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Gordhan provides 3 reasons why SAA deal with Takatso has been scrapped
Gordhan also said the airline was in a sustainable position for the next year to 18 months and would not require further tax-funded bailouts.
Public Enterprises Minister Pravin Gordhan has announced the scrapping of the deal to sell 51% of South African Airways’ (SAA) shares to the Takatso consortium.
This, he said, was for three reasons: the government needed to ensure a fair value was attached to the sale of the 51% shares; public interest was secured in this fair value; and the airline should be placed in a more sustainable position than it was in 2019.
He also said the airline is in a position that is sustainable for the next year to 18 months, and there are other ways financing can be obtained should it be needed.
“But at no stage, in the course of the months that come, will the SAA get money from the fiscus,” he said, referring to tax-funded bailouts of the past.
Gordhan briefed the media in Cape Town on Wednesday regarding the deal that was first signed in 2021 but was busy being renegotiated.
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The deal had been controversial, with Gordhan previously saying some documents relating to it had to be kept secret due to the negotiations and the documents’ commercial sensitivity.
The documents are:
- The shortlist of interested parties from which Takatso was selected;
- The Harith General Partners’ expression of interest (Harith is the funding partner in Takatso); and
- The sale-of-shares agreement and addenda.
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However, a parliamentary portfolio committee on public enterprises threatened a subpoena, which saw Gordhan relent and agree to present the documents to the committee behind closed doors as long as members signed non-disclosure agreements.
‘An inevitable failure’
Democratic Alliance (DA) MP Alf Lees called the failure of the deal inevitable, as it was a “bad deal from the beginning”.
“The taxpayer took on all SAA’s massive liabilities of some R15 billion, leaving SAA debt-free with considerable assets, including a respected brand, all of which had a likely value that exceeded R7 billion.
“For 51% of this debt-free SAA to be sold for R51 was outrageous and a slap in the face of taxpayers.
“Currently, SAA is running at massive losses that amounted to some R760 million in the first three months of this year. This incompetent SAA management will now result in these massive and ongoing losses, leading to yet more taxpayer bailouts.”
He said the airline is diverting limited state funding away from areas that may stimulate economic growth.
“SAA must be cut loose and be sold. The airline industry has recovered, and a willing private buyer should be easily found.”
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Takatso appeared to be ‘the right fit’
Democratic Alliance (DA) MP Alf Lees called the failure of the deal inevitable, as it was a “bad deal from the beginning”.
“The taxpayer took on all SAA’s massive liabilities of some R15 billion, leaving SAA debt-free with considerable assets, including a respected brand, all of which had a likely value that exceeded R7 billion.
“For 51% of this debt-free SAA to be sold for R51 was outrageous and a slap in the face of taxpayers.
“Currently, SAA is running at massive losses that amounted to some R760 million in the first three quarters of this year. This incompetent SAA management will now result in these massive and ongoing losses, leading to yet more taxpayer bailouts.”
He said the airline is diverting limited state funding away from areas that may stimulate economic growth.
“SAA must be cut loose and be sold. The airline industry has recovered, and a willing private buyer should be easily found.”
Failure to meet requirements
“One of the requirements for the approval of the competition tribunal for this transaction was that Takatso must find a way of exiting the minority shareholder in Takatso, which was a combination of two firms: Global and another.
“Over a period of time, we inquired whether Takatso was executing what the tribunal had asked it to do, and we could not see any evidence of that.
“But the far more important point was that the valuation of the business and the valuation of the assets of SAA were undertaken in that 2020 period, which the property valuers, for example, would call liquidation value, and they gave us a sum of about R2 billion for the assets of SAA.”
Gordhan said SAA was not flying at the time, and did not own many aircraft, so it was worth very little.
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But late last year, there were far more people using the airline, and a new valuation was done, which came at R1 billion in the business and R5.5 billion in the properties, which meant any negotiations with Takatso would have to take this into account.
“Those negotiations continued for the latter part of last year and the beginning of this year. However, we came to a point where, whilst there was a meeting of buy-ins, so to speak, on some of the issues, there were other issues in which there was no meeting of buy-ins.
“For example, the exception that would be given to the new entity in terms of paying rent for the property that they would utilise. That is one example; there were many others.”
Transaction terminated
Gordhan said last week there was an agreement that, in terms of a clause in the old purchase agreement, with mutual consent, the transaction could be terminated.
“That clause was put into action, and both parties agreed after we enquired about the status of negotiations that there was no clear path forward as far as the transaction was concerned.
“We also have to bear in mind that the SAA is a public asset and it has modern valuations, if you like, in the process, and we must ensure that, from a public point of view, there is a fair value attached to the sale of the 51% shares.
“Secondly, we must ensure that the public interest is secured as well in ensuring there is this fair value.
“Thirdly, the process must ensure that the SAA is left in a more sustainable condition than it was in late 2019.”
The Minister said with the new valuations from last year, the government is convinced the airline can sustain itself for the next year to 18 months so that no jobs would be lost.
“We are confident that SAA has a bright future ahead of it,” he said.
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