SA Express faces final liquidation

If bank guarantee not received by close of business on Thursday.
Should the payment not materialise Fly SAX will be required to ‘look for’ other financing options before April 29. Image: Tod Burns

SA Express’s anchor investor has until close of business on Thursday (March 25) to produce the bank guarantee required for the balance of the R50 million purchase price of the airline.

Roughly R24 million was raised following an auction of the airline’s assets in November last year, leaving an outstanding balance of R26 million.

In January the airline’s provisional liquidation was extended to April 29 to allow for the conclusion of the shareholding agreement between the provisional liquidator and the government.

The payment of the outstanding balance and the conclusion of the shareholding agreement has to be finalised before the end of April in order for the airline to avoid final liquidation.

Worker-owned entity

SA Express, which has been under provisional liquidation since April last year, is set to be owned by worker-owned entity, Fly SAX after the entity was chosen as the preferred bidder in October.

The entity met with the airline’s liquidator, Aviwe Ndyamara, and the anchor investor on Wednesday to discuss the payment of the outstanding balance. The anchor investor is also expected to provide seed funding that will be used to recapitalise the airline to get it off the ground.

However these funds had not materialised at the time of the meeting, according to Ndyamara. Should the payment not be made by the end of Thursday, according to the agreements signed with the anchor investor, Fly SAX will be required to “look for other [financing] options between now and the [end of] term date”.

Crowdfunding

The airline was set to be recapitalised through crowdfunding platform Uprise.Africa. This has however been put on hold to allow the anchor investor to provide the much needed financing immediately.

Initially, Fly SAX had estimated that it would require R250 million as start-up capital for the airline, with R200 million to be sourced from the anchor investor and through equity crowdfunding.

The public offering will reopen once the airline resumes operations.

Chief executive of Uprise.Africa Tabassum Qadir said the initial anchor investors secured last year – Imperial Capital LLC and Landile Shembe Foundation – both still intend to participate in the equity crowdfunding round.

“However once shares have been transferred to Fly SAX the discretion will be solely with their anchor [investor] (undisclosed by Fly SAX) if they want to crowdfund or not as they may not be open to idea of an alternative and institutional-free funding model but rather a traditional mode of funding,” she said in a statement.

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Mystery investor

Both Fly SAX spokesperson Thabsile Sikhakhane and Ndyamara declined to provide the name of the mystery anchor investor as doing so would breach signed non-disclosure agreements.

Moneyweb however understands that Siga Express,  Tshepo Mahloele and Lebashe Investment Group have all thrown their hats in the ring to potentially save SA Express from final liquidation.

Siga Express is a subsidiary of Johannesburg-based investment holding company Siga Capital. It focuses on “being an integrated public transport operator through partnerships, new contracting, and acquisitions in the South African market”, according to its website. Mahloele is the chairman of the Lebashe Group.

In correspondence sent to Ndyamara in January, seen by Moneyweb, Siga chair Patuxolo Nodada and Tshepo Mahloele, ( representing Harith General Partners according to the letter)  , jointly offered to provide the R26 million required to buy SA Express.

 

Harith spokesperson Khaya Buthelezi told Moneyweb that the company had not provided the airline’s liquidator with the outstanding funds required to purchase SA Express. Despite the correspondence sent to the airline’s liquidator naming Mahloele as a representative of Harith, Buthelezi told Moneyweb that the company is not involved in the transaction.

Nodada had not responded to queries by the time of publication.

Lebashe chief investment officer Warren Wheatley said the investment company was approached earlier this year by Fly SAX to “support them” in their bid to buy SA Express. The company has however not made any financial commitments.

“We’ve written back and expressed an interest to work with them, but it [the transaction] is subject, of course, to detailed due diligence, [a] detailed understanding of the strategy, and detailed negotiations,” he said.

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Airlines all over the world is having a hard time. One wonders if it is wise to invest in any airline, never mind a bankrupt airline?

on top of it – crowd funding can help, but for sure not on a continues basis, if it can not generate its own income and a positive cash inflow by its operations, it will be a fruitless exercise.

Sensei, I’ve seen more of these land distribution farm operations throughout SA than what you’ve probably seen – in person – and certainly, you’re spot on; some were partly financed by countries like Sweden, Norway etc, and I could probably tell you more than you me about government’s failed redistribution efforts.
However, I also know of cases of flourishing black-owned commercial farms – one woman-owned outside JHB – in flower exports to the UK and Europe going for a good 2 decades by now and not part of government financing or redistribution. In the Cape a few km from me there is a flourishing goats milk cheese farm, owned by a coloured lady who was trained in France. She also exports her products and several wine farms are owned and operated by black women around here. None of these successfull farms have anything to do with government money or backing. They’re not huge commercial ventures the size of Bertie Van Zyl’s fresh produce farms up north, but are run on exactly the same profit and sustainable basis as any other where government is NOT involved. In the case of the goats milk cheese farm at Imhoff, Kommetjie, it was local businesses that sponsored the overseas training, and from there the woman business owner obtained normal finance from banks to rent the land, employ several employees from the area, produce the cheese of which the export products are subject to the same food safety regime of approvals and inspections that all other exported food is. The farm also caters very heavily for the masses of overseas visitors who flood to Cape Town every summer.
So I believe that with the right training and aptitude for farming anyone has an equal chance of success – the problem comes in when people with no exposure to farm life become beneficiaries of grand government schemes.

Thank you, Louise. I agree 100%. The playing field is level. People with the right mindset and skills can be successful. It is only that the success rate is very low, statistically.

All those ‘secret investors’ that in the end never turn up!

The concept that workers are able to run the business is a purely communist one. This idea ignores the fact that risk management, skills and capital are prerequisites in any business venture. Workers, per definition, do not have these crucial attributes. The profit motive is the driving force in the free market. The profit motive is responsible for the efficient allocation of scarce skills and resources. Therefore, no business can survive in a free market environment if the protection of jobs is high on the agenda. It is similar to protecting the cost structure and striving for increased inefficiency and more losses. This is the opposite of capitalism.

Even a monopolistic state-owned entity will be bankrupted by such a management style. Consumers are supposed to pay for the inefficiencies. So, the dominance of the rights of workers can only be to the detriment of the rights of the consumer. We can either have an oppressive dictatorship where workers own businesses, or we can have a free society where the consumer is king. We cannot have both at the same time.

The worker becomes owner / part-owner / shareholder strategy has worked in some cases on farms – not in every case.
There’s evidence that workers who know how to farm – except perhaps how to balance the books, but those skills can be acquired through training – because they’ve been on a farm for many years, are more motivated if they have a share in the business, rather than merely earning a salary.

I do not agree at all. Not even close. Farming is not about the skills to spot the difference between a harvester and a plough, it is about financing the purchase and knowing when to use it. The difference between sustainable farming and bankruptcy is one week.

Viable farmers are on the cutting edge of management strategies and technological advances. Viable farmers educate and advise the professors at the Agricultural departments and train the technical advisors at the Dept. of Agriculture.

There is no way on earth for a farmworker, no matter how skilled he is, to manage a modern farming enterprise on a sustainable basis, without constant help from the state, in an environment where excellent farmers go bankrupt on a regular basis. To suggest this is possible is simply naive.

In theory, farmworkers can be successful farmers under the mentorship of a commercial farmer, yes. In practice, however, because they do not have the required mental attitude, they will not listen to the mentor and they will overspend on personal consumption and sell the diesel, fertilizer and tyres for cashflow. The proof is waiting for you at your nearest land redistribution project. This is not a race issue at all. It is simply an economic reality.

Another state-owned airline that didn’t make it; at least the bailouts weren’t as bad as at SAA.

End of comments.

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