Tue, 15 Jun 2021

  • Parliament is finalising a special allocation of R2.7 billion to SAA's subsidiaries.
  • The Organisation Undoing Tax Abuse wants to stop this.
  • The R2.7 billion is part of R10.5 billion allocated to SAA in last year's mini-budget.

The Organisation Undoing Tax Abuse wants prevent the allocation of R2.7 billion of the R10.5 billion allocated to South African Airways in the mini-budget last year, from going to the state-owned airline's subsidiaries.

It has made submissions to Treasury, the Department of Public Enterprises (DPE) and SAA, and plans to make a formal objection to Parliament's Standing Committee of Appropriations (SCOA) this week, it said on Tuesday.

The funding is urgently required for restructuring the subsidiaries to align them with the reduced business environment due to the impact of the pandemic, and to settle unpaid salaries and creditors.

But unlike SAA, its subsidiaries Mango, SAA Technical (SAAT) and AirChefs did not go into business rescue. SAA exited business rescue at the end of April.

The remaining amounts to be paid in terms of its rescue plan will be done via a so-called receivership.

'Unjustified, flawed'

"We want these funds to be withheld until submissions made to Parliament and SCOA have been heard, considered and decided on in Parliament," OUTA chair Wayne Duvenage said in a statement on Tuesday.

OUTA has written to Public Enterprises Minister Pravin Gordhan as well as Treasury director-general Dondo Mogajane, the chairperson of the SAA Interim Board Geoffrey Qhena, and the receivers of SAA, Siviwe Dongana and Bongani Nkasana, with a formal request, and raising its concerns.

OUTA will be submitting its objection to SCOA this week, explaining why the diversion of the R2.7 billion is "unjustified and flawed" in relation to SAA's business rescue plan.

Will it be enough?

Members of SCOA last week expressed concerns about whether R2.7 billion will be enough to keep the subsidiaries of SAA going or whether Parliament will be asked for more money in future. The committee was briefed by representatives of SAA and its shareholder, the DPE.

The committee is busy with the process of finalising the special appropriation of the R2.7 billion. It would be R1.6 billion for SAAT, R819 million for Mango Airlines and R218 million for Air Chefs.

"The matter of recapitalising these three subsidiaries was not contemplated as part of the allocation of the R10.5 billion allocation to SAA in the business rescue plan, other than to make mention thereof after the implementation of the plan," says Duvenage.

'Much bigger issues'

In OUTA's view, due process in terms of the Public Finance Management Act is not being followed.

Furthermore, OUTA is looking into the possibility of reckless trading by the executives and boards of the subsidiaries when it comes to their solvency and lack of filing for liquidation or business rescue over the past year or more.

"One must ask if the boards of Mango and SAAT contemplated their respective organisations' solvency and acted in the best interests of these companies, whilst they were making losses prior to and during the pandemic-induced economic meltdown," says Duvenage.

OUTA calls on the state "to stop wasting its limited resources in the bailout of non-core state-owned enterprises".

"The country has much bigger issues to deal with, such as the fight against corruption," says Duvenage.

In terms of the process to finalise the special appropriation, he expects it to go to the National Assembly and Standing Committee on Public Accounts by the first week of June and then on to the National Counsel of Provinces. He does not foresee big challenges in the process since this is not "new money".

Source: News24

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