This interview was aired on RSG Geldsake (in English).
RYK VAN NIEKERK: South African Airways, SAA, took to the skies last week, 18 months after its planes were grounded when the airline went into business rescue.
The airline’s revival raised eyebrows as its private-sector partner, the Takatso Consortium, was not involved with the airline operations. The government and the consortium announced a few months ago with great fanfare that Takatso will pump R3 billion into SAA over three years, and will receive a 51% shareholding in return. The Takatso Consortium consists of the infrastructure investment firm Harith and the aviation group Global Aviation.
On the line is Takatso CEO Gidon Novick. Gidon, thank you so much for joining me. Why were you not in seat 1A when the first plane took off?
GIDON NOVICK: Ryk, I wasn’t offered that seat, unfortunately. They always put me at the back, next to the toilet.
RYK VAN NIEKERK: [Chuckling] So what happened? Why wasn’t Takatso operationally involved when the airline took to the skies?
GIDON NOVICK: We are still busy with the transaction. It’s a complex one, lots of moving parts [and with] a long legacy, as you well know. We are taking our time. We’ve got to do it properly. We’ve got to do it right and work through the complexities. In the interim there was a decision to get started and I guess timing just wasn’t appropriate for us to get involved in the relaunch that took place last week.
RYK VAN NIEKERK: Well, the deal was announced in early June. It’s now three months later. Was the intention in June to be part of the whole relaunch of the airline?
GIDON NOVICK: I think it would have been ideal, to be honest. I mean, it did make sense to do it all in one. But I don’t know – from my experience, not only in this particular transaction, these deals always take longer. Everyone always sits down and says ‘Let’s get it done, get it done quickly’, and inevitably it does take longer than everybody would ideally like.
RYK VAN NIEKERK: What are the outstanding points you still need to agree on, because it does sound as if there may be a bit of friction when you are probably now looking at the fine print?
GIDON NOVICK: Yeah.
There is friction and there should be friction in a transaction like this.
It’s a significant transaction, not only in terms of the value, but in terms of the significance to the country, to state-owned enterprises – government strategy regarding state-owned enterprises. So I think it’s got to be done right. Certainly from the consortium’s point of view, it’s got to make commercial sense. And there are pieces that need to be negotiated: the value, the terms and conditions, and it’s got to be done properly.
RYK VAN NIEKERK: I think what was surprising was that government was prepared to offer a private sector company a majority stake in the airline. The number of 51% was mentioned – is that one of the sticky points?
GIDON NOVICK: Not at all. We wouldn’t be involved and we wouldn’t be in the process if it wasn’t for that. That was absolutely necessary – that it is privately controlled and commercially run. I think the two come hand in hand. And so, absolutely, that’s agreed and will be part of the deal.
RYK VAN NIEKERK: They were reports that one or both of the Takatso shareholders, Harith and Global Aviation, withdrew from the process. What is the status on their involvement?
GIDON NOVICK: No, no, no. Both are involved. Harith is the key strategic funding partner and Global and the team at Lift are involved as technical partners. So it’s very much in play, very much intact.
RYK VAN NIEKERK: And the R3 billion funding – is that still available?
GIDON NOVICK: Well, that R3 billion is an estimated commitment over time. It’s certainly not an upfront commitment. As we learn more and more about the business and the business plan we’re getting a better sense of the exact quantums involved.
But there certainly will be a significant upfront investment into the business; importantly it’s going to be going into the business and not as a purchase of shares or not a quantum for a purchase of shares.
But the exact quantums of investment are one of the issues still being negotiated.
RYK VAN NIEKERK: So how long do you think it will take for you to actually put ink on paper?
GIDON NOVICK: Ryk, you know what, I’m actually not even going to give a timeline, because you just can’t predict these things. On the one hand we want to do it sooner rather than later, but on the other hand we’ve just got to get it right. And in my mind that’s more important than speed.
If it takes another few months then so be it, but it must be done right.
There are a lot of parties involved in this transaction, as you can imagine, to get everybody into a place [where] they’re comfortable and happy, and more importantly, to give the South African public the confidence that these types of deals can be done and can be successful I think is critical.
RYK VAN NIEKERK: Who are you negotiating with? The SAA management, the board, or the Department of Public Enterprises?
GIDON NOVICK: No, it’s the DPE. They are the shareholder and they are the party that’s relinquishing 51% of their shareholding. They are the counterparty and they’ve actually been really good counterparties, negotiating partners – tough when they’ve needed to be tough. I think fair overall. Obviously there’s just a plethora of issues to be negotiated and discussed.
RYK VAN NIEKERK: It sounds as if the attitude has changed since the announcement. We spoke shortly after it was announced in June this year, and you were very, very positive – and it almost sounds like you are a lot more reserved now. Was the deal maybe announced prematurely before you actually had to talk about the key elements of the contract?
GIDON NOVICK: I think the intent is very much still there, Ryk. You know, both parties want to do the deal. I guess maybe naively we thought it could be done a lot quicker. But the intent is there and we still very much want to do it and want to do it right. If it takes a little bit more time than we initially anticipated, then we need to be a little bit patient.
RYK VAN NIEKERK: Gidon, thanks so much for your time. That was Gidon Novick, CEO of Takatso.