South African Airways is up a creek. With a financial paddle that is you and I aka the taxpayer. Circling above in a banking holding pattern are creditors. It doesn’t really matter what Dudu “Fast Asleep” Myeni thinks, its what’s going to happen to her that is a True Story. Because the reality is our national carrier is no longer considered a going concern. By it’s own Board.
This has fiduciary implications for Myeni and her chommie Jacob “hehehehehehe” Zuma. While she appears to have high friends in places, this is only a fleeting moment of safety. Because coming soon at a SAA movie house near you is liquidation. No amount of spin doctoring is going to save the national airline, only a sudden and significant change in operations will do that, along with another beefy bailout.
That’s not going to happen while Myeni cocks a snook at Finance Minister Nhlanhla Nene. So she has to go.
The SAA Board Submission which you’re not supposed to see but is easily and readily available online – here – describes a very serious financial condition.
The essence of the finding is that SAA is no longer a going concern. Worse still, the submission describes a business being conducted recklessly.
That’s bad. Very bad. It’s a disaster for the present executive.
Our national Airline is suffering from reckless trading. Technically, creditors who’re owed billions could use Section 131 (1) of the Companies Act to apply for a court order placing SAA under supervision and to begin business rescue.
SAA does not meet the solvency and liquidity test required to continue operating as a going concern. Solvency relates to the assets of the company exceeding liability, and liquidity means the company can pay its debts over 12 months. It may pass the solvency test, but its failed the liquidity exam.
The Board Submission notes:
“Based on the reliance on a going concern guarantee and the inability for the auditors to sign off on the annual financial statements, SAA has been and remains technically insolvent. Accordingly, SAA is financially distressed and trading under insolvent circumstances. Any further trading under the current circumstances constitutes reckless trading in terms of Section 22 of the Act.”
What this really means is two things.
- That SAA files for business rescue and is then protected legally or
- The Directors apply for liquidation on an urgent basis.
Time is of the essence.
But Myeni, what of her? She’s hanging around meetings and refusing to co-operate. With Finance Minister Nene firstly. That’s all going swimmingly for this walking disaster of a Chairwoman. Zuma is protecting her back. For now. She’s refusing to negotiate and her edicts are ultimately self-destructive. However, when fiduciary reality catches up with her, she’s going to be toast. It’s all a great game. Then she walks away with the inevitable golden handshake. Goodbye, you’ve been a disaster, here’s R12m.
In the meantime we live with a terminal SAA that’s slipping quickly into a financial coma while Myeni and Zuma play the giddy goat. The Board Conclusion is noted. It’s suggested that the following four options be considered extremely urgently:
- Request the shareholder inject capital. That’s you and me folks, via the government.
- Finalise its decision regarding the Swap Option. This is a very technical process, but basically SAA changed an Airbus A320-200 purchase into a Swap for other aircraft. They’ve got to make up their minds NOW on this deal.
- Reach out to Airbus and try and find a way forward. If not, court action and possible liquidation threatens.
- Establish a transaction team to renegotiate the Swap. Myeni has tried to get that done through a third party – her .. umm .. friends?
Thousands of jobs are threatened. Staff are beginning to have an inkling about what’s going to happen.
It’s not going to be pretty, and perhaps its time to prepare the crime scene forensic cleaning team to put on their rubber gloves, mask and full-body gown. Wiping the blood off the walls at SAA is going to take nerves of steel and the constitution of a Visigoth.
Desmond Latham 