The Democratic Alliance (DA) has sent a legal notice to Finance Minister Tito Mboweni over the government’s commitment to source funding for a new South African Airways (SAA).
In the notice, DA’s lawyers gave Mboweni until 17h00 on Thursday (16 July) to confirm that he will not use section 16 of the Public Finance Management Act (PFMA) to fund SAA’s business rescue plan – or face legal action.
“If you intend to proceed to authorise funding under section 16 of the PFMA, our client will have no choice but to approach the high court for urgent interdictory relief pending a review of your decision,” the DA’s lawyers wrote.
‘Funding would be unlawful’
The party contended that using section 16 would be unlawful because “there is no emergency” and such expenditure would not be “exceptional.” It added, “Nothing about SAA’s decade-long decline or its current status in business rescue justifies this extraordinary short-circuiting of the usual appropriations process.”
On Wednesday, Mboweni and Public Enterprises Minister Pravin Gordhan signed a joint letter committing the government to “mobilise funding for the short, medium and long term requirements, to create a viable and sustainable new South African national airline.”
According to the business rescue plan adopted earlier this week, R10.1 billion is required to restructure the airline, stabilise its balance sheet and provide working capital for its entities.
“The restructuring will include severance packages to about 2,700 SAA employees who will be retrenched, which packages meet the minimum requirements of the Labour Relations Act, and the provides incentives to those employees at the lower rung of the remuneration scale to ensure that they are not worse off,” the Department of Public Enterprises (DPE) said in a statement on Thursday.
‘Yet another bailout’
DA MP Geordin Hill-Lewis said it was not clear where the government would “find the money” for the plan. He added, “It would be totally unacceptable to inject yet another bailout into SAA using public money, or to offer government guarantees for new loans.
“Even this commitment shows Minister Mboweni has backtracked on his previous stance not to countenance any further support for the bankrupt airline. If he is forced by the ANC and Cabinet to disburse public funds to SAA again, then he will have to carefully reconsider his position in the government.”
Last month, the Cabinet endorsed the business rescue plan and “the concerted effort to mobilise funding from various sources, including from potential equity partners for the uptake of the new airline.”
DPE also said it welcomed “the attraction of a mix of local and international investor groups to provide the new airline with technical, financial, and operational expertise to ensure significant South African ownership whilst diversifying the investor base.”
The troubled airline was placed under business rescue in December 2019 following years of mismanagement and government bailouts running into billions of rand.