almost all cases entails some downsizing, which inevitably includes retrenching staff.
Yet Gordhan’s brief to the SAA business rescue practitioners is: come up with a rescue plan because a state airline is a matter of national interest. But the shareholder, in this case the government, will provide no further funding. And, by the way, we will not entertain any sale of assets or retrenchment of staff either. How utterly ridiculous.
The practitioners should also be censured for not having the balls to say that in the absence of any willingness by the banks to provide further funding SAA simply cannot be rescued. Especially not in a post Covid-19 world with the expected reduction in airline travel.
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