Former executives and directors of the soon-to-be-sold state-owned regional airline SA Express (SAX) are expected to appear before an inquiry into what led to its liquidation. The inquiry started on 25 September last year.

SA Express was placed under provisional liquidation in April 2020 after a failed business rescue process.

The High Court appointed Advocate Mawande Seti-Baza as commissioner to conduct the inquiry, the airline's shareholder, the Department of Public Enterprises (DPE), told Parliament's Portfolio Committee on Public Enterprises on Wednesday.

Further sittings of the inquiry are anticipated to which the former executives, and any persons identified from a report by the liquidators, will be subpoenaed.

Government gave SA Express more than R1.2-billion in urgent financial support for the 2019/20 financial year. The DPE has in the past acknowledged that mismanagement took place at the airline. The Zondo Commission into State Capture has also heard testimony in this regard.

SALE SHOULD BE CONCLUDED IN THREE MONTHS
The process of selling state-owned regional airline SAX should be concluded within the next three months, according to a presentation by the DPE to the committee. An equity crowdsourcing proposal by a group called FLYSAX, backed by some employees, was selected as the preferred bid out of about 17 expressions of interest on which due diligence was done. The transaction is subject to approval by, among others, the provisional liquidators and the DPE.

A bank guarantee needed as part of the process to sell state-owned regional airline SA Express has yet to be concluded and the sale of shares agreement in this regard has not been finalised.

The purchase price is R50 million payable as a bank guarantee, which would be offset by the sale of assets and the balance being payable and recovered from the bank guarantee. A public online auction for the sale of the airline's assets closed on 18 November 2020. The total sale from the assets that were sold amounted to R24 748 700. The remaining assets will be auctioned off at a reduced rate, the committee was told.

The outstanding balance of the purchase price is in the amount of R25 251 300, recoverable once the bank guarantee is in place. Failure for the balance of the purchase price to be obtained will result in the final liquidation of the airline and the proceeds from the sale of assets being distributed amongst the creditors. 

The committee was told that there are regular engagements with the airline's creditors in line with legislation.

A return date to court was scheduled for 28 January. However, a further extension of the provisional order was requested and granted. According to the DPE, this was because of the various licenses and permits that are still in place and will also allow for the conclusion of the sale of shares. The process is being managed by the provisional liquidators. 

Liquidation affects 691 employees

The liquidation of the airline will affect 691 SAX employees whose contracts of service had been suspended since 29 April 2020. The employees approached the SA Human Rights Commission for mediation and the DPE is still awaiting the conclusion of this process.

The DPE explained that legal opinion it obtained concluded that the Insolvency Act is not available to government to invoke to pay SA Express employees' salaries. Any government contribution must be made to the provisional liquidators.

Furthermore, due to the airline having seized operations, its operating certificate, an aircraft maintenance approval, and an aviation security training approval in terms of the Civil Aviation Regulations all expired on 31 July 2020. Engagements, in conjunction with Fly-SAX, are also ongoing with the International Air Services Council (IASC) to reserve the international route rights.

The committee further heard that SAX's annual report was not tabled due to delays in the finalisation of the audit.

The Fly-SAX proposal includes an intended investment opportunity in SA Express to retail investors through a public offering. Uprise Africa, an "equity crowdfunding" platform that allows investors from around the world to invest capital into South African businesses in exchange for equity shares, is facilitating the process. The CEO of Uprise Africa is Tabassum Qadir, the former co-chair of grounded low-cost SA airline Skywise.

The retail investors will not be subscribing for shares directly in Fly-SAX, which is a private company and is not permitted by law to offer its shares to the public. The Uprise Africa Fund is an unlisted public company and will subscribe for shares in Fly-SAX by means of the funding raised in this offering. The Uprise Africa Fund will in turn issue shares in itself to investors, and these shares will be economically linked to SA Express.