SA Express, the 26-year-old state-owned airline, has sent a letter to their more than 600 employees advising that they would not be paid, and that they were not to return to work. It would seem that SA Express will be the first of the cash-strapped state-owned businesses to be abandoned by the government. The airline owes more than two billion rand to creditors and was placed on provisional liquidation at the Johannesburg High court on April 29, 2020. Business rescue advisors Phahlani Mkhombo and Daniel Terblanche argued that the business had no prospect of survival which prompted the decision of the court. The final liquidation hearing is expected to take place on the 9th of June. Interested parties will have until then to provide reasons to the court on why the airline should not be liquidated.
A decade of state capture has decimated many state-owned companies and the extreme unprecedented effects of the lockdown on the economy will be the final nail in the coffin for some of these enterprises. In the case of SA Express, the government could not offer a bail-out and staff has not been paid since March. The UIF application resulted in only partial payments for the employees. Should the business not be sold within 21 days of the appointment of a final liquidator, employee contracts will be terminated and they will be entitled to preferent claims in terms of the Insolvency Act.
The act provides that all employees have a preferent claim of up to R12,000 for salaries and wages and R4,000 in respect of leave pay, or any other form of paid absence and R12,000 in respect of retrenchment pay.
They said these claims would be paid from the free residue funds established once all secured creditors had been paid. Dividends in respect of claims were paid to creditors only after the confirmation by the master of the high court of a liquidation and distribution account.
The liquidators said all contracts of service not already terminated will, unless the liquidator and the employees have agreed on continued employment going forward, automatically end 45 days after the appointment of the final liquidator.