SAA’s turbulent journey to nowhere

In a dramatic twist that can only be scripted in the murky theatre of SA politics, the much-vaunted privatisation of SAA has hit an air pocket. The strategic equity partnership with a group of black investors, Takatso, once hailed as a cornerstone of President Cyril Ramaphosa’s reform agenda, has been abruptly terminated. Public enterprises minister Pravin Gordhan’s announcement last week is more than a corporate setback, it is a sobering reality check on our privatisation aspirations.

The deal’s collapse, by mutual consent, is a narrative of the nation’s socioeconomic struggle to lift the weight of state-owned enterprises (SOEs) off its fiscal shoulders. The transaction, backed fully by former finance minister Tito Mboweni, and a retiring private enterprises minister, Gordhan, was a politically bold move, a signal of intent to wean SOEs off the government’s dwindling fiscal reserves. But the script has flipped, leaving the flag carrier that became synonymous with financial haemorrhage hanging by a thread and punching an irreparable hole in Ramaphosa’s ambitious reform agenda.

To be sure, the post-Covid market is an unpredictable beast. Yesterday’s valuations are today’s fantasies. And yes, the reevaluation of SAA’s worth, which now overshoots Takatso’s initial R3bn offer, reveals the volatile nature of the aviation industry. But it is worth noting that the government signed an undisputed “valid, binding and enforceable” agreement to sell the once proud national flag carrier for a nominal fee in exchange for a R3bn working capital injection.

The implications are profound. For Takatso, led by Tshepo Mahloele, the withdrawal means stepping back from a deal that promised to reshape the African aviation landscape. For Ramaphosa, it is another false dawn, a missed opportunity to showcase the deal as a symbol of a new era where private investment could resuscitate failing parastatals. For the ANC, it is a reminder that the path to reform is fraught with ideological battles and vested interests that can ground the most well-intentioned plans.

The privatisation of SAA was supposed to be a tale of triumph, a testament to the government’s commitment to structural reform. Instead, it has become a cautionary saga of what happens when political rhetoric meets the harsh realities of market dynamics and shareholder interests.

The deal’s unravelling shines a harsh spotlight on the need for transparency in such high-stakes transactions. Critics, including the DA and EFF, have been vocal about the potential noncompliance with the law, citing the confidentiality clauses shrouding the deal in secrecy. They argue that this could have been the largest privatisation effort since the government sold its stake in Telkom more than two decades ago, yet it has all been done in secret.

As Gordhan made it clear, there will be no further bailouts for SAA. But what is its fate now? The airline’s collapse into the arms of business rescue practitioners in 2019 was a stark reminder of the consequences of years of mismanagement and corruption. The Takatso deal was a lifeline, a chance to turn the page on a troubled past for SAA, which has been an albatross around the neck of the fiscus. Now the airline’s prospects look bleak.

The broader implications for Ramaphosa’s reform agenda cannot be overstated. The privatisation of SAA was meant to be a template for selling strategic equity stakes in other ailing SOEs. It was a chance to demonstrate that the government could facilitate the entry of the private sector into sectors long dominated by state control. But this setback sends a troubling message to potential investors and international observers about the stability and predictability of SA’s policy environment. Name one investor who would get into business with the government if it cannot be trusted to keep its word. None.

This editorial is also a call to action for the government to navigate the stormy weather of privatisation with greater foresight, transparency and commitment to the long-term viability of national assets. The government must reassess its approach to SOE reform, ensuring that future deals follow a transparent framework that delicately balances political factions and economic imperatives serving the national interest.

As the dust settles on the aborted privatisation effort, one thing is clear: the reform journey is never a straight line. It is fraught with complexities and challenges. The saga is far from over, and the next chapters will be critical in determining whether SA’s privatisation journey can eventually reach a successful destination.

A SAGA OF WHAT HAPPENS WHEN POLITICAL RHETORIC MEETS THE REALITIES OF MARKET DYNAMICS