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Deputy President David Mabuza says government will closely monitor the R10.5 billion allocated to the South african airways (SAA) business rescue practitioners to ensure that it is being put to good use.
Minister of Public Enterprises, Pravin Gordhan, has welcomed governments commitment to provide R10.5 billion to finalise the Business Rescue Plan (BRP) and restructuring of South african airways (SAA). Minister of Finance, Tito Mboweni, made the commitment, when he presented the Medium Term Budget Policy Statement (MTBPS) in Parliament on Wednesday. Failure to allocate the funds would have resulted in the liquidation of the airline at the cost of more than R18.5 billion. Further, the liquidation would have meant that SAA employees would have been worse off and received a maximum of approximately R32 000 per staff member, regardless of years of service, to the extent that there are funds available, the Ministry of Public Enterprises said on Thursday. Employees will only receive payment once the final liquidation and distribution account has been approved which can take up to 24 months. The Ministry believes that the completion of the business rescue process is the only viable alternative to a viable and sustainable national carrier one which supports job preservation and the ability to bring the airline back from the brink to a position where employees, suppliers and business partners can continue to contribute to the South african economy and its integration into the global economy. The R10.5 billion will pave the way for the finalisation of the business rescue process and restructuring of the airline through the following activities: Appointment of an Interim Board; Appointment of an Interim Chief Executive Officer and Interim Chief Financial Officer; Implementation of a Social Plan a training layoff scheme which will be facilitated by the Transport Education Training Authority in partnership with the Department of Labour and Employment; Selection of a suitable Strategic Equity Partner to strengthen the launch of the new airline; Settle the airlines legacy debt, including voluntary severance packages to employees; and Begin preparations for the formation of a new customer-centric airline designed to be lean, technology capable, digitally modernised and agile to service all market segments. The Department of Public Enterprises is engaging constructively towards the national interest objective of the formation of a new airline in the first half of 2021, which will be run in a professional and sustainable manner to support key economic sectors including tourism, and solidify South Africa as an african gateway to international markets. The Ministry believes that the restructuring contained in the Business Rescue Plan for SAA is fundamental and will create a solid base for the emergence of a competitive, viable and sustainable national airline for the Republic of South Africa. The cumulative effect of these actions is that government will be partnering with the private sector in the launch and management of the new airline and relieving the financial burden from the fiscus, the Ministry said. The Business Rescue Plan, concluded in line with section 151 of the Companies Act, has made the following recommendations: A payment of a compromise dividend to the Companys concurrent creditors of R600 million which would equate to approximately 7.5 (seven and a half) cents in the Rand) and payable over a three-years period; A payment of approximately R1.7 billion to aircraft lessors, which is an equivalent of six months aircraft rental payments, again, payable over a three-year period; The post-commencement creditors will be paid directly out of the working capital injection for the restart of the airline; The lenders, inclusive of PCF lenders, will be paid as contemplated in the budget announced by the Minister of Finance on 26 February 2020; and Retrenchments, estimated to cost R2.2 billion, are contemplated which will result in one thousand employees being retained by the Company and such retrenchments will be pursued through either the Leadership Consultation Forum or section 189 process of the Labour Relations Act. The Plan contemplates the following: An initial working capital injection of R2.8 billion of which R800 million is for the payment of post-commencement creditors; Retrenchment costs of R2.2 billion; A provision for un-flown tickets of R3 billion required in the medium term and Payment to Creditors, other than Lenders, in the amount of R2.2 billion.
The severe impact of the Coronavirus pandemic on the economy has forced the National Treasury to embark on extensive fund allocation manoeuvring, in a bid to soften the blow of the pandemic on the most vulnerable. This has led to the identification of R500 million for assistance with food relief, among other beneficiaries. Documents accompanying Finance Minister Tito Mbowenis Medium-Term Budget Policy (MTBPS) Statement indicate the amount would be added to the provincial equitable share for providing food relief in response to the impact of COVID-19 to mitigate the adverse effects of hunger. Funds were identified from various sources. Funds have also been sourced and redirected to the school infrastructure backlog to the value of R475 million. The funds will form part of the completion of projects that are part of the Sanitation Appropriate for Education (SAFE) initiative, which deals with the replacement and removal of inappropriate and unsuitable sanitation, including pit toilets, at schools. The funds are for schools in the Eastern Cape, KwaZulu-Natal and Limpopo, reads the 2020 Medium Term Budget Policy Statement. The report also details reductions to provincial conditional grants for R10.5 billion for the business rescue plan for South african airways. The reductions are made uniformly across programmes falling within national departments; these include provincial conditional grants. There will be no reductions made to the provincial equitable share for this purpose, the report reads. With respect to the reductions to conditional grants, the Treasury said these are made proportionately across provinces as much as possible. Provincial conditional grants are reduced by R1.3 billion. These are made up of R56 million reduced from the national tertiary services grant and R14 million from the community library services grant. Another R14 million is reduced from the comprehensive agricultural support programme grant while R52 million will be subtracted from the health facility revitalisation grant. Above this, R224 million is reduced from the HIV, TB, malaria and community outreach grant while R5 million is deducted from the ilima/letsema projects grant. Exactly R980 000 is reduced from the land care programme grant. While R4 million is set to be taken from the mass participation and sport development grant, R42 million is lessened from the national health insurance grant. Just over R26 million is reduced from the statutory human resources, training and development grant. Also, R37 million is reduced from the title deeds restoration grant. The document further indicates that R336 million is to be taken from the school infrastructure backlogs grant while R240 million is reduced from the national health insurance: indirect grant. Housing is not spared, with R273 million reduced from the provincial emergency housing grant. Reduction to the provincial equitable share indicate that R25.3 billion is set to be cut from this. This is because reductions were not included in the calculations of the allocations to provincial government at the time the budget was tabled. This is part of the reduction of R160 billion to the growth of the public-service wage bill that was announced in the Budget tabled in February 2020, the Treasury said. While provinces are responsible for basic education and health services, roads, housing, social development and agriculture - municipalities provide basic services such as water, sanitation, electricity reticulation, roads and community services. Provincial and municipal governments face multiple pressures over the medium term as government reduces expenditure growth and poor economic performance affects other revenues and funding sources, said the document. During the 2021 MTEF period, transfers to provinces and municipalities are growing below inflation or contracting. Over the medium term, reads the report, government proposes to allocate 48.2 % of available non-interest expenditure to national departments, 42.2 % to provinces and 9.6 % to local government. Over this period, national government resources decline at an annual average of 3 %, provincial resources increase by 0.9 % and local government resources increase by 2.1 %, it reads.
State-owned South african airways has limped along for a decade thanks to regular government bailouts.
The department has briefed Parliament on the performance of SOEs like Transnet, Denel, South african airways (SAA) and Eskom.
Consultant Nicholas Linnell has told the Zondo Commission how former South african airways (SAA) chairperson Dudu Myeni facilitated discussions around affairs...
South african airways' Business Rescue Practitioners (BRPs) say they have taken a decision to suspend all airline operations with immediate effect, while they wait for an outcome to the group's funding issues.
This comes after South african airways (SAA) Technical suspended its services to Mango due to non-payment.
South african airways needs more than R10 billion for the restructuring of the embattled airline.
The Department of Public Enterprise (DPE) on Friday confirmed that government will reprioritise funds to finalise the restructuring of South african airways (SAA) and the implementation of the airlines business rescue plan. The DPE said an announcement to this effect will be made in the Adjustments Appropriation Bill, which will soon be introduced in Parliament. The national carrier will not be liquidated. Because the restructuring process should be brought closer to finalisation in the next few weeks, lending institutions will be requested to finance the restructuring process and honour commitments for voluntary severance packages and retrenchments. At the same time, the DPE will continue to assess the 20 unsolicited expressions of interest from private sector funders, private equity investors and partners for a future restructured SAA. The DPE is sympathetic to the plight of SAA employees, while continuing to work with other government departments, including National Treasury, to make sure that the airlines restructuring plan will be successfully implemented, the department said. In charting the way forward, the DPE believes the key to solving the difficulties at SAA is the finalisation and implementation of the business rescue process, followed by the start of a restructured airline and appointment of new non-executive directors and leadership team, including securing a credible strategic equity partner that can introduce the required technical, financial, and operational expertise into the business.