Pretoria – Minister of Public Enterprise Pravin Gordhan and his senior officials have been accused of sabotaging the SA Express business rescue practitioners, making it impossible to turn things around and prevent the liquidation that cost scores of employees their jobs.
This is according to the airline’s employees and the National Union of Metalworkers of South Africa (Numsa), which came across a 2020 report detailing how business rescue practitioners Phahlani Mkhombo and Daniel Terblanche had no joy trying to work with the department to save the airline.
SA Express has been under provisional liquidation since April 2020. An application for liquidation at the Johannesburg High Court by the business rescue practitioners eventually led to the conclusion that that there were no reasonable prospects for the business to be rescued without the support they needed.
On being appointed as interim business rescue practitioners, Mkhombo and Terblanche immediately tried to meet Gordhan in February last year to solicit key decisions from the minister and a commitment from the government to save the state-owned entity, according to the BRP’s report seen by the Pretoria News. However, the minister sent delegates to the introductory meeting.
The report shows that the BRP’s biggest struggle was trying to receive post-commencement funding, needed in a business rescue process to successfully restructure a company. These funds can be used to pay creditors, insurers and salaries.
In the report, Mkhombo and Terblanche said their plea for government intervention from the department fell on deaf ears. Even letters sent to the department when things became tougher were ignored.
In light of this information, Numsa has expressed great disappointment and noted that Mkhombo and Terblanche could have had a fair chance to turn things around had they received the support they needed.
The union is also disappointed that it did not even receive the intervention of the department, even when one of the country’s commercial banks was willing to loan them post-commencement funding. This was on condition that the department committed to make the loan government-guaranteed, which could have helped avoid the grounding of aircraft.
Mkhombo said that had the department given them the support they needed, the BRPs would have turned things around.
However, he said that was now water under the bridge, because they had made the application for liquidation last year, which had not been opposed by the department. The airline was subsequently placed under provisional liquidation, which was being handled by liquidators, which were facilitating the sale of the company.
“Our pleas fell on deaf ears and the department did not bother to respond to our requests. We were informed that the department had engaged with the applicant creditor to persuade them to withdraw the business rescue application and remove us,” said Mkhombo and Terblanche in the report.
They added that they understood that the department was of the view that they could not be trusted after being nominated by the applicant. “They thought we were not independent.”
Gordhan’s spokesperson, Richard Mantu, did not respond to written questions sent on Wednesday regarding the contents of the SA Express BRP’s report. These included the reasons for the department’s failure to co-operate with Mkhombo and Terblanche; the basis for the department’s belief that the two men were not independent; and whether the minister believed he had done enough to save the airline.
Mkhonto and Terblanche added that the department attempted to lobby creditors to vote against the ratification of their appointment at the first meeting of creditors, but was not successful. “All the independent creditors voted in favour of the ratification of our appointment, but despite this, the department did nothing to facilitate our role in resuscitating the airline.”
Numsa spokesperson Phakamile Hlubi-Majola said: “We are not surprised that the business rescue practitioners seem to be basically saying that the department sabotaged SA Express. It is, in our view, certain that the department has absolutely no interest in rescuing SA Express.
“We say this because in the early stages, before the airline was placed under business rescue, there was a frivolous application made by one of the creditors to try and get SA Express liquidated in December 2019, yet the department did not even bother to try and defend SA Express in court, just to show you that they were not committed.
“They went to court to defend SAA against an ailing frivolous application to have it liquidated, but they did not bother defending SA Express from being liquidated. Luckily, that liquidation application failed and, subsequent to that, SA Express was placed under business rescue.”
Hlubi-Majola said, in fact, the workers and union had questions about SA Express and some of the people who had been chosen to purchase the airline.
“The latest information we have is that a consortium of five or six employees were chosen to purchase the airline. It is not all employees, it is only six employees. What we find worrying is that we are not sure if these people have money to purchase this airline. They certainly do not have a history of running an airline; these are employees.
“We are not saying employees should not be involved. In fact, that for us would have been the ideal situation, but these employees must have money in order to purchase the airline. What we understand is that this consortium does not have the money to pay the balance required to buy the airline.”
She reiterated that Numsa and the South African Cabin Crew Association had found an investor with the money to purchase the airline and the experience of running an airline, and was open to the possibility of employing all the staff when the airline takes off.
“The department has a duty to explain to the public exactly what criteria was used to find the people who are going to take over from SA Express and purchase the airline. They must explain whether these people, from the beginning, had the means to pay for the airline and also hire staff.”
Hlubi-Majola said the department could not be trusted because the process to choose this consortium was shrouded in darkness, and the taxpayers whose money was used in all these processes deserved to know the truth.
“Given the history that we have with the department, we do not trust that they acted in the interest of South Africans. We do not trust that they acted in the interest of SA Express. We are very concerned about the future of SA Express at this time,” she added.
According to the SA Express BRPs’ report, this is what has transpired since their appointment.
* The business rescue practitioners explored various Post-Commitment Funding options, including engagements with various lenders in order to keep the business operations ongoing and avoid any disruptions.
* They engaged with some of South Africa’s commercial banks and other Development Finance institutions in an effort to secure Post-Commitment Funding. One of South Africa’s commercial banks indicated that it might consider advancing Post-Commitment Funding, but only on receipt of a government guarantee.
* They addressed a letter to the minister on February 13, 2020, requesting the government’s urgent intervention by providing the required government guarantee of R350 million to enable the company to perform duties.
* The practitioners engaged with the lessors and owners of the aircraft as early as February 7. The outstanding amount in respect of the leased aircraft as at commencement of business rescue proceedings was R70m, and had not been paid for over 3 months.
* Initially, the lessors had intended to ground their aircraft, firstly at the commencement of business rescue proceedings; and secondly, on February 20, 2020. However, through negotiations they were able to persuade the lessors on more than three occasions not to ground their aircraft and, consequently, secured extensions until February 28, 2020.
* This was done in order to give the government – either through the department or the National Treasury, an opportunity to demonstrate its commitment to the entire business rescue process and to provide assurances and guarantees to the lessors of the aircraft that their Post-Commitment Funding claims would be paid as part of the business rescue process.
* The lessors were mindful of the fact that the funding application and any guarantees from government would take time to process, but all the lessors needed was a commitment and assurance that their funding claims would be paid.
* However, they stated in the report that the department failed or refused to give satisfactory commitment and assurances to the lessors, and this ultimately led to the grounding of three aircraft on February 28, 2020. Another aircraft owned by a different lessor was grounded on March 5, on the same basis.
* They also highlighted that by March 4 last year, the company only had R 1 447 429. This is the reason why the business rescue practitioners again forwarded a letter to the department to inform them of the dire financial position of the company, and that their urgent intervention was required.
* Without the department’s intervention the business rescue practitioners would not be able to continue with the 25 trading activities and the risk was that all the aircraft would be grounded by Friday, March 6, 2020, due to the non-payment of the above critical creditors. The non-payment of either of the Airports Company of South Africa, Swissport and Marsh Insurance would have resulted in the grounding of the aircraft.
* On March 5, 2020, the insurance premium was not paid again, and it was against this background that the business rescue practitioners started to put plans in place to ground all the aircraft until proper insurance was in place.
* They were only informed late on March 6 that the department had made arrangements directly with the insurance brokers and a 7-day extension was granted.
* Business rescue practitioners said the department usually ignored them, but when it would respond they were met with hostility, as the government doubted their independence.