The Department of Public Enterprises (DPE) issued a press release on March 29 regarding the business rescue process for State-owned regional airline SA Express. In it, the DPE stated it “noted” that the airline’s Business Rescue Practitioners (BRPs) had made a court application to liquidate SA Express. The department also admitted that the government could provide no further financial support for the airline.
“The government has provided more than R1.2-bn in urgent financial support to SA Express for the 2019/20 financial year, including the R300m released last October,” stated the DPE in its press release. “This was an attempt to restore the damage done to the airline by corruption and mismanagement perpetrated by previous leadership teams of the airline. … The damage done has turned out to be graver than initially assessed. As a result, the Government is not in a position to give further fiscal comfort especially in these difficult economic times and considering the competing priorities.”
Regarding the liquidated application, the DPE said that it would “determine its course of action” after studying it. Regarding the airline’s workforce, the department assured that the government had gone to the Unemployment Insurance Fund (UIF) with a formal application, to make certain that SA Express employees received the support they needed. The UIF had been asked to expedite the process.
The DPE also re-assured that it had not been negligent in its handing of the crisis at SA Express. “The allegations that the government deliberately withheld financial support to the rescuers and that the department’s approach to the process was unconstructive, are baseless,” it asserted.
It affirmed that the first request for funding from the BRPs had “lacked a credible business case”. The government had to comply with the requirements of the Public Finance Management Act and the Companies Act.
A business rescue plan had also to take into account the impact of the Covid-19 pandemic as well as the competitiveness and volatility of the country’s aviation market. “The advent of the Corona[virus] pandemic quickly compounded our economic situation as it introduced unprecedented risk to humanity and exposed our economic fragility as a nation,” said the DPE. “Therefore, considering the reduction of passenger traffic in the market, the business rescue plan had to take into account the recent changes in the market. It is in this context that the department needed to see a business rescue plan that is resilient so the proposition could withstand a whole new business environment.”
The business rescue process for SA Express was initiated in February as a result of an application by one of the airline’s service providers, Ziegler SA. “Before SA Express was placed under business rescue, the government mandated the board and management to investigate and terminate a number of irregular contracts as a way to save money and root out corruption,” affirmed the DPE. “The Ziegler SA contract was one of these. The contribution of some members of previous leadership teams in the poor management of the airline needs to be investigated, and where appropriate, for justice to take its course.”