Business rescue process culmination of years of mismanagement

By the time South African Airways (SAA) went into business rescue on 5 December, 2019, the airline had already lost more than R50 billion in bailouts over 10 years.

It was also several billions in debt and further burdened taxpayers with government debt-funding guarantees it needed to secure some debt in the first place. Its low-cost subsidiary, airline Mango, which went into business rescue shortly after its parent, is still in business rescue.

SAA’s business rescue process was the culmination of years of mismanagement, dysfunctional boards, infighting and to a certain extent, state capture under former chair, now delinquent director, Dudu Myeni. The airline had last turned a profit in 2011.

The time SAA spent in business rescue saw the airline slash its fleet of ageing aircraft, return leased narrow and wide body metal to lessors and retrench thousands of staff.

Bar a few chartered repatriation flights and controversial Covid vaccine sorties, the business was dormant while business rescue practitioners waded through a decade of mess and Public Enterprises Minister Pravin Gordhan publicised the search for a strategic equity partner for SAA.

SAA exited business rescue on 30 April, 2021 and two months later. Gordhan announced the selection of a preferred bidder to purchase the airline in a publicprivate partnership.

The Takatso Consortium at the time comprised majority shareholder Harith, a black-owned investment firm with existing aviation infrastructure interests like Lanseria Airport, along with Kulula and Lift founder Gidon Novick and Lift co-parent Global Airways.

Takatso was to purchase 51% of SAA’s equity for R 51 with the state retaining the minority share. The commitment from the preferred bidder was to make R3 billion in working capital available to SAA once the deal was inked.

What followed was a protracted period of what turned out to be very little activity. A veil of secrecy surrounded the proposed deal throughout.

However, it later emerged that Takatso didn’t have R3 billion to burn, noted in parliamentary documents published in November 2022.

It was also revealed that the company was seeking to borrow money to fund its working capital contribution thereafter.

In April 2023. SAA board chair Derek Hanekom told media that Gordhan was confident that the deal will be concluded “within the next four months”. That was 11 months ago.

Novick quit as chief executive last year June, but retained his shares in the consortium.

And slowly, allegations and lawsuits started to emerge; other bidders litigated against public enterprises for exclusion from the deal while more recently, former acting director-general of the department Kgathatso Tlhakudi suggested dodgy dealings and incorrect valuations of SAA.

Then, last week, Gordhan announced a re-evaluation of SAA and a renegotiation of the deal with Takatso. With only a weekend in-between, the entire deal was canned on Tuesday.