25 September 2019
Are ACSA Board directors liable under the Companies Act 2011?
Airports Company South Africa (ACSA) directors should reread the personal liability sections in S45 in the Companies Act 2008 (the Act) before extending any further largesse to SA Express Airways (SAX). The public needs answers to a number of questions. Is ACSA, a state-owned enterprise (SOE), giving preferential treatment to SAX, a fellow SOE? On what basis did ACSA permit SAX to operate again on 30 August 2019, having been grounded on 28 August for outstanding debt, when that debt remained unpaid? Are the directors of ACSA reckless in providing additional and continuous credit to SAX and are they aware that the Act states that the company to which financial assistance is given, must pass both the solvency and liquidity tests, when SAX by its own admission fails both? The Act also provides that shareholders – and all trade unions – must be informed of the terms on which such financial assistance is provided. If not, then the directors can be held personally responsible for losses suffered by the company. Did the ACSA board do this? Are ACSA directors aware that personal liability means your house, car, savings and more.
ACSA, formed in 1993 as a public company under the Airports Act (No. 44 of 1993). Although it is 75% government owned, it is legally and financially autonomous and operates under commercial law. Its directors are subject to the provisions of the Act, including S45.
On 28 August, ACSA grounded SAX’s entire fleet for non-payment of R71m debt. On 30 August, ACSA lifted this order enabling SAX to commence with operations. Yet the debt was not paid since SAX did not have the means to pay its overdue debt on that date. We know this by SAX’s own admission, when acting CEO Siza Mzimela told the Parliamentary Select committee on 11 September that SAX had confirmation that the R300m bailout for SAX to meet its current operating requirements would be made available. It had been "advised that re-capitalisation of R300m had been approved by national Treasury". This was 12 days after the suspension was lifted. On what basis did ACSA reinstate SAX’s operations and how did the ACSA directors reach this decision? Was pressure applied and if so, by whom?
In the same 11 September presentation, Mzimela said that SAX is "solvent" while admitting the airline did not having working capital to honour their short-term obligations. Does insolvent have a different meaning for bankrupt national airlines?
In the first three months of the current financial year, SAX made a loss of at least R120m. This has been exacerbated by having only 50% of its fleet operating in July and August. SAX, like SAA, makes interesting use of the word "profit" identifying only one route out of 12 as "profitable": Johannesburg - Hoedspruit; but this is before any overheads are applied meaning it still makes a bottom-line loss.
SAX received a bailout of R1.24bn of taxpayer’s money in November 2018 and a government guarantee of R300m for bank loans. As yet, it is unclear whether the latest R300m is a guaranteed bank loan or another public money bailout. Bailing out failed apartheid relics of national airlines may be good business for the banks, which are guaranteed returns at high interest rates. But it is immoral to prop up entities which enable the rich to fly at the expense of the poor by guzzling money diverted from essential service provision. It is time their customers took notice.
SAX carries fewer than 400,000 passengers per year which translates into a publicly funded subsidy of R3,850 per passenger one-way and R7,700 return. (Media release: Did SA Express finally face financial reality or did government blink?)
That SAX has received any financial assistance is shameful. It is not a going concern; cannot obtain an unqualified audit report; has not produced any audited financial statements since FY2015/16; is embroiled in Zondo inquiry corruption; has covered up manipulation of FY2009/10 accounts to enable huge management bonuses (under Mzimela); has publicly stated it plans to undercut private airline competitors on the back of taxpayer funds – yet CEO Mzimela is on record saying SAX will make a profit by April 2019.
The FMF is taking legal steps to ensure SAX complies with our public interest PAIA (Promotion of Access to Information Act) request to make critical financial information available.