South African unions demand dismissal of finance minister Tito Mboweni over airline liquidation

The National Union of Metalworkers of South Africa and the South African Cabin Crew Association made the demand after the National Treasury under Tito Mboweni announced that no money would be allotted for South African Airways which faces liquidation

July 07, 2020 by Peoples Dispatch
South African finance minister Tito Mboweni. File Photo. Copyright (cc-by-sa) © World Economic Forum ( Eric Miller [email protected]

The National Union of Metalworkers of South Africa (NUMSA) and the South African Cabin Crew Association (SACCA) have demanded that president Cyril Ramaphosa “immediately intervene and fire” finance minister Tito Mboweni.

This demand was made in a joint statement by the two unions on June 5, Sunday. This was after the National Treasury, which Mboweni heads, pushed for liquidation of the national airline, the South African Airways (SAA).

The treasury told the Parliament’s Standing Committee on Finance on Friday that it has not made any allocation in the supplementary budget for the bailout of SAA, and two other state-owned enterprises, the SA Expressa and the diamond mine, Alexkor. The statement came just days ahead of a crucial vote by stakeholders to determine the future of the airline. 

The treasury claimed in its written presentation that these enterprises were “insolvent.” It added “no further action (is) required in terms of bailouts except” to finance the repayment of debt to those creditors whose loans have a government guarantee.

This will lead to the liquidation of SAA. The roughly 4,700 employees of the company will lose their jobs with a severance pay of no more than R32,000 (USD 1,880) regardless of the number of years they’ve served. Even this amount is not a guarantee, and is conditional on the availability of funds. This is the outcome that NUMSA and SACCA, among other unions, have been seeking to prevent for months. 

The unions have vowed to take all possible legal measures to prevent the liquidation. They reminded the finance minister that the Companies Act, which makes the provisions for liquidation, is “subject to the provisions of the South African Airways Act, 5 of 2007”.

The preface to this act states mentions that “since the State has a developmental orientation and regards South African Airways as a national carrier and strategic asset that would enable the State to preserve its agility to contribute to key domestic, intra-regional and international  air linkages, the State intends to retain it as a national carrier.”

The unions said that the Treasury had disregarded this preamble and was seeking to prejudice the vote of the creditors in favor of liquidation on July 14. 

The meeting on July 14 of the Leadership Consultative Forum (LCF) will see creditors and other stakeholders, including the unions, vote on a revised business plan presented by the Business Rescue Practitioners. The creditors’ share of votes outnumbers that of the unions. If the plan does not get 75% of the votes in its favor, a liquidation process will be triggered.

Contradictory positions on SAA

This position of the Treasury in favor of liquidation directly contradicts the public posture of the government’s Department of Public Enterprises (DPE). Minister Pravin Gordhan repeatedly said that liquidation is not an option.

Instead, the DPE had been seeking the support of stakeholders for the previous business rescue plan. This plan envisioned keeping the SAA afloat, with only 1.000 of the 4,700 workers. The remaining 3,700 workers, according to this plan, were to be offered a Voluntary Severance Package (VSP). 

This plan was put to vote at the LCF on June 25. The stakeholders adjourned the voting, and asked the BRPs to present a revised plan.

NUMSA, SACCA and Airline Pilots Association of South Africa (ALPA-SA) were opposed to this plan on the grounds that the massive job losses are not necessary. They pointed out that labor costs have not been the major source of drain on SAA’s coffers.

The unions maintain the airline’s finances have been sucked out over the years by overpriced contracts. Many of these were allegedly handed over in a corrupt manner to private companies for services which SAA could undertake at a lower cost internally.

However, because anything more than 25% of the vote opposing the plan would have triggered a liquidation, a negative vote was not an option. The three unions instead made a proposal to adjourn the voting until July 14 and to seek a revised plan from the BRPs.

One of the creditors, SA Airlink, a private competitor airline to which SAA owes R700 million, also made the same proposal, but for a very different reason. Airlink was concerned that the plan did not show how resources would be raised to repay the debts. 69% of the creditors supported the adjournment of the voting, evidently because they also shared Airlink’s concern.

Smaller unions concede to DPE

Infuriated by the adjournment, the DPE then withdrew from the forum, accusing the majority unions of collaborating with SAA’s competitor, Airlink. “That’s a lie!” NUMSA’s spokesperson, Phakamile Hlubi Majola, told Peoples Dispatch.

“We did not side with Airlink. We put our own reasons on the table. Airink made its own presentation and gave its own reasons, which were different. Secondly NUMSA and SACCA, the day before this meeting, were in court to oppose a liquidation application by Airlink. So for DPE to suggest that we support airlink is dishonest,” she added.  

In the meantime, on July 2, other unions – the National Transport Movement (NTM), the South African Transport and Allied Workers Union (SATAWU), the Aviation Union of Southern Africa (AUSA) and Solidarity – approached the DPE, expressing willingness to accept the VSP offered in the BRPs’ plan.

“The only recognized unions at SAA are NUMSA, SACCA, SAA Pilots Association (SAAPA) and the NTM. Solidarity and SATAWU are not are not recognized at SAA. So whether they agree or not is frankly neither nor there,” Hlubi Majola said. 

General Secretary of NUMSA Irvin Jim reiterated that NUMSA, SACCA and SAAPA are the majority unions at SAA, and any deal with the labor can only be made with them.

However, the DPE welcomed the other unions’ willingness and was reportedly going to ask the BRPs to take note, five days before they were expected to present a revised plan on July 7. 

Phakamile Hlubi Majola fears that if, as a result, the BRPs present the same plan again without revising it to address the concerns raised by different sections of the stakeholders, the result will be liquidation.

“Because the DPE cannot guarantee that the creditors will vote for this plan. It wasn’t only us who had a problem with the plan,” she said, stressing, “69% of the creditors also had a problem with this plan. So if we go into that meeting on July 14, and nothing has changed in the BRPs plan.. the creditors will simply vote ‘No’, and we will be on our way to liquidation.”

The Treasury has added more uncertainty to these existing uncertainties about whether or not the BRPs will present a different plan, and if they do, will it satisfy the differing and often antagonistic interests of labor and creditors. 

“To the extent that these statements have compromised the independence and credibility of the imminent vote on South African Airways’ Business Rescue Plan, NUMSA and SACCA are in the process of taking legal advice as to the best course of action and all our rights remain reserved,” NUMSA and SACCA said in the joint statement.