SAA to enter urgent business rescue

 ·4 Dec 2019

President Cyril Ramaphosa has ordered failed airline South African Airways (SAA) to enter into voluntary business rescue.

In a leaked letter sent out on Wednesday evening (4 December) the office of the presidency said that the situation at the airline has become so dire that previous plans to restructure the business needs to pivot to this new direction – urgently.

Presidency spokesperson Khusela Diko confirmed to TimesLIVE that the letter was official correspondence.

The letter reads:

Developments at SAA

His excellency President Cyril Ramaphosa has directed me to inform all members of the executive of the urgent need to change the approach adopted by the Cabinet in regard to addressing the dire situation in which South African Airways (SAA) finds itself.

Cabinet adopted an approach that entailed the restructuring of SAA. However, after discussion with various key stakeholders, including potential leaders, developments have now necessitated a change of approach to the SAA conundrum.

In this regard, SAA will have to urgently go into voluntary business rescue.

This is the only viable route open to the government to avoid uncontrolled implosion of the national airline. The voluntary business rescue approach will also prevent liquidation applications by any of SAA’s creditors, which would land the airline in an even worse position.

We remain seized with the SAA crisis and will keep members of the executive informed at all material times.

Yours sincerely,

Cassius Lubisi (secretary of cabinet)

Earlier on Wednesday, minister of public enterprises Pravin Gordhan, agreed that the next best option, other than liquidation, to stop the multi-billion rand taxpayer bailouts to SAA would be to put the national carrier into business rescue.

DA MP Alf Lees said that Gordhan’s comments showed that sense has finally prevailed regarding the airline, but warned that the pressure on South Africa’s fiscus is far from over.

“It is very unlikely that the application for Business Rescue for SAA will be conceded to unless there is a further bailout, presumably amounting to R2 billion, from the South African taxpayer in order to provide the working capital required to enable SAA to continue trading,” he said.

“With business rescue will come an obligation for the government guarantees of R19.1 billion to be honoured. This will require an increase in sovereign borrowings that in turn will increase debt service costs and place a further burden on taxpayers.”

However, he said that if business rescue is awarded then it will take control of SAA out of the hands of the ANC, which can only be a good thing for the airline.

“The business practitioner who is appointed must take robust action to immediately cut costs at SAA without any interference from the ANC. The DA will monitor this very closely in order to ensure that the ANC keeps its distance.”

Read: SAA in limbo as government considers bailout

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