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Gordhan slams SAA business rescuers for spending R35m on US consultants

Public enterprises minister Pravin Gordhan discussed the state of SOEs during a virtual parliamentary meeting on Wednesday night. File picture.
Public enterprises minister Pravin Gordhan discussed the state of SOEs during a virtual parliamentary meeting on Wednesday night. File picture.

The government is unhappy that SAA business rescue practitioners (BRPs) spent between R30m and R35m on American consultants, while it has not yet seen any plan to save the national carrier from total collapse.

This was disclosed to MPs from the National Assembly and the National Council of Provinces (NCOP) by public enterprises minister Pravin Gordhan during a virtual parliamentary meeting on Wednesday night.

"We've written and engaged the practitioners on several important issues - firstly on the question of access to information," he said.

"For example, an American aviation consultancy was brought in on the recommendations of the lenders, who lent the R2bn initially, to be the aviation advisors. That firm did work which resulted in fees of something like R30m to R35m being paid to them, but we have not seen the product of what they've actually done. We want full access to that information so that we can evaluate whether we had value for money in that regard.

"We've called on the BRPs themselves - all of the consulting entities that they've brought in, which includes some accounting firms, to actually reduce fees by anything up to 40% so that they also contribute - like the staff would be contributing - to a proper outcome of this process. We've not heard from them in this particular regard."

Gordhan also told MPs that labour unions and SAA management had agreed for workers to take a 50% salary cut, depending on seniority, in a bid to stem massive job losses at the cash-strapped national airline.

Gordhan said the government also wanted the BRPs to reverse their decision to put a complete halt to all SAA flights on Friday, including planes that may be required to urgently repatriate South Africans stuck in foreign countries as the world battles the Covid-19 pandemic.

"What we've had in recent days is the announcement by the practitioners that all flights, repatriation or otherwise, will stop on May 8. Just before I got onto this call, the department has had a discussion with the BRPs and there's now some indication of maybe some flexibility in this regard."

He said the approach being adopted was at odds with the government's intentions when they first enlisted their services.

The BRPs have proposed large-scale retrenchments at SAA and that it should also be placed under liquidation, but Gordhan said they were opposed to this.

"In our view, if this wind-down process that the business rescue practitioners seem to be on at the moment continues as they propose, it will not serve the original objective that we set for the business rescue process. That is also a matter of contention between the shareholder and the BRPs," he said.

"There should be no fire sale of important assets of SAA, nor should there be any movement towards liquidation when in fact there are many alternatives that should be pursued."

He told MPs that SAA in its current form would no longer exist going forward, following years of losing billions and a financial crisis which has since been compounded by the coronavirus pandemic that has grounded all airlines across the globe.

Gordhan said the government was determined to convert SAA into a new airline, but not all of its current employees would be absorbed into the envisaged new national carrier.

"SAA as it exists will not exist into the future, partly for the reasons that it was not competitive and unviable, but also because of the whole environment - both within aviation and the economy more generally - has changed very significantly. Nobody can quite anticipate what air travel is going to be like even two months down the airline."