SAA deal falls apart
• Termination of sale to equity partner a blow to privatisation drive
Public enterprises minister Pravin Gordhan has announced that SAA’s deal with strategic equity partner Takatso has been terminated, in a setback to one of President Cyril Ramaphosa’s biggest privatisation drives amid pushback from some in the governing ANC party.
“Late last week there was agreement that by mutual consent this transaction should be terminated as there is no clear path forward,” Gordhan said after a cabinet meeting on Wednesday. He said that in a postCovid market, a new valuation on the national carrier’s worth was made and this overshot Takatso’s original R3bn offer.
“At the end of last year, we had a different economy and a different flying public, and a new evaluation was done. In essence, the business came up with about R1bn valuation of assets and the property was valued about R5bn,” Gordhan said.
UNDERPAYING
Speculation was rife that the sale of SAA to the Takatso consortium could be in jeopardy as some government and ANC leaders sought a re-evaluation of the airline’s value on grounds that the group of investors was underpaying for the stake.
The deal, signed two years ago, tested Takatso’s determination to build an African airline champion that could compete on the global stage without undermining the commercial merits of the move for its stakeholders. Takatso, which counted Africa-focused private equity outfit, Harith, as a partner, said it had agreed to renegotiate the terms of the deal six months ago “in good faith”, despite signing a valid, non-binding and enforceable agreement in February 2022.
“These negotiations have been protracted, and the resultant revised transaction structure has introduced unacceptable levels of risk and uncertainty,” said Takatso, which counts Tshepo Mahloele, chair of Arena Holdings, as one of its dealmakers.
RAISES QUESTIONS
The latest development raises questions about the fate of SAA, which tumbled into business rescue in 2019 after years of losses. The withdrawal of Takatso takes away a partner that would have injected R3bn cash over three years to fund its operations in exchange for a 51% stake.
Gordhan made it clear on Wednesday that there would be no further bailout for SAA from the national fiscus.
The deal, had it got over the line, would have been another step forward for Ramaphosa’s structural reform agenda, which has seen his government open private investment in power generation, and recently in rail transport. The government had
hoped to use the transaction as a model for selling strategic equity stakes in ailing parastatals.
Like most state-owned companies, SAA — cited as one of the primary sites of state capture — has been a drain on the fiscus, surviving on billions of rand in government bailouts until 2019 when it collapsed into the arms of business rescue practitioners.
Critics of the transaction demanded greater transparency in the deal-making process, which would have been the biggest privatisation effort since the government sold its stake in Telkom two decades ago.
The DA was one of the most vocal opponents of the deal, saying it may be “potentially” and materially noncompliant with the law because Gordhan, citing confidentiality clauses, would not share copies of the share sale agreement.
Uncertainty over the fate of SAA could compound the shortage of alternatives, especially on domestic routes. This follows a News24 report that Safair, which has captured 60% of the domestic air travel market, is under investigation and could be grounded for contravening licence conditions that require a majority local shareholding.