Gordhan is in an SAA-sized hole
If you find yourself in a hole, stop digging. The second law of holes is less known but no less important: when you stop digging, you’re still in a hole. We can apply the laws of holes to SAA. The government analysed the situation correctly: the airline was losing R500-million a month and the first law of holes applied.
SAA went into bankruptcy protection and emerged as a much smaller and more modest loss-maker. The government did the right thing, selling off a 51% stake to Takatso Consortium in a deal over a year ago, on necessarily very generous terms.
But the government is doing a bad job of recognising the second law of holes. The process is a mess and got worse this week when aviation luminary Gidon Novick resigned from the board of the consortium.
Novick was part of the reason the consortium won the bid, something the government acknowledged. But, in an apparent fit of pique, Public Enterprises Minister Pravin Gordhan lashed out at Novick.
Gordhan told Parliament’s public enterprises committee Novick was a minor party: “Just because he happens to be somebody with experience somewhere in his past, as all of us do, doesn’t discredit everybody else, nor does it mean that what he puts on the table is something one must take seriously.”
That is a short-sighted and misguided statement. Novick was CEO of Comair and started Kulula.com and Lift airlines. To claim he is a nobody, and dismiss his concerns, argues a hubris and highhandedness that helps nobody.
Novick is indeed a minority partner in the consortium; the majority partner is Harith General Partners. Interestingly, Novick has resigned from the board but has not given up his interest in the consortium.
Takatso still needs to raise a lot of money, as does the government. The issue that caused Novick to resign – a lack of communication – is a reason it’s taken more than a year for any forward movement; not to mention making it hard to raise capital.
This is because, it turns out, Gordhan did not take the Treasury fully into his confidence before signing with Takatso. This was more than a communication issue, as the Takatso deal requires the government to cover R3.5-billion in SAA’s remaining debt.
The deal was shrouded in secrecy and only later did we find out the cost of a 51% stake would be just R51 and the government would have to put more money into SAA if needed.
This was not the “stop digging” notion the Treasury signed up for.
Gordhan claims the deal is still on but refuses to explain what the hold-ups are.
Harith and executive director Tshepo Mahloele have to raise R3-billion to invest in SAA – while the responsible minister is taking potshots at the group’s most knowledgeable and experienced member.
The spat shows major differences between government and the private sector that the former will have to get past for a private-sector-supported infrastructure rebound.
Ministers like to demand fealty from the private sector. But if the parties are going to co-invest the government is going to have to swallow some pride. In short, remember the second law of holes.
The deal was shrouded in secrecy and only later did we find out the cost of a 51% stake would be just R51 and the government would have to put more money into SAA if needed