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Business Leadership South Africa CEO blasts government over SAA


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Business Leadership South Africa CEO blasts government over SAA

20th April 2020

By: Rebecca Campbell
Creamer Media Senior Deputy Editor


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In her weekly newsletter, released on April 20, business group Business Leadership South Africa (BLSA) CEO Busi Mavuso criticised the South African government for its handling of the financial crisis at State-owned national flag carrier, South African Airways (SAA). The airline is currently under business rescue.

“The confusion over SAA continues,” she wrote. “No sooner had public enterprises minister Pravin Gordhan written to the state airline’s business rescue practitioners [BRPs] last week to deny them R10-bn of requested funding, leaving no option but liquidation, than his spokesman put out a statement that ‘no agreement’ had been concluded regarding full-scale retrenchments. This is how business rescue works. When all other options are exhausted, liquidation is all that’s left, starting with retrenchments.”


In his letter, Gordhan informed the BRPs that “Government will not support the extension of the foreign currency borrowing limit to permit foreign financing of the business rescue plan, nor for a care and maintenance budget, as you have proposed. … Further note Government is unable to provide additional funding to sustain the business rescue process beyond the funding that has already been provided to the airline in the form of post commencement finance …. [N]either will lending guarantees be provided in respect of the Business rescue process. The advent of Covid19 pandemic has further stretched national resources …. [A]s we have discussed, the BRPs must consider their options within their available resources.”

But shortly afterwards, the Department of Public Enterprises (DPE) put out a media statement that seemed to undermine the Minister’s letter. As Mavuso pointed out in her newsletter, the DPE statement stated flatly that no agreements had been reached on full-scale retrenchments at SAA. “The airline is under the stewardship of Business Rescue Practitioners who have in the past four months been engaged in attempts to rescue and restructure the airline,” added the DPE in its statement. “Part of this process is to consult with creditors, unions and the shareholder as the process unfolds. As a result, there are discussions with the unions on alternatives to the current SAA business model, the success of the business rescue process, and the best possible outcome for the airline’s employees.”


Mavuso described SAA as symbolising the government’s mismanagement of the economy. SAA’s condition was now “terminal” with the Covid-19 pandemic being the final straw. “The fact that government is continuing to resist this inevitability further harms its credibility,” she affirmed. “This is particularly so at a time of economic crisis. … We should do everything possible to protect viable and competitive businesses through the crisis, not waste scarce resources on a business that has absorbed tens of billions over the past decade that could have been spent far more wisely.”

She criticised the government for still not having made up its mind about the future of the airline, which she described as a “malady … – a refusal to make hard decisions. … Past shibboleths must be laid to rest. … State-owned enterprises [SOEs] are one of those shibboleths. SAA will not survive the crisis, but many others among the 700 SOEs are also cash-strapped and unsustainable. They should be closed, sold or restructured where they are of genuine strategy value to government.”


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