The 26th week of 2020 will prove decisive in the South African political sphere. The business rescue practitioners appointed to try and resurrect South African Airways (SAA), after three extensions and extensive (and perhaps unlawful) interference by the Department of Public Enterprises (DPE), published the proposed business rescue plan on 16 June.
The plan, however, is more of a pipe dream than anything else. The political drama about to unfold would be majestic to behold if it were playing out on television. Unfortunately, this is all but fiction.
It has been reported that the bill that taxpayers would possibly have to foot amounts to R26.7 billion, which includes the R16.4 billion already appropriated in February to settle past guaranteed debts. Sadly, however, this number is a gross underestimation.
It is projected that SAA will incur a total of R6.4 billion in losses from fiscal 2021 to fiscal 2023. These losses will have to be paid by taxpayers, as provided for by paragraph 28.3.7 of the proposed rescue plan. The total cost to taxpayers thus amounts to R33.3 billion. Alas, this is only for SAA.
The business rescue plan also includes recapitalisation allowances for SAA Technical, Air Chefs, and Mango, all three of which are subsidiaries of SAA. The costs of the recapitalisation are R1 billion, R0.15 billion, and R0.95 respectively. This adds a total of R2.1 billion to the bill, totalling the final cost estimate to R35.4 billion. That is R8.7 billion more that taxpayers might have to cough up over the next couple of years.
There is, however, a possible hero lurking in the upper echelons of the executive that might just save the day.
Minister of Finance, Tito Mboweni, is wielding a sword that could prove fatal for SAA and lifesaving for taxpayers. One hopes the Minister, who was moulded in an atmosphere of independence as the Governor of the Reserve Bank, opts to use the sword swiftly and decisively, not only against the DPE, but against the entire ideology that idealises the consolidation of state and economy.
On Wednesday, 24 June, Minister Mboweni will be delivering an emergency budget speech that has been necessitated by the coronavirus pandemic and the subsequent excessive lockdown. Adding to the budgetary pressures is the insistence of the DPE that the dead bird that is SAA be strung up and flown like a directionless kite, of course not at their own expense. The vote on the proposed rescue plan for said deceased bird will take place on 25 June, nine days after its publication, which is one day less than the maximum time allowed to pass between publication of a rescue plan and the vote thereon, in terms of the Companies Act.
The way in which the interested stakeholders who are afforded a say will vote, will be heavily influenced by the generosity shown by Minister Mboweni on Wednesday. If no money is made available by Treasury, there will be no point in approving the plan as it would be dead in the water.
But things get even more interesting.
In terms of the Companies Act, a statement of conditions, if there are any, must be included in the business rescue plan that must be satisfied in full if the plan is to come into operation. The rescue plan for SAA sets out six conditions, two of which necessitates the approval of both the Minister of Public Enterprises, Pravin Gordhan, and the Minister of Finance.
Firstly, both ministers Gordhan and Mboweni (to the extent necessary) must approve of the implementation of the aspects of the rescue plan that include transactions that require the approval of SAA’s executive authority in terms of the Public Finance Management Act.
Secondly, both ministers must co-sign a letter confirming government’s support and commitment to providing the R33.1 billion required by SAA.
Therefore, on top of the fact that Minister Mboweni can pre-determine the fate of SAA to a very large extent on Wednesday, he can also stop Minister Gordhan’s resurrection plans dead in their tracks by simply withholding his approval, which is required by 15 July at the latest, if the rescue plan is nevertheless voted in favour of on Thursday.
Minister Mboweni is known for his refusal to hop onto the dilapidated bandwagon in the African National Congress. If his history of political heresy is anything to go by, one is certainly justified in believing that the Minister might just refuse to toe the line when it matters most and save taxpayers billions in wasteful expenditure. South African Airways has been dead for a while now. It is time for it to be entombed and the memory of it discarded into the annals of history. This article was first published on BusinessBrief on 24 June 2020