Tag: liquidation

Liquidation may be the only option for SAA

By Babalo Ndenze for EWN

Some members of Parliament said that the only option left for South African Airways (SAA) was liquidation.

This comes after a vote on a restructuring plan was delayed until July after creditors and unions adjourned talks.

It also follows a decision by the Department of Public Enterprises to withdraw from the Leadership Consultative Forum working on a business model for a new and restructured SAA.

The Department of Public Enterprises said that instead of creating conditions for attracting investment and skilled South Africans, three unions had put SAA on a path towards possible liquidation.

The department said that unions had effectively aligned themselves with a competitor who stood to benefit substantially should SAA be liquidated.

However the Democratic Alliance (DA)’s Alf Lees, a member of the Standing Committee on Public Accounts (Scopa), said that liquidation was increasingly looking like the only option.

“Now it seems to me that we’ve hit the wall and liquidation is the only option,” Lees said.

He said that the business rescue process should ideally have ended in December and the rescue team should have applied to court for liquidation back then.

“They should have then done what the law required of them to do and applied to court for liquidation, so that step now remains.”

SAA to cut 4 700 jobs

Source: IOL

South African Airways (SAA) has issued notice to all 4 700 of its employees that it intends to begin consultations on retrenchments, the business rescue practitioners (BRPs) for the troubled national carrier said on Monday.

“The joint BRPs today announced that South African Airways SOC Limited has issued a notice advising its employees of the intention to begin imminent consultations in terms of section 189 of the Labour Relations Act 66 of 1995,” a spokeswoman for the BRPs said.

They stressed that retrenchments, along with route and fleet reductions, were essential to avoid liquidation and said therefore a shorter consultation process had been proposed.

The notices went out to all unions representing staff and management, following talks over the weekend and earlier with labour representatives.

A reduction in route flow as well as the airline’s fleet were unavoidable, and apart from cutting staff, salaries could also be reduced, said the BRPs.

“The BRPs contemplate that all 4 708 employees will be affected and the number of jobs that will exist in the restructured organisation will be the subject of the consultation process.

“Significant changes to conditions of employment, including remuneration and benefits, appear unavoidable and will be sought by agreement.”

They added that they would seek to preserve as many jobs as possible but cautioned that the outlook for SAA had dimmed further following the spread of the Covid-19 virus and its impact on international travel.

SAA has stacked up losses of R26 billion over the past six years and was placed in voluntary business rescue in December.

“Load factors on the airline have declined steadily from August 2019 to a low of 71 percent in January 2020. Forward sales have also declined significantly with all markets showing negative or minimal growth, within a very competitive market. The recent marked decline in travel due to the Covid-19 virus will further exacerbate matters.

“The changes required at SAA are therefore both structural and economic. They are urgent if liquidation is to ultimately be avoided in which event all employees will lose their jobs.”

The business rescue team, which is due to submit a report to government at the end of March, said they were proposing a fundamental restructuring to enable SAA to function as a sustainable African airline and the current structure did not allow for this.

The restructuring process at this stage does not affect staff at SAA’s subsidiaries Mango, SAA Technical and Airchefs.

Initial consultations with staff and representatives will be held on Thursday.

The legally prescribed 60-day consultation process would end on May 8. However, the business rescue practitioners said an expedited month-long consultation process ending April 8 had been proposed in an effort to avoid liquidation.

It is essential that this process achieve an agreement between the company and the unions that will be communicated to the creditors and the lenders as part of the business rescue plan, if the business rescue plan is to be approved and liquidation avoided.

“The business rescue practitioners believe that if this is achieved, SAA will be sustainable and the future of SAA can be ensured, without further fiscal assistance.”

By Genevieve Quintal for Business Live

The VBS Mutual Bank is “hopelessly insolvent” and should be wound up as the purpose and object of the bank no longer exists.

This is according to the Reserve Bank’s Prudential Authority’s application to the high court in Pretoria.

The bank was placed under curatorship in March after looting by executives led to a liquidity crisis. A damning Reserve Bank report by advocate Terry Motau and Werksmans Attorneys, released earlier in October, detailed looting at VBS bank of nearly R2bn and identified the role of political players from the ANC and the EFF.

In an affidavit to the high court, Prudential AuthorityCEO Kuben Naidoo said the bank was hopelessly insolvent.

“Despite the efforts of the curator, the vortex of the black hole created by the role-players named in the investigator’s report, has resulted in the disappearance of VBS’s substratum and it being objectively impossible for VBS to achieve the purpose of its existence,” he said.

This decision will not sit well with various ANC MPs and those from the EFF who have called for the bank to be recapitalised.

During his maiden medium-term budget policy statement (MTBPS) last week, finance minister Tito Mboweni also indicated that the embattled bank could be saved. But Naidoo said the restatement of the 2017 financial statements, which were falsified and signed off by KPMG partner Sipho Malaba, was a monumental task for the curator, Anoosh Rooplal, to reconstruct the VBS balance sheet.

The results of this indicated that VBS’s liabilities exceed its assets and therefore it was “factually insolvent”. Naidoo said there was no possibility that VBS would be in a position to pay its debts and there was no possibility or prospect of the bank becoming a successful concern.

Rooplal also determined that curatorship was no longer viable for VBS.

It was necessary to bring an end to the curatorship as it would enable a liquidator to utilise the mechanisms provided by the insolvency and company law legislation, to recover monies from recipients in terms of void and impeachable transactions.

Naidoo said that after receiving a letter from the curator and after considering the investigator’s report he, in consultation with the governors of the Reserve Bank, determined that VBS must be placed in final winding up. “VBS is hopelessly insolvent and massive frauds have been perpetrated against it. There is no prospect of entering into any resolution plan in respect of VBS.”

The present activities relating to VBS are primarily directed at recoveries resulting from the thefts and frauds addressed in the Motau’s report, he said, adding that in the circumstances, it would not serve any purpose to grant a provisional winding-down order, as the conclusion of the “hopeless financial position” and the conduct of those who managed VBS, was unavoidable

He has asked the court to hear the urgent application to finally liquidate VBS on November 13, and has also asked the high court to appoint Rooplal as the liquidator as he has been inextricably involved in the affairs of VBS for the past seven months.

By Roy Cokayne for IOL

The South African Bureau of Standards (SABS) has been placed under administration.

This is after Trade and Industry Minister Rob Davies last month removed the entire SABS board because he had lost faith in its ability to effectively manage the bureau.

In May this year, Davies confirmed that the bureau was bleeding customers and potential revenue and in March this year he instructed its management to urgently oversee a detailed process to develop a turnaround strategy.

Davies on Friday announced the appointment of three SABS co-administrators, SABS group operating officer Jodi Scholtz, the deputy director-general of the Industrial Development Division at the Department of Trade and Industry (dti) Garth Strachan, and the chief director of technical infrastructure institutions at the dti, Tshenge Demana.

He said the co-administrators were charged with producing a diagnostic report and turnaround action plan.

They hade been appointed for the period from July 2 this year until January 30 next year and in terms of the provisions of the Public Finance Management Act, they had been given all powers and duties necessary or incidental for the proper functioning of the SABS. Sidwell Medupe, a spokesperson for the dti, on Friday confirmed that SABS chief executive Boni Mehlomakulu, who as chief executive was a member of the bureau’s board, had been dismissed as a board member, along with the other board members. Medupe also confirmed that Mehlomakulu now reported to and took instructions from the co-administrators.

The SABS last year reported a R44.3 million loss for its 2016/17 financial year.

The SABS has been in the spotlight since it emerged that it irregularly certified substandard coal by Guptalinked mines to facilitate the suspension imposed by Eskom on another supplier to pave the way for the Gupta-owned Tegeta contract to go ahead.

However, the problems at the SABS go much deeper than that and it has received widespread criticism in the past few years from many industries about the level of service these industries were receiving from the bureau.

Business Report reported in January last year that South Africa’s coatings industry claimed the SABS’s paint testing laboratories appeared to be non-operational.

The Master Chemical Blenders Association, which collectively represents more than 50 companies, last year told Business Report that their members were unable to get their compliance certificates from the SABS, despite interacting directly with Mehlomakulu and that the SABS did not have testing capability and that many were possibly no longer compliant.

The SA National Accreditation System (Sanas), which is responsible for accrediting industry bodies and laboratories that conduct testing and is recognised through legislation as the only national body responsible for carrying out accreditation, suspended the certification programmes of the SABS, but subsequently lifted this suspension in March 2016, claiming the suspension was of an administrative nature.

Complaints Many other industries have complained to Business Report about the level of service provided by the SABS. Davies last month confirmed that he had received many complaints from both big and small business, including complaints from black industrial players, that the government was working hard to expand, about the lack of service from the SABS.

Davies confirmed in response to a parliamentary question in May that the SABS had lost 1 052 customers since its 2015/16 financial year, including 401 customers since April this year, resulting in a loss of revenue to the bureau of almost R50m in this period.

In addition, the SABS had to refund 41 customers a total of R1.03m in this period.

Davies said the peak in customer losses was in the SABS’s 2016/17 financial year, due to customers cancelling their permits and certificates with the SABS.

The reasons for the cancellations included the suspension of SABS certification programmes by Sanas; customers moving to competitors; and expired certificates and permits.

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