Millions paid to SAA consultants, rescuers

Government criticised over SAA funding

Consultants working in the first five months of troubled state-owned airline South African Airways’ (SAA’s) business rescue process cost the taxpayer almost R170m.

Business Times has seen documents filed by the airline’s joint business rescue practitioners (BRPs), Les Matuson and Siviwe Dongwana, with parliament’s standing committee on public accounts that show that between January, when SAA’s business rescue process started, and May 2020 more than R169m was paid to six consulting firms, among which was US consultancy Alvarez & Marsal Europe.

Appearing alongside the business rescue partners in parliament in June, public enterprises minister Pravin Gordhan said that despite the business rescue process costing the public purse millions, there was little value to show for it.

As a result, the government refused to advance R7bn that the business rescue practitioners saidwas necessary to restructure the airline, leading to a tense standoff that saw Dongwana and Matuson threaten to begin liquidation processes for SAA.

At the time, news reports said Gordhan, unimpressed with the plan, had gone as far as commissioning his own plan for a new airline that would rise out of the ashes of the dead SAA as he did not believe the R36m purportedly paid to the business rescue practitioners and an alleged R35m paid to Alvarez & Marsal Europe were worth it.

Other speculation at the time was that the total fees paid to the business rescue practitioners and all consultants were in excess of R200m.

At the time, Dongwana and Matuson said their use of the consultants was not outside the norm given the size and complexity of the first state-owned enterprise to be placed in business rescue.

“The fees should, therefore, be assessed in the context of a team (appointed to assist with rescue proceedings), rather than on an individual BRP basis,” they said in a statement posted on the Matuson & Associates website.

They also said some of SAA’s lenders had insisted that Alvarez and Marsal, which was the top earner with an eventual R61m, be used because it had intimate knowledge of the airline.

The firm’s brief was to provide aviation restructuring advice to the BRPs.

The second-highest-paid firm, PricewaterhouseCoopers Advisory Services, was paid R38mfor liquidation calculations, cashflow projections and development of a new airline sustainability model.

Matuson & Associates’ business rescue and restructuring consulting earned the firm R22.2m, and Matuson and Dongwana were paid R1.2m and R1.7m respectively in their personal capacities. Dongwana’s firm, Adamantem, was paid R14m for providing business rescue and restructuring consulting. The rest of the R160mwent to law firms Edward Nathan Sonnenbergs (R28.5m) and Allen & Overy (R4.8m).

The details of the payments come in the same week as details of years of corruption and malfeasance were laid bare at the judicial inquiry into allegations of state capture chaired by deputy chief justice Raymond Zondo, in Braamfontein, Johannesburg.

Two of the airline’s former long-standing board members, Yakhe Kwinana and Dudu Myeni, gave testimony on their tenure on the SAA board during a period that was riddled with turbulence and ultimately preceded the total collapse of the airline.

SAA was put into business rescue last December after its board of directors could no longer carry the risk of operating the company while it was not a going concern.

Both Kwinana and Myeni’s appearances before Zondowere characterised by clashes with evidence leader Kate Hofmeyr as they attempted to duck responsibility for a litany of corporate governance breaches, intimidation of officials and corruption allegations.

Earlier this week the National Union of Metalworkers of SA (Numsa) called out SAA’s shareholder, the department of public enterprises, after it learnt that Adam Voss, the departed CEO of SAA Technical, had paid himself an R830,000 bonus on the eve of his departure from the company last month.

The revelation came as the government was criticised over the diversion of money meant for service delivery, including health care, basic education, and the eradication of school pit toilets, to fund SAA’s R10.5bn business rescue.

At the airline, engineers and other staff were recently made to take pay cuts of 75% due to the Covid-related shutdown of air travel across the globe.

“What makes us not consider any kind of compromise is that the same CEO, Adam Voss, who took the decision to cut workers' wages by 75% in October 2020, paid himself a bonus of R836,962.63,” the letter from Numsa to the department said.

“During the meeting, when I asked him about paying himself this bonus, he confirmed on record in the presence of his management team that this was his money, owed to him from last year.”

The same CEO who cut workers’wages paid himself a bonus of R836,962.63

Numsa

In a letter to the department of public enterprises