South Africa Funds for Airline Breach Rules, Administrators Say

South Africa’s Department of Public Enterprises has paid 1.5 billion rand ($98 million) to the administrators of the bankrupt national airline, but it can’t be used because they say the conditions imposed breach labor and companies regulation.

South African Airways, which was placed under administration in December last year, hasn’t flown since March and its business rescue plan details a hierachy of payments including severance packages for dismissed workers. Labor union members are currently demonstrating because they haven’t been paid.

“The conditions that were stipulated for how it should be spent are in contravention of both the Labour Relations Act and the Chapter 6 of Companies Act,” the administrators said in a statement sent to Bloomberg, “So, we are unable to utilize the funds until the conditions have been amended.”

Under South Africa’s companies act when a firm is placed under so-called business rescue advisers are the first to be paid, followed by secured creditors and employees for work done during the business rescue period.

The department is preparing a statement, said Richard Mantu, its spokesman.

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