SAA Business Rescue Update, with Minister & Deputy Minister

Meeting report

Opening remarks
The Chairperson welcomed Members and thanked them for being willing to attend during the parliamentary recess. The meeting had been re-scheduled from the previous week as SAA had failed to appear before the Committee.

He thanked the Business Rescue Practitioners (BRPs) for their letter from the previous week which he had initially viewed quite favourably. It was important for everyone to know that a request was a request but he had asked that the meeting proceed and SAA had simply refused to send someone in place of the BRP who was unable to attend. That had put Parliament and the Committee in a very difficult position.

Having said all of that, he was informed that the BRPs were not online and while giving the BRPs time to get online, the Chairperson received a call from the Minister requesting that the meeting be delayed until 14:15.

At 14:15, the Chairperson repeated his comments and stated that he was not satisfied that the Committee had been given the run around after he had said that the meeting would go ahead with a single BRP the previous week as he had understood why the second person could not be present. It set an unacceptable precedence and made accountability by Parliament extremely difficult when those who were accounting to the Committee set their parameters for meetings and decided when they would attend.

The Secretary confirmed the attendance of Members.

The Chairperson invited the Minister to provide a few opening remarks.

Opening remarks by the Minister of Public Enterprises
Minister Pravin Gordhan said he hoped that the BRPs would be able to answer Members’ question. He reminded Members that since the appointment of the BRPs in December 2019, neither the management at SAA nor the Stakeholder had been able to take any decisions in relation to SAA.

He apologised for requesting a delay but he had had to listen to Deputy Chief Justice Zondo, Commissioner of the State Capture Commission on a matter relating to an incident that had taken place when he had been appearing before the Commission earlier in the week.

The Minister informed the Committee that the Chairperson of the SAA Board, Mr Geoff Qhena, was also on the platform.

Presentation by the SAA Business Rescue Practitioners
The presentation would be made by Mr Siviwe Dongwana, BRP. He was joined online by his fellow BRP, Mr Les Matuson. He apologised for the situation of the previous week in which the BRPs and the management had not attended the Committee meeting.

Mr Dongwana stated that there had not been an audit at SAA to date but the end of the Business Rescue was nigh and the SAA would then be run by the board that would have oversight of the operations of the company. He promised to forward the management accounts for 2020/21 to Members of the Committee after the meeting as that would inform Members of the current situation.

Mr Dongwana’s presentation focused on how the Business Rescue funds had been spent by the BRPs. He informed the Committee of actions taken by the BRPs. Amounts utilised to date:
- Unpaid Salaries, 3 months settlement = R360.7m (3 888 employees, 85% of workforce);
- Voluntary Severance Packages = R1.55bn (3 140 employees)
- Post-Commencement Finance Creditors = R400m (high volume of creditors and complex contracts)
- Un-flown Tickets Liability = R700m (Travel vouchers valid until February 2023)
- Working Capital - that amount was currently being utilised for the costs of care and maintenance
- Remaining funds would finance the restart of the operations post-business rescue process.

Mr Dongwana anticipated that the Business Rescue process was close to the end. He had hoped for the end of March but a couple of weeks was still required to tie up loose ends. The process was that the BPRs had put the R10.5 billion in three buckets: money owed to lenders on the back of government guarantees and who would be paid over the next three years; the settlement with lessors; money owed to general creditors as above. The business could not move forward with such a heavy debt and therefore all of those debts would be taken out of SAA and put into a company known as the Receivership, which had been designed to receive that debt. All other SAA debts would be written off. Mr Bongani Nkasana and he had been appointed as directors of the Receivership.

He indicated that the BRP had achieved a great deal more than what the company would have received if it had gone into liquidation. Importantly from the cost of employee perspective, staff had been reduced from 4 500 to approximately 1 000. The staff, too, had received significantly more money than anticipated if SAA had been liquidated. He added that staffing at SAA had been extremely bloated.

Mr Dongwana reminded Members that the Special Investigating Unit (SIU) had presented to SCOPA on 3 March 2021 and had provided a report. He wished to touch on two issues. The first issue related to McKinsey and SAA had provided information to the SIU as requested so the Unit could move forward on that one. The second issue was regarding the ongoing investigation at SAA into the situation in which legal services had been provided through a panel. The individual responsible had been suspended and the Voluntary Severance Package that the individual had requested, had been withheld until the investigations were completed. He had not left the company as reported by the Hawks.

Discussion
The Chairperson explained that the Committee was receiving a briefing; as such it was not a hearing and Members should put all questions before responses would be given.

Mr A Lees (DA) asked the Minister if any shareholding had been negotiated and what shareholding would remain in state hands if there had been such negotiations. His second question revolved around the proposed flight by SAA to collect vaccines from Mumbai. On or about 31 January 2021, had the Minister taken a decision, after the relevant manager had given the go-ahead, not to allow that flight to take off? Had he had any direct or indirect communication with the manager who had taken the decision?  If so, what was the substance of the detail of those communications?

Mr Lees noted that Mr Dongwana had, to some extent, dealt with his next point but it was very inconclusive. He had indicated that financial statements would come at some unknown time in the future because of the business rescue and no audit having been done. He did not believe that was an acceptable position. Surely, there should be an audit and the financial statements for the past three years should be produced?

Mr Lees drew the Minister’s attention to the question of the R2.7 billion that had not been paid out for subsidiaries. The BRPs seemed to think that they had no responsibility for the subsidiaries but the capital required for the subsidiaries was in the BR plan. The R2.7 billion had not been paid out and on what basis, in terms of what PFMA regulations, would such funding be justified? It was not in terms of the BR process as that was apparently coming to an end. What was the actual financial position of the subsidiaries? The subsidiaries were not in business rescue. Where were the subsidiaries’ financial reports? When would they be available? What was the status of SAA Technical and Mango?

Minister Gordhan stated that there had been no agreement to sell shares, as yet. Secondly, in relation to the flight to Mumbai, there had been no flight to Mumbai to collect vaccines. Mr Lees might have his facts wrong.

Mr Lees said that there was no flight because a manager had stopped the flight. Had the Minister had any direct or indirect communication with the manager who had taken that decision?  If so, what was the substance of the detail of those communications?

Minister Gordhan repeated that, as far as he knew there had been no intended flight to Mumbai to collect vaccines. If there were other flights, the BRPs should be asked to explain. During that period, he had been trying to get the cargo side of the business off the ground and he was doing that with the BRPs. The Brussels flight to collect vaccines had eventually got off the ground, despite the efforts of some pilots South African Airways Pilots’ Association (SAAPA) to sabotage the flight. Eventually, with the assistance and approval of the South African Civil Aviation Authority (SACAA), the flight had taken off and there had been discussions with the Department of Public Enterprises (DPE).

Minister Gordhan stated that he had conducted meetings with the Auditor-General who had said that, given the state of the airline, the Auditor-General had not conducted an audit. As soon as the airline was out from the under BRP, the Minister would enquire of the Auditor-General as to the way forward. He added that the R2.7 billion for the subsidiaries was part of the R10.5 billion package that everyone had been informed about. Whilst the subsidiaries were not under BRP, they were impacted by the lack of business through SAA. SAA Technical (SAAT) was also in need of restructuring and was the target of several expressions of interest and he would give attention to SAAT as soon as that money was received by SAAT.  Mango was flying but had its own problems with creditors.

He pointed out that subsidiaries did not generally provide their own financial statements. That was normally done as a group. Once he had spoken to the Auditor-General, he would inform SCOPA as to how SAA would be dealing with the Annual Reports - its own and that of its subsidiaries - as well as the financial statements and audits necessary for the purpose of the Annual Report.

Mr Lees addressed the BRPs. What was the estimated extent of further capital funding requirements to get SAA to profitability? Would it run at a profit from day 1? That was highly unlikely, so how much more money was needed to get the airline up and running and back to profitability? Did the October 2020 revised BRP include an increased funding requirement to R19.3 billion? When was it projected that SAA would show profitability, i.e. in which financial year in the future?

Mr Lees noted that the Chairperson had dealt at some length about the non-appearance of the BPRs and the SAA board at the last meeting. He noted that the BRP had chosen not to attend the meeting last Tuesday but, two days later, they had produced a 24-page detailed report on “affected persons” to the public. That had contained a great deal more detail than the report that the BRPs had chosen to present to that Committee that day. It was another indication of the dereliction on the part of the BRPs and their contempt for Parliament. He did not have a question for them in that regard.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
Regarding the flight to Brussels for vaccines on or about 24th February 2021, Mr Lees asked what the cost was and who had paid for the flights. An official from DPE had publicly stated that commercial cargo had been carried on the flights. If so, what was the cargo and what was it worth?  He said that the CAA had been blamed for the delayed departure of the flight. What was the cause of that delay?

Mr Lees stated that the next questions addressed a quite angrily-worded public statement by the BRPs the previous day. They had said that an “Alpha Floor” incident was being investigated but the pilots had identified the symptoms before the incident had taken place and that they had taken appropriate actions. On what basis did the BRP make the public statements of fact while what had occurred had yet to established? What qualifications did the BRPs have to make such a statement?  Did the so-called “Alpha Floor” incident actually occur or not? The BRP’s statement suggested that such an incident had not occurred.

He noted that, in terms of the Companies Act, BRPs were entirely accountable for SAA in the place of the board and the senior executives, and that had been confirmed in that very meeting by Minister Gordhan and Mr Dongwana. So, why did the BRPs allow the flight to Brussels when they were aware of risks and the numerous exemption that had to be granted by the CAA to make the flight possible? Did the BRPs accept that they were, and would be held, accountable should there have been a problem? Was the training of the flight crew current and up-to-date?

Mr Lees turned his attention to retrenchments. The BRP made provision for all unions to accept the new conditions and for retrenchments to have occurred as it had pointed out in the presentation. A number of unions had not accepted the conditions and 90% of the pilots were locked out and not available to fly aircraft. Why had those unions not accepted and what would be the status of those employees after the BRP process was concluded? How could the BRP objectives have been achieved with that provision not having been achieved and with 90% of the pilots still locked out? Who would fly the aircraft?

Mr Lees stated that he would hold his other questions for the CAA.

Minister Gordhan stated that questions on further capital funding had caused confusion in the mind of the public. Government had always said it would take responsibility for all restructuring costs and make some funds available in the R10.5 billion for interim flying. The fiscus would not be required to make any contribution in the future because a parallel process taking place was the finding of an equity partner. Future funding will come from the proposed partner and that would determine the viability of the airline. There had been some interested parties in 2020 but a lot had changed since the beginning of the BRP and Covid had changed things in the aviation industry, locally and globally.

Whether SAA would be making a profit in the future or not, depended largely on the what the future shareholder looked like. It was government’s responsibility to clarify that matter.

The Minister was not sure if he had to answer questions that the pilot’s association was feeding to political parties. Questions about the Brussels flight had nothing to do with the BRP. There was a huge sense of discomfort around the questions about unions. Mr Lees had said 90% of pilots had been locked out, but did the Committee know that a substantial number of pilots had left the pilots’ association and were part of a new union, the NTM (National Transport Movement) and could fly provided that the requirements of the CAA were met? The Committee should also know that members of the SAAPA were doing everything possible, ultimately to their own detriment, to sabotage attempts to get SAA off the ground. Some of them ran training sections and kept postponing training so that the training of pilots was not up-to-date. The Committee Members should not be lobbied by exterior forces. The pilots were opposing what government was doing, i.e. trying to get an operational airline off the ground.

The Chairperson suggested the Minister should not cast aspersions and say that Mr Lees’s questions had been a result of lobbying. Mr Lees’s concerns were valid and whilst there might be concerns about discussing certain things, a Member could not be accused of having succumbed to lobbying.

Minister Gordhan had said that what he had actually said was that he would be concerned if there was lobbying taking place. It was a general concern. Members should be outside of any lobbying. It was a subject for another day but he was not casting aspersions. Ministers were also lobbied but one should not succumb to it.

The Chairperson indicated that he would take the matter on advisement and would take it up with the Minister at a later stage if need be. He would look at the transcript of the meeting.

Mr Dongwana answered all the questions put to the BRPs. His colleague, Mr Les Matuson, did not speak in the meeting.

He said that it was difficult to say when SAA was likely to get to profitability as that crystal ball had become very dim in the context of Covid for the entire industry. There were so many variables that it was impossible to predict what Covid had done to the industry. It was a very difficult question but the important thing was that the BR had made sure that the airline had a very low overhead structure. That was very important. Profitability would depend on routes, the prices currently available in the markets and a whole host of factors, but the BRP had ensured that the baseline overhead cost structure was quite thin and that would stand the airline in good stead.

Regarding the flight to Brussels, he said that the Business Practitioners had given the airline permission to take advantage of opportunities in the cargo space to make profits, particularly where the profitability was ensured and that flight had been a profitable one. He was not comfortable to disclose to the Committee the cost structure in the current competitive environment. Suffice to say that and all cargo flights had been profitable. Even flights taking foreigners out of the country had been, if not profitable, at lease cost neutral because of the humane factor.

Mr Lees sought clarity on his use of the word “costs” that had been misunderstood. He wanted to know the selling price and that was not in realm of confidential information. What was the selling price and what was the cargo that had been carried?

Mr Dongwana said that an RFQ (Request for Quotation) had been sent out by the client and the airline with the most suitable quotation had received the business. He could not give out the information because it would mean that competitors would have a direct line of sight into SAA’s pricing.

Mr Lees stated that it was a parliamentary question and he needed an answer.

The Chairperson stated that he would look into the matter and come back with a decision as to whether that information should be disclosed.

Referring to the alleged “Alpha Floor” moment, Mr Dongwana said that there was an investigation into the flight going on in parallel with the civil aviation authority and he believed that he should wait until the report came out and the facts were known. It could then be presented to the Committee. That would take out any issues besides the factual ones.  Regarding the unions, he explained that the new terms and conditions had been accepted by almost all of the unions. The current SAA structure had continued and was populated by 1 000 employees at all levels. The SAAPA pilots were the only ones not to sign. SAAPA was not opposed to the terms and conditions but the SAAPA had to settle a broad range of agreements, including new terms and conditions. The Judge in the Labour Court had stated that lock-out was an acceptable labour practice to reach final agreement.

Mr G Cachalia (DA) stated that he had two tranche questions, one to the Minister and one to the BRP.

Mr Cachalia asked Minister Gordhan for the names of the private equity partners who had been in discussion with the Minister, SAA, DPE, the BRPs or any other connected persons. Were all prescripts of the PFMA followed when flying to Brussels? If not, why not? Were there any plans to use SAA or Mango for flying Covid vaccines in and around SA, regionally, in Africa, internationally? Other than the flight to Brussels around 24 February 2021, had any other flights by SAA or Mango contained vaccines since the first vaccines were received in SA in January 2021? And if so, were the PFMA requirements adhered to?

Minister Gordhan replied that Mr Cachalia was aware of issues relating to the commercial factor when talking about private equity partners so he could not release that information at that stage as it might compromise the ability to settle the matter. All would be revealed when the matter was settled.

The Minister stated that he hoped and believed all prescripts of PFMA had been followed. Regarding plans for SAA and Mango to fly vaccines, he said that government had a responsibility to acquire vaccines and if SAA could provide services and was asked to do so and was capable, the airline had to do so. From the vaccine point of view, government had a responsibility to protect citizens by acquiring vaccines and if it requested SAA to do so and to utilise the huge potential in cargo flights, then SAA should do so. He had recently learnt that there was a huge potential for business in the cargo sector.

Mr Cachalia clarified the responses he had received. Question 1: The Minister could not reveal names; Question 2: He hoped the PFMA had been followed; Question 3: No response.

The Minister said that all requirements had been adhered to, as far as he knew.

The Chairperson asked that questions not be personalised and that as the people responsible for implementing policy were online, the Chairperson of the Board and the DG of the Department of Public Enterprise, they should answer.

The Minister noted that the Chairperson had added the word “procurement” to Mr Cachalia’s question to narrow down the scope of the huge tome of the PMFA.

Mr Cachalia confirmed that he had been referring to procurement, but also “delivery” in terms of the PFMA.

Mr Kgathatso Tlhakudi, DG, DPE, said that the DPE/SAA had followed the PFMA prescripts. The Department of Health (DoH) had been the client. He had done the same in respect of obtaining personal protection equipment (PPE) and he had also assisted the Department of International Relations (DIRCO) to follow correct processes when it was a client and had to evacuate SA citizens during Covid.

Mr Tlhakudi gave a guarantee that the PFMA prescripts had been followed.

Mr Cachalia addressed the BRPs. He asked what amount was required to keep Mango and South African Airways Technical (SAAT) operational and to return them to profitability. What guarantees would the BRPs provide that the funds set aside for SAA’s BR would not be used by them or any other receivers who might subsequently be appointed for Mango or SAAT to keep the subsidiaries going? What was the extent of Mango and SAAT liabilities? Where did the SAA and Mango pilots who were flying obtain training to remain current?

He also asked about SAA 4272 that flew to and from Brussels with vaccines on or about 24 February 2021 and other SAA flights: Were the crew up-to-date to fly the highest, most severe category 3 instrument landings. A privately-owned aviation training institute outside of SA was apparently used for additional flight crew training to undertake the flight. What was the cost of the training? Did the school belong to an SAA pilot? Was a formal tender process used to award the tender as per the PFMA? Would any failure to apply the PFMA be investigated and the relevant persons held accountable? Was the training insufficient and were multiple exemptions required from the CAA? Did Rolls Royce, the engine manufacturers, or did Airbus, the aircraft manufacturers, make any reports to SAA that they had received automated reports from the aircraft that there had been an Alpha Floor incident or incidents? If so, were those reports received by SAA?

Mr Dongwana stated that he could not answer the questions regarding Mango and SAAT liabilities and the amount needed for the subsidiaries to remain operational. DPE would be able to assist him but BPRs did not have sight of reports on the subsidiaries.

He explained that, in terms of funds set aside for SAA BR, a number of processes were in place. Firstly, all funds had been allocated into the appropriate buckets, so they could be used for their intended purpose, e.g. funds for employees were in a bucket. However, working capital funds funded the current operation of the airline. The Receivership had been established to disburse funds to those who had government guarantees, creditors and lessors, i.e. in line with the intended purposes.

Mr Dongwana stated that he could not account for Mango pilots and their training. As far as SAA pilots were concerned, when they had undertaken that flight, the services of a flight training school had been procured in line with PFMA. The owner was an ex-pilot of SAA. He would provide details in writing. Subsequently, SAA had ceased acquiring external training as it was against the Regulatory Agreement. One of the fundamental issues was that the Regulatory Agreement with CAA hampered certain decisions by the board and management, as it determined that SAAPA had to give the go-ahead for training. The training at SAA was done by SAAPA pilots, and unless they agreed that outside training services could be used during the lock-out, then the airline was not in a position to undertake training.

Regarding reports received from Airbus, he was aware that reports had been received, but he would give the answer in writing once the safety officer had cleared his answer to be accurate.

Mr Cachalia asked if he was correct in understanding that BRPs had no line of sight into the books of Mango and SAAT.  If that understanding was correct, why was DPE not fielding the question?

Mr Dongwana replied that the BRPs’ authority was limited to the statutory entity of SAA, which was why he had no basis in law to answer questions relating to the subsidiaries which were stand-alone statutory entities which had their own boards and management and it would be a significant over-reach to answer questions on the subsidiaries.

Mr Cachalia asked if the subsidiaries had an impact on SAA. If they did, they surely affected the BRPs and then the answer he had received was not sufficient.

Mr Dongwana stated that SAAT and Air Chefs were service providers to SAA and SAA procured services when necessary and the airline would ensure that the subsidiaries were then paid for the services rendered. As SAA was preparing to fly, it would be procuring services from the two subsidiaries and paying for them in the ordinary course of business.

The Chairperson noted in the presentation that R2.7 billion had been requested by the BRP for the subsidiaries. In that context, when was it an over-reach and when was it not an over-reach?

Mr Dongwana said that the shareholder was responsible for the recapitalisation of the subsidiaries. The R2.7 billion would be provided to those entities once the funds had been received from the shareholder. Under what conditions could SAA be conduit to provide funds to subsidiaries? Being a conduit for those funds was only possible if SAA were solvent and in liquidity.

The Chairperson enquired whether the R2.7 billion had any role to play in the BR of SAA or whether the BRP was just a conduit.

Mr Dongwana agreed that the BRP was just a conduit.

Mr Lees said that BRP must have had sufficient access to the books of Mango and SAAT to be able to determine that R2.7 billion was required for restructuring purposes and yet now they feigned no access at all. How had the BPRs calculated that R2.7 billion was needed for the entities? He requested the DPE to respond.

Mr Tlhakudi responded that the R2.7 billion was a product of an engagement with the subsidiaries and their financial analysis teams looking at what was needed.  Mango required R1 billion; SAAT required R1.5 billion and R200 million for Air Chefs.

He explained that the transfer process could not happen until SAA was solvent and until the subsidiaries had presented a comprehensive plan. In fact, he believed that they needed a new plan. The requirements of the subsidiaries had changed as a result of the Covid-19 pandemic. When the funds would get to the two entities would be determined by the parliamentary process. There would have to be a special Appropriations Bill that would enable the funds to be disbursed but the Department had been unable to attend to that before Parliament had gone into recess. He was hopeful that it could be brought to Parliament soon after the recess and then the funds would be able to flow. The revenue base of the subsidiaries had been eroded quite substantially. Mango had five aircraft flying and so had to adjust its cost base. SAAT had also seen its revenue base eroded but he believed that, correctly positioned, SAAT and Mango could find substantial business outside of their traditional customer base, especially SAAT. The new SAA team would have to support the entities.

The Chairperson noted that they were waiting for Special Appropriation. That was, in ordinary language, a bailout.

Mr Tlhaudi was adamant that it was not a bail-out. A bail-out was when funds were provided for operating costs. In that instance, the funds were for restructuring and not a bailout. It was inappropriate to call it a bail-out.

The Chairperson asked whether the R2.7 billion was required as a result of the collapse of SAA.

Mr Tlhaudi said that he would not call it a collapse.

The Chairperson suggested that if SAA were not in the position that it was, the subsidiaries would not require the funds.

Mr Tlhaudi replied that it was not new money, but had been allocated the previous year.

The Chairperson asked him not to meander but to answer the question.

Mr Tlhaudi explained that the R2.7 bn was part of the R10.5 bn that had been appropriated for SAA. The revenue base of SAA had been eroded but Covid-19 had affected all its customers, especially customers who flew to SA on international flights. In 2020 the market had collapsed by 85% and no business was sustainable under those circumstances.

The Chairperson said that he had heard the Covid refrain but Covid had, in fact, exposed existing challenges. He could not speak from an informed position because the lack of compliance in submitting financial reports had led to the current position where the Committee was not informed. The full story went back to that point. The lack of compliance had hit Covid and had snowballed and exploded.

Mr Lees asked for clarification. On the one hand, the DG was saying that the R2.7 bn was part of the R10.5 bn allocation from the Medium-Term Budget Statement but on the other hand, he was saying that there was a Special Appropriation Bill coming. Which was it?

Minister Gordhan explained that National Treasury had made the decision regarding the process and the question should be directed to National Treasury for the best response. Secondly, the original sin was not Covid but state capture, which had affected not only SAA, the airline, but the SAA Group. The subsidiaries, too, had been affected by malfeasance, by massive stealing of parts at SAAT. The previous manager of SAAT had been in the process of restructuring SAAT under the direction of the board and the process of issuing 189 Notices had commenced before BRP, so that history was directly linked to state capture. The SAA Group had been affected by state capture. When the Department wanted to look into the subsidiaries, the BRP had hesitated to allow the Department to look into the matter. It was a collection of issues that had led to the situation.

Secondly, the Minister said he had already clarified that it was not the Department’s fault there were no financial statements. In the past the SAA board had reported, but in the past couple of years, the Auditor-General had been unable to do an audit owing to the BRP and he had already assured the Committee earlier in the meeting that he would arrange to have an audit done as soon as possible.

The Chairperson retorted that he was not apportioning blame, but the DG had raised his challenges and so he had presented the challenges of the Committee, seeing that there was a meandering in the context of questions. The Committee had scheduled a visit to SAA in 2019 but had held back on those intentions when the Committee heard that SAA had gone into business rescue. He would not allow a deflection of questions as a normalisation in SCOPA meetings. That game was not going to be played in a SCOPA meeting.

The Minister asked if he was being accused of deflecting.

The Chairperson said that it was not the Minister who was deflecting but there had been deflection in the context of the questions that had been posed. If the original answer had been the same as what the Minister had just said, there would have been no problem.

The Minister stated that it was important that the Executive and the Legislature found a way of interacting that was constructive and helpful to all sides concerned. The Minister stated that he was committed to such a position.

The Chairperson concurred that that remained the outlook of the Committee.

The Chairperson had two questions for the BRPs. In the period that they had been there, how much had the BRPs cost the taxpayer, i.e. how much had the BR practice cost South Africans, and when did the BRPs think that they would wrap up their work, considering that they had been there since November 2019. He was not going to accept a response along the lines that the answer would be coming in writing because those answers never arrived. The BRP always promised responses in writing but they never arrived.

Mr Dongwana said that the costs were in the region of R200 million and that the Minister had presented the details at the previous meeting. That report had been sent to the Committee following the previous meeting. He would update the previous report and send it to the Committee.

The Minister intervened saying that he had a slide from his previous presentation that he could read out.

The Chairperson thanked him. He would come to him next.

Mr Dongwana said that he had mentioned in his presentation concerning the end of the process that the Receivers had been appointed and were opening bank accounts for the Receivership and making sure that the administration for the Receivership was set up. The BRPs were, as indicated in the plan, analysing the payment of post-commencement creditors, paying employees or ring-fencing money to pay employees and in the presentation he had referred to some of the challenges experienced with the post-commencement creditors. They had to go through the reconciliation processes and make payments and close the books. Once payments had been made, the accounts would be transferred to the receivership so that the Receiver could make payments. He stated that all things going according to plan, he believed that they would exit in the next couple of weeks. The aim had been to exit at the end of March 2021. However, it was not just a timing issue but also a process issue and certain issues had to be appropriately closed.

The Chairperson commented that end of March didn’t seem possible, nor was he being particularly specific, so he would assume that there was no set date.

The Minister read out a list of payments by the BRPs. He understood that the figures were current at the end of December 2020:
Adamantem (Mr Dongwana’s firm) - R28.2 m
Matuson & Associates - R23.7m (difference being that Mr Matuson had not taken any fees for some months)
Edward Nathan Sonnenbergs (Legal Firm) - R41.6m
Alvarez & Marsal (Aviation Advisors) - R61.1m
PricewaterhouseCoopers - R38.7 m
Allen and Overy (Legal Advisor) - R 8.2m
Letsema Consulting (Valuation Advisor)- R 2.6m
Holstein Attorneys (Legal Advisor) - R0.1m
Thomas Bartos (Legal Advisor) R0.3m
Redford Capital - R0.3m
Norton Rose (Legal Advisor) - R0.5m
Bowmans (Legal firm) - R0.7m
Astute Financial Services Exchange (Business Distress Advisor) - R1.7m
Total R207.5m

Estimate to completion = R35.5m
Estimate of final figure = R243 m

Minister Gordhan stated that the figures appeared to be up to May 2020, in which case, the numbers were not up to date. He apologised as he had thought that the figures were up to December 2020. There seemed to be some confusion on the document before him.

The Chairperson stated that he would be coming to the Minister to wrap up the session.

Mr Lees agreed that the Committee had gone as far as it could go, although it had not been a completely satisfactory session, but he requested that the Committee once again attempt, as with the previous encounter, to submit written questions in the hope that written responses be sent to the Committee.

The Chairperson requested an updated schedule from the BRP, more recent than the May 2020 BRP schedule figures, as well as written responses to the other questions by Friday the following week. He stated that, if the answers were not received, he would have to raise the matter with the Presiding Officer in Parliament as answers from SAA were never forthcoming. The presenters were aware of certain questions and the Committee Secretary would clarify the other questions. He would provide guidance in respect of the questions on the competitive practices and he would check the Hansard as he had said.

He invited concluding remarks from the BRP.

Mr Dongwana said that the amounts that the Minister had read out actually dated from December 2020, not May 2020, but he would provide the Committee with an updated schedule through the Department. He thanked the Committee and hoped to wrap up the process in the anticipated timelines and that once the BRP processes had been wrapped up, he hoped that SAA would be able to continue on a sound footing.

Minister Gordhan said, from a shareholder point of view, he would like the BRP to conclude sooner rather than later. Secondly, he wanted to see a proper hand-over process and a hand-over report in writing from the BRPs to the interim board so that it would be in a position to manage the affairs of SAA properly.

The shareholder noted that it appeared that Mr Dongwana and his business associate, Mr Bongani Nkasana, had been appointed as the Receivers, although the shareholder had had some hesitation about Mr Dongwana and his associate making themselves available for the position. He was registering his concerns even before the receivership began and he hoped that they would not get into the same kind of expensive exercise in terms of fees as the business rescue had cost the state in excessive fees. He would be looking at that very, very carefully.
 
Regarding the SAAPA, the Minister reminded the pilots that the regulatory agreement still applied. He wished to send a very public message to the pilots that on the one hand they want an airline to employ them but, on the other hand, they were doing everything to sabotage the airline, so he did not know how they reconciled the two positions.

The Minister stated that SAA would do everything that was required to collect vaccines wherever in the world they were to be collected from. That would occur in conjunction with the carrying of cargo inwards or outwards. SAA could fill a plane with cargo within 24 hours of announcing a flight. That showed the extent of the demand for cargo flights, globally, at that stage. Cargo was regrettably not one of the areas that had received attention in terms of bringing revenue into SAA during the past period. He would liaise with the BRPs to enquire as to why that line of business had not been not pursued as there was an enormous potential for revenue in area of cargo.

He cautioned the Chairperson, who had requested responses by the following Friday, that Friday 2 April 2021 was Good Friday and so there would be no close of business that day.

The Chairperson said that the Committee tended to work over weekends and holidays. Given the pending lockdown, there might not even be church, so he would be at home. However, he wanted the responses to be practical and not hostile, so that issue of the deadline could be sorted out in the letter providing details of the questions.

The Chairperson stated that the process could not be open-ended; it had to be brought to a logical, economic and functional conclusion insofar as the viability and sustainability of SAA was concerned.
To rescue an airline that found itself in that chaotic and messy position was a major issue. It remained a concern to the Committee that there was no financial statement and the Committee would engage with the Auditor-General as an audit should be an integral part of the investigations at SAA. The country had to learn from the mistakes in the past and the audit was an enabler from which those lessons would arise and nip the perpetual crisis mode of SAA in the bud. Every time SAA was unable to be audited, critical and vital things fell through the cracks, hindering the ability to assess the situation and apply consequence management, and the lessons of what one should not do to collapse an airline.

The Chairperson was adamant that the state should not continue throwing taxpayers’ money at non-financial problems. Money did not fix everything. There had to be a global picture of what had happened at SAA and the mechanisms for doing that included the Zondo Commission, the Audit process and the BRP, to name but a few. Crisis compounded crisis. The Covid-19 crisis compounded the SAA crisis. The third Parliament had gone to visit SAA and even then the most basic of controls were absent. SOEs thought it would be a bail-out and business could continue as usual and the taxpayer would bail the SOE out, but the shortfall in the tax base meant it was impossible to do that anymore.

SAA should be making money for SA, not the other way around. SA was in desperate need of an economy that would support the people, particularly young people. The Chairperson stated that he always spoke on behalf of young people. The situation was desperate. The R240 million for the BR process could not be in vain as so much was riding on it. The situation called for cooperation and mutual respect and everyone to fulfil their duties wherever one was deployed. Parliament had to hold the Executive and the departments to account and they had to respond to questions. It was not personal.

The Chairperson remarked that he left his emotions in bed in the morning so that his sense of shock was reduced when he heard all the things that he heard in the SCOPA meetings. He hoped to obtain the requested responses and that the BRP would be brought to a conclusion. It had cost a lot of money and now had to be concluded. SCOPA would collaborate with the Portfolio Committee on Public Enterprises in that regard.

He told the Interim Board that there was no more money; it was finished. So, SAA had to be self-sufficient and self-sustaining. Consequence management had to form part of the processes at SA so that those who thought SoEs were there to be pillaged, had to walk the plank. The only way to do that was to ensure that each entity was functional. The elements of state capture had to be banished.

The Chairperson stated that matters had not been exhausted, but Parliament was in a better position and could move forward on the basis of the answers provided. He thanked the Members, the Minister, the DPE, the board and the BRP, and wished everyone well.

The meeting was adjourned.