Bain to pi­lot SAA, SAX merger

Con­sul­tancy firm paid R12.1m to de­velop air­lines’ cor­po­rate plan

The Star Early Edition - - BUSINESS REPORT - Siyabonga Mkhwanazi

THE MERGER of state-owned en­tity SAA with Mango and SA Ex­press (SAX) was gain­ing traction af­ter the gov­ern­ment an­nounced yes­ter­day that a con­sul­tancy firm was over­see­ing the project.

Min­is­ter of Pub­lic En­ter­prises Lynne Brown told Par­lia­ment yes­ter­day that Bain and Com­pany South Africa had been paid R12.1 mil­lion to de­velop the cor­po­rate plan for the merger of the three air­lines.

Deputy Pres­i­dent Cyril Ramaphosa told the Na­tional Assem­bly last year that the merger of SAA with SAX and Mango was on track.

How­ever, he would not give the dead­line for the com­ple­tion of the merger.

This was the same sen­ti­ment ex­pressed by SAX’s chief ex­ec­u­tive, Inati Nt­shanga, to MPs last year that the merger was go­ing well.

He also did not in­di­cate to mem­bers of the na­tional leg­is­la­ture how soon the project would be com­pleted.

The dis­clo­sure by Brown, through a writ­ten par­lia­men­tary re­ply to a ques­tion from the DA, has given the strong­est in­di­ca­tion by the gov­ern­ment to im­ple­ment the merger.

In her re­ply Brown said Bain and Com­pany South Africa had been hired to over­see the project.

“The work to be con­ducted by Bain and Com­pany South Africa en­tails the devel­op­ment of the said op­ti­mal cor­po­rate struc­ture in line with the gov­ern­ment’s ob­jec­tives and in cog­ni­sance of the in­dus­try best prac­tice,” she said.

Pres­i­dent Ja­cob Zuma an­nounced in his State of the Na­tion Ad­dress last Fe­bru­ary that the three air­lines would be merged to form a sin­gle en­tity in a mea­sure to cut costs and in­crease prof­its.

Brown re­fused to com­ment fur­ther on the mat­ter.

SAA and SAX have suf­fered bil­lions in losses in the past few years.

SAA for two years failed to sub­mit au­dited fi­nan­cials in the Na­tional Assem­bly, which caused a pub­lic out­cry.

How­ever, last year SAA sub­mit­ted the fi­nan­cials as it needed a R5­bil­lion guar­an­tee to con­tinue op­er­at­ing as a go­ing con­cern, which showed a com­bined loss of R5.6bn.

A new board has been ap­pointed to turn the air­line around.

SAX is also in the same sit­u­a­tion as it also missed the dead­line to sub­mit its fi­nan­cials to the na­tional leg­is­la­ture.

Mango is the only air­line that ap­peared to have been per­form­ing well in the past 10 years.

But Zuma said the merger of the air­lines would strengthen the bal­ance sheet of SAA.

In its fi­nan­cial state­ments, SAA said the tough trad­ing con­di­tions in the in­dus­try were part of the losses it in­curred in the past two fi­nan­cial years.

SAA was also forced to shut down some of its un­prof­itable routes.

Zuma is ex­pected to touch on progress made in the merger when he de­liv­ers his State of the Na­tion Ad­dress on Fe­bru­ary 9. Ramaphosa may also raise the mat­ter when the Na­tional Assem­bly de­bates the State of the Na­tion Ad­dress the fol­low­ing week.

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