Union judgment piles pressure on SAA rescue team
The SAA business rescue practitioners are to appeal Friday’s judgment in which the labour court in Johannesburg set aside retrenchment notices issued to employees on the grounds that these were procedurally unfair.
The judgment is a new spanner in the works for Les Matuson and Siviwe Dongwana, who are attempting to wind down the company in the absence of cash to fund its operations. However, it has also alarmed business rescue professionals across the board because it threatens to constrain their ability to restructure the workforces of distressed companies during business rescue, which has up to now been the established practice.
Judge Andre van Niekerk ruled in favour of the National Union of Metalworkers of SA (Numsa) and the SA Cabin Crew Association (Sacca), which maintained that a business rescue practitioner must first present a business rescue plan before issuing notice of the intention to commence consultation on retrenchments.
As it was common cause that no business rescue plan had been issued, Van Niekerk set aside the notices as being procedurally unfair.
SAA has been in business rescue since December 5. Under the Companies Act a business rescue practitioner must present a plan to creditors within 30 days. Matuson and Dongwana have had several extensions but were told by public enterprises minister Pravin Gordhan on April 10 that the government could not provide any further funding for the rescue process.
The government guaranteed loans of R5.5bn to fund the rescue. As SAA had a cash burn rate of between R500m and R1bn a month prior to December, the pre-commencement funding has been depleted.
Matuson and Dongwana said that this left them with only two options: a structured winddown, in which assets are sold and employees paid retrenchment packages with any cash realised, or liquidation. However, Gordhan has said he will not allow either option.
Together with consultancy Seabury, which has previously done work on a turnaround strategy for SAA, Gordhan is poised to unveil his own business rescue plan, for which he has the buy-in of labour.
In a meeting with parliament’s portfolio committee on public enterprises last week, the minister said he intended to meet Matuson and Dongwana in pursuit of his plan.
Numsa and Sacca, which along with other trade unions have agreed a leadership compact with Gordhan to establish a new airline, have also urged Matuson and Dongwana to consider the jointly agreed plan.
“Numsa and Sacca are currently doing the work which the [business rescue practitioners] have consistently failed to do, which is to devise a turnaround strategy for SAA ...
“We are working with the
department of public enterprises on this, and we urge them to join us,” the unions said after Friday’s judgment.
“The strategy also includes a plan to save SA Express, which is also facing liquidation, and workers there are suffering today because of the failure of another set of business rescue practitioners.”
Gordhan and the SAA business rescue practitioners are also at odds on the reasons for the repeated delays to finalising the business rescue plan. While
Gordhan has said this is entirely their responsibility, the business rescue practitioners have had to contend with delays over government funding.
Gordhan said last week that “the plan could have been concluded long ago”.
“Now we are saying instead of moving to liquidation or wholesale sale of assets, we are proposing an alternative route,” the minister said.
“They have finally agreed to talk about this. So we need to find money from within their cash, plus contribution from employees so that the runway is increased, which gives us time to resolve the future path soonest. These are legal issues,” Gordhan said.
The next step is not clear. If Gordhan and the business rescue practitioners are unable to find common ground on the way forward Matuson and Dongwana will either have to resign or Gordhan will need to file for their removal in terms of the Companies Act.