Tag: South African Airways (SAA)

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.

As a bare minimum, directors are required to act in a manner which benefits the company – that is, to act in the company's best interests. This is entrenched in section 76 of the Companies Act which requires all directors, alternate directors and prescribed officers to act in good faith, in the best interests of the company and with the necessary degree of care, skill and diligence and prevents such persons from (1) abusing their position; and (2) knowingly causing harm to the company.

Sparking an immediate celebration in the rand and bond markets, the 2020 Budget Speech ticked all the right boxes for markets, depicting a government that is reform-minded and ready to show its muscles.

Minister of Finance Tito Mboweni will deliver his 2020 budget speech today. South Africa enters a new decade with a growth forecast of only 0.7% (according to ratings agency Moody’s).

Certain senior politicians seem to have a misapprehension of how business rescue works in South Africa, particularly as it regards the situation at South African Airways (SAA). Some within the ruling party recently indicated that government will intervene to 'retain the [sic] SAA as a state-owned enterprise'. This cannot legally be done.

As most South Africans eagerly awaited some reprieve from a year of constant and negative bombardment, be this over matters such as a massively contracted economy, rising unemployment, state capture, rising corruption and the threat of expropriation of property without compensation, many had hoped to return from their annual vacation rested, and hopeful to hear some positive news. This did not happen.

Government intervention in the economy simply does not work. It is a mystery, then, why so many otherwise intelligent people keep calling for more of the same. After years of low growth (12 years now) concurrent with government fiscal deficits and various stimulus packages, we are now faced with retrenchments across the economy. The latest of which is Massmart announcing that it is considering retrenching 1,400 people.

The SAA and SA Express boards have failed consistently, but there is a solution, one that will end taxpayer bailouts, satisfy politicians’ desire to keep the flag flying and even retain our national pride. But it will take courage and political will.

Eskom has one and SAA is looking for one. And as South African State Owned Enterprises (SEOs) and private sector companies continue to suffer from an ailing economy, there is no doubt that the role of Chief Restructuring Officer (CRO) is catching on. 

South African Airways’ sometimes-controversial CEO, Vuyani Jarana, has resigned. When the news broke on Sunday, many were caught by surprise, perhaps because it follows only a week after the resignation of another state-owned enterprise (SOE) CEO, Eskom’s Phakamani Hadebe.