SAA must be put under business rescue - DA | Fin24
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SAA must be put under business rescue - DA

Jul 19 2016 17:49

Cape Town - The stalemate between Finance Minister Pravin Gordhan and South African Airways (SAA) chairperson Dudu Myeni is rapidly driving the national carrier to total collapse and this cannot be allowed to happen, said the Democratic Alliance (DA) on Tuesday.

The DA believes there should be an application to the relevant section of the Companies Act by applying to a high court for an order to place the SAA under supervision and commence business rescue proceedings.

"This is to further prevent ... Myeni and her dysfunctional board from driving the airline deeper into the ground and threatening our economy," Alf Lees, DA MP and shadow deputy minister of finance, said in a statement.

Lees pointed out that under Myeni's leadership, SAA has been plagued with financial problems "with assessed losses of R18bn to date and little sign of a turnaround".

Gordhan has been unable to implement the turnaround plan he announced in February 2016, which included the restructuring of the SAA board, the possible part privatisation of SAA and the amalgamation of SAA with SA Express, Lees explained.

The directors' report for 2014 emphasised that SAA was trading at a loss.

"That the government guarantee had been increased by R6.5bn and that this guarantee had been used to raise cash of R3.2bn to fund operating losses, makes it clear that without further cash injections SAA will not be able to pay its debts as they become due in the ordinary course of business," said Lees.

Lees explained that under the Companies Act, continued trading by SAA constitutes reckless trading and SAA is “financially distressed” in terms of this act.

"This places the SAA board directors in breach of various sections of the act, so that they have knowingly caused harm to the company and not exercised the powers and performed the functions of director in the best interests of the company. No proceedings for liquidation have been initiated and the directors have also not resolved that SAA voluntarily begin business rescue proceedings."

Lees highlighted that the relevant section of the act will apply to the directors of SAA; this stipulates that a director of a company is liable for any loss, damages or costs sustained by the company as a direct or indirect consequence of the director having acquiesced to carrying on the company’s business - despite knowing that it was being conducted in a manner not in accordance with the act.

Gordhan on July 14 requested Parliament to grant SAA an extension until September 15 to table its annual financial statement. Treasury said the 2015 financials could not be issued on a going concern basis until the guarantee SAA requested from Treasury was put in place.

"There is no doubt that SAA is not a 'going concern', which clearly indicates that, as contained in the 2014 annual report, SAA has continued to trade on an insolvent basis. Furthermore, the financial statements should be tabled forthwith, irrespective of whether they can be tabled under a going concern or not," said Lees.

Parliamentary oversight committees last year rapped SAA over the knuckles for its failure to submit its annual report for 2014-15, but a corporate plan tabled showed that its operating performance increased by R358m in the nine months to the end of December.

READ: Gordhan wants delay in SAA financials release

In the report, SAA also forecasts savings to the value of R1.1bn over the next three years.
In November last year, the national carrier asked for further bailouts from government to the tune of R5bn to enable it to complete its financial statements for 2014-15. This was in addition to a Treasury grant of R6.5bn in December 2014.

"Given the potential implication for the sovereign and for the economy the matter has required extensive and careful consideration. The annual financial statement will be tabled once they have been finalised," said Treasury at the time.

saa  |  dudu myeni  |  pravin gor­dhan


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