Taxpayers’ last gift to SAA is ... R3.5bn

It’s official. The government has signed the agreement to sell a controlling shareholding in loss-making South African Airways (SAA) to the Takatso Consortium.

Public Enterprises Minister Pravin Gordhan confirmed this during an address to the standing committee on public accounts on Tuesday.

Gordhan reiterated previous promises that it will be the new controlling shareholder’s responsibility to fund the airline going forward.

Taxpayers are off the hook, save for a provision that government will pay the R3.5 billion that was previously agreed to finalise SAA’s business rescue process.

Actually, there is another little provision of government support in the sales agreement – that government might subsidise certain unprofitable routes, if government deems the routes to be important enough to service.

Overall, the burden has been lifted from taxpayers’ shoulders.

After the formal presentation to parliament by the department of public enterprises and SAA management, opposition parties seemed to make a point of repeating the promises that no more financial aid would be extended to SAA in future in its new guise as a joint venture between government and the private sector.

Gordhan gave a brief summary of what led to the government taking the important decision to sell half of SAA to a private partner.

In short, after years of mismanagement, SAA couldn’t even pay its employees their salaries at the end of November 2019.

Within a few weeks towards the end of 2019, insurance companies refused to extend insurance on tickets for passengers who booked tickets with SAA. Importantly, this insurance covers passengers against an airline going bankrupt after they paid thousands towards tickets.

Travel agents stopped selling SAA tickets as they feared that paying customers would arrive at the airport but SAA aeroplanes would not.

Flight Centre, one of the biggest travel agents in the country, was among those that suspended the sale of SAA tickets.

At the same time, banks refused further loans to SAA as government was not willing to extend new loan guarantees. The International Air Transport Association (Iata) also asked for guarantees that SAA would be able to pay landing fees, berthing costs and service fees when its planes land at international airports. SAA was forced into business rescue, with rescue experts proposing either liquidation or a total reorganisation of the airline. The third proposal, to involve a private sector partner, was accepted.

Takatso Consortium, formed by investor firm Harith General Partners and aviation enterprise Global Aviation, emerged as the favourite and eventually closed the deal.

Gordhan says Harith will contribute funding and Global Aviation will contribute aviation expertise.

The agreement stated that Takatso would acquire 51% of SAA after completion of a due diligence. Takatso will be totally responsible for the operation of the new SAA.

Private sector partner was best option