In view of the dire state of SA’s state-owned enterprises , it comes as no surprise that there is heightened interest in not only the outcome of the SAA business rescue but also in whether such proceedings, as a process, are a workable solution for SOEs in general.
The process has already left its mark on employment law relating to business rescue. The first notable contribution is that of the labour court in the National Union of Metalworkers of SA vs SAA & others, which was confirmed on appeal. These judgments firmly establish that a business rescue plan is a necessary precondition for any retrenchment processes under the Labour Relations Act during business rescue proceedings.
The key takeaway from the SAA business rescue process is that maintaining a constructive relationship with employees and organised labour is critical to the success of the process. Standoffs with trade unions and employees, as we have seen in the case of SAA, are a significant impediment to the rescue process, resulting in delays and unnecessary costs.
In the case of SAA, to date a large part of its funding has been provided by the government, as sole shareholder. However, obtaining government funding is challenged in light of the ever-increasing demands placed on the strained fiscus. SOEs therefore may have to seriously consider alternatives to government funding: privatisation through private equity investments and/or debt equity swaps with creditors.
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