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Government sells majority of SAA to private entities

Global Airways and Harith General Partners to take a 51% shareholding in state airline.
Image: Bloomberg

South Africa agreed to sell a majority stake in the country’s grounded national carrier to a local jet-leasing company and private-equity firm, ridding the government of an entity that has long been a drain on state finances.

A consortium comprised of Johannesburg-based Global Airways, which owns recently launched domestic airline Lift, and private-equity firm Harith General Partners will take a 51% shareholding in South African Airways, Public Enterprises Minister Pravin Gordhan said on Friday. The government will retain a minority stake.

The rand strengthened on the news, trading 0.5% firmer at R13.55 to the US dollar as of 10:11 a.m. in Johannesburg.

The grouping named Takatso will invest as much as R3.5 billion ($258 million) over the next three years, Lift co-founder Gidon Novick and Harith Chief Executive Officer Tshepo Mahloele said in an interview.

“Government will have no further financial obligations to the company, outside of the existing liabilities that they will settle,” Novick said. “Route networks we are still working on, and it will be a phased roll-out based on demand re-emerging post Covid.”

The sale of SAA comes about six weeks after the airline emerged from lengthy bankruptcy proceedings, having reduced its workforce by almost 80% and cut liabilities to about 2.6 billion rand. The next challenge is to resume international flights, though South Africa remains cut off from much of the world due to pandemic travel restrictions.

Sustainable airline

The carrier is among a number of South African state-owned companies to have deteriorated into a state of financial distress over the past several years, in large part due to mis-management and corruption. However, the SAA disposal marks the first effective privatisation of a major entity since the sale of former phone monopoly Telkom SA about two decades ago.

A longer-term goal is to list the carrier on a stock exchange, Gordhan said. In the meantime, the government will retain special voting rights to ensure the airline remains in the country, among other national priorities.

The deal represents a triumph of sorts for Gordhan, who has argued for the revival of SAA with the help of private investors while others were calling for it to be liquidated. The carrier has been the beneficiary of numerous bailouts and government debt guarantees over the years, and Finance Minister Tito Mboweni reluctantly allocated R10.5 billion from the state last year to help it stay afloat.

Global Airways started Lift in December last year under Novick, a former head of Comair Ltd., which operates the South African low-cost airline Kulula. Harith invests in infrastructure across Africa, and is the co-owner of Lanseria Airport north-west of Johannesburg. The duo will complete due diligence before the deal is finalised.

While SAA is now “solvent and liquid,” business-rescue practitioners said when handing over the aircraft, subsidiaries including low-cost arm Mango and maintenance firm SAA Technical remain under financial strain and are in the process of being recapitalised.

The Department of Public Enterprises and the new consortium will together assess the future of the divisions as part of the due diliegence process, Gordhan said.

Read: SA set to announce strategic equity partner for SAA

Read: SAA aims to resume flights in July or August

© 2021 Bloomberg

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This is gonna end in tears. The tears are neither mine nor are they of joy.

What could go right?

Pravin will save the day if things go South again.

The private equity partners definitely guaranteed a bailout.

I take my hat off to them.
It was like selling a car without an engine for a new car price.
Well done guys.

Maybe do the same with Eskom, what do they call it now?

Yes Yes Yes!!!!! i am so happy

I would’ve been happier if it came before the R10billion bailout by taxpayers

I trust this has Competition Commission approval.

Ebrahim will stir the pot here with his great foresight and wisdom.

Solvent and liquid, hmm. They still have to settle with the pilots, see more of Pravins money (tax payers money) being spent. And no, I will not fly with this turkey.

I now won’t fly with Lift either – in addition to SAA and Mango!
There’s too much baggage and tax payers’ money at risk – also down the line. But of course with Gordhan coming to the party with all civil servants’ business trips restricted to the government airline, the deal was attractive to the majority stake owners. All that remains is now for the DGs of all government departments to push for as many as possible business trips (and vacations with families) for officials in their departments to ensure 100% bums on seats at not only SAA and Mango, but the new airline Lift as well!

Nice equal playing field for airlines in SA – SAA and Gordhan’s legacy honks! Stay away!

Wrong pic. Should have been a crashed plane. What a farce. First the corrupt ANC loot billions of taxes to keep the SAA cadres in luxury and now they just give it away with no accountability for missing billions. Disgusting. Doing business with a corrupt government is always a disaster.

It is not going to work. We were told the world would open up in 2020, it never did. SA is still on red-list of most countries and tourism is virtually non-existent.

Where is this airline going to get passengers now?

It seems Gordhan is in charge of the business plan????? Communist, Transformation, BEE, BS as usual.

If this is the priority of your business and not sound business principles, well…. You are dead in the water and as an airlind you should be nowhere near the water!!!

Had the people that bought it agreed to that BS Hahahaa. You are plain dumb and you deserve go bust!!!

TSK!! These people!!

Will the new buyers pay back the R100Bn spent on bail-out to SAA over the last 10-15 years?

The tax payers want their money back.

The thing here AP is that we the Tax payers will be bailing out the 51% Black Consortium when this deal goes bust ……. cause it will go bust !!

I wont be using them

You need to up your medication if you are even contemplating that will ever happen!!!

At least they finally let go of the crazy idea that they could get a partner for a minority stake.

In a partnership like that you’d simply watch how the government destroys your investment. You need full control to run it like a business not a milking cow. So at least 51% was always the only option.

51% may be on paper but when the unions start to crack the whip which they will do very soon, when they see a chance to pull the wool over the new guys eyes.

These guys do not know how evil SA labor unions can be.

And somewhere in the fine print must be life long guarantees for government officials free rides. If so doomed – who else will want to support SAA?

For sure!

Harith partners have a shaky history – plenty deals done with government involving PIC money. Not to be trusted.

The PIC, controlled by the state, is the only possible financier for the deal.

The good news is that the new SAA plans to list on the JSE in 3 years time.

Then the PIC can turn its loan to fund the purchase into equity.

While they are at it, they can buy all the shares!

Do the same with other SOEs and see people doing some work for a change and earning their salary.

So if the new equity partners can sort the airline out with R3.5 billion, why has it been costing R10s of billions up until now?

Certainly the bargain of the century! What a farce.

Now that is the best question on the panel.

Thats the beauty of private entities; they don’t carry extra “weight”.

This may turnout to be a Gautrain in the sky.

I don’t care who owns SAA – I will never fly with them again. Ever.

So Gordhan gets it going his way.

As aghast as I have been by this perpetual drain on the fiscus and groundhog day drama, at least it is a way.

If the analogy of Telkom applies, could work out well in the long-term.

Could be a good move for a more honed ESG business and sustainable tourism catalyst cutting to the core of 4IR.

Not holding breath NB!.

I fear that the Government Employment Pension Fund might be sponsoring this face-saving exercise. (So glad I don’t work for the Government.) Like all these BEE deals, the existing shareholder has to lend money to the BEE shareholder in order to buy the shares. Did government lend money to Takatso and if so, what happens if they don’t repay?

More excellent news – twice – one week – All that needs to happen now is Duane Vermeulen must be declared fit for the Lions Tour then all’s well!!

As long as it is government-controlled it is dead in the water.

This is not government controlled – check shareholding!

Shame, get someone to help you understand….

How long have you been Africa?

From another report:

“While the shareholding places government in a minority position, the parties were vague about the Shareholders Agreement that will detail its mandate.

This could see the State retain several veto rights or influence including Board composition, network and fleet amongst others.”

HRT is your friend.

The SA public has a moral obligation to boycott SAA.

I think its a smokescreen.
I think they are selling it to the ‘tax payer’.

This is awesome news! Hallelujah! Win-win for SAA. It would be nice if they could list on a stock exchange as well. Any company needs business savvy to survive. SAA is no different.

List on exchange??? Uhmmm….

Maybe they can buy some audited financials from one of the multi national auditing firms.,..

They never bought the debt so shoulder to the wheel fellow taxpayers…..

Please add a route between PE and Bloemfontein…

These are early days. No details of this transaction have been released. Exactly how much is Takatso paying for SAA.02? Or are they getting it for zilch? What’s going to happen to the remainder of the staff? Will there be further retrenchments, this time on Takatso’s terms. Witness that Telkom underwent a roughly similar process: started with about 46,000 staff; now has about 13,500 staff. Where is Takatso’s R3,5bn “investment” coming from? Will it be honoured? What/how will the unions do/think/act as the deal is a step towards privatisation?

F^%$K EVERY single state touched and therefore infected institution. Let them and their parasitic employees suffer their fate.

What a JOKE – voted in parasites allowed to even contemplate running a business? Stop paying your taxes and start kick the living S$##T out of government officials!

End of comments.

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