Registered users can save articles to their personal articles list. Login here or sign up here

SAA said to consider share sale for cash

SAA has had an equity partner before.

South African Airways could sell shares to the public as the state-owned carrier seeks ways to end years of losses and reduce the need for bailouts, according to people familiar with the matter.

The move would enable the government to cut its stake in much the same way as it did with former phone monopoly Telkom SA. almost two decades ago, said the people, who asked not to be named as the information is not public. However, the carrier would first need to make progress with a turnaround plan designed to reach break-even in three years, they said.

While the sale of a stake to an equity partner has been aired repeatedly over the years, this is the first time it’s been suggested that SAA should list on a stock-exchange. Pretoria-based Telkom’s initial public offering in 2003 raised almost $500 million and the government’s shareholding is now just under 40 percent.

SAA declined to comment.

The airline’s Chief Executive Officer Vuyani Jarana is facing renewed pressure from his bosses in government, which last month put aside R5 billion ($352 million) to help SAA repay debt. Last week, finance minster Tito Mboweni said it was his preference to shut down the carrier rather than continue to stretch state finances, while his counterpart at the department of public enterprises, Pravin Gordhan, warned on Monday that “radical things need to be done” for the airline to survive.

Nigeria Flights
More immediate plans than the share sale include holding discussions with potential commercial joint-venture partners including Air Mauritius, one of the people said. That could lead to cost savings on routes to the Asian-Pacific market as the airlines would share operating costs.

SAA will also consider a resumption of flights to Abuja, the Nigerian capital, which it abandoned in 2017, the person said. The carrier would apply for a local license or find a partner to help Nigerians travel to the U.S.

Jarana, 48, a former executive at South African mobile-phone market leader Vodacom Group Ltd., was hired a year ago, in part for his experience in the private sector. He also has no connection with previous management, which has been embroiled in the corruption scandals that plagued state-owned companies during ex-President Jacob Zuma’s almost nine years in charge.

SAA fired its former CEO and chief financial officer in June after finding them guilty of misconduct, while former chairwoman Dudu Myeni has also left. Under their leadership, SAA failed to properly value assets or correctly record irregular or wasteful expenditure, according to an Auditor General report released earlier this year.

SAA has had an equity partner before. The government sold 20% of the carrier in 1999 to Swissair, which pioneered the concept of an alliance anchored via minority stakes, only to buy the shares back in 2002 when the European carrier went bankrupt.
COPYRIGHT© 2018 Bloomberg L.P

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.


To comment, you must be registered and logged in.


Don't have an account?
Sign up for FREE

LOL. You must be joking. Billions missing and not one single person in jail.

We buy shares to get some of the future cash flows from a firm. Will normal equity investors ever see positive cash flows from SAA?

Considering their major shareholder is the government and they are on turnaround plan number 10, I would say with a high probability that you would get better returns by hiring a helicopter and throwing cash out the back. At least you would have fun doing it.

What a laugh. Now the ANC want us to invest money in a Company after they have effectively run it into so much debt and past the bankruptcy mark and that it is unlikely to produce a turnaround profit free of all the debt they have until my great grand children are grandparents and I have been dead for decades. The only way I could then be at a shareholders meeting would be if it was a seance.

Ask those who ran off with the cash to put their stolen money where their lying mouths are. That is one way of getting some return on what was manipulated from the taxpayers wallets.

Load All 3 Comments
End of comments.


Insider GOLD
ONLY R63pm

Moneyweb's premium subscription is a membership service which will give you access to a number of tools to take charge of your investments.
Or choose a yearly subscription at R630pa - SAVE R126

Get instant access to all our tools and content. Monthly subscription can be suspended at any time.



Follow us:

Search Articles:Advanced Search
Click a Company: