Future of South African Airways remains blurred |

The future of South African Airways (SAA) remains blurred. While the government stresses that the takeover deal with Takatso Consortium for a 51 percent share is not at risk, other reports state that the consortium has yet to raise the required ZAR 3.0 billion to complete the transaction that was announced in June 2021. Takatso still believes in the transaction, but calls out to hurry up. Future of South African Airways remains blurred. State-owned SAA’s position has been weak for years as it was run inefficiently and accumulated huge losses. The airline went into business rescue in December 2019 with the aim of selling off part of SAA to private investors. That’s why Pravin Gordhan, minister of the Ministry of Public Enterprises (DPE) was so happy on June 11 last year that after a “rigorous, year-long process” Takatso Consortium had been selected as the preferred strategic equity partner. Takatso would take a 51 percent share, with the South African state retaining a 49 percent share. It also keeps the golden share that allows it full veto on matters of national interest while also keeping a minimum stake of 33.3 percent in case the consortium raises wants to raise its share. Gordhan said at the time: “The objective of bringing in an equity partner to SAA is to augment it with the required technical, financial and operational expertise to ensure a sustainable, agile and viable South African airline. SAA will contribute to the venture, the brand, the flag, landing slots, route licenses, lounges, and a successful loyalty program (Voyager). With this partnership, we believe we are closer to achieving the important objective of having a sustainable national airline.” Takatso’s management said: “The consortium brings a unique combination of skills and infrastructure funding (including airports) and aviation operator experience. This will ensure the development of SAA into a viable and agile commercial airline.” Following the pandemic, SAA relaunched operations in September 2021 albeit on a reduced scale. Takatso Consortium consists of two parties, Global Airways and Harith General Partners The former is a South African ACMI specialist that has wet-leased its Airbus A320ceo’s and A340s to airlines like Mango, FlySafair, Corendon, Air Cote d’Ivoire, Comair, and lesser-known airlines such as Jubba and Sunrise Airlines. Harith is owned by Harith Holdings and thirty percent by Public Investment Corporation, which is an asset firm wholly owned by the South African government. Reiterating support In May, the government reiterated its support for the Takatso offer and confirmed its commitment once again on September 22, when Gordhan said in a presentation to parliament: “We urge all regulatory authorities to assist in having a speedy conclusion to this process. We also want to assure the loyal customers of SAA that we will do everything possible to ensure SAA grows from strength to strength.” But comments that same day in September from DPE acting director Jacky Molisane caused a stir within SAA, which responded with a media statement: “The news that SAA will be liquidated if the transaction is not concluded has been taken out of context, and the import of the statement made by the Acting DG is exaggerated and blown out of proportion. Elsewhere, Ms Molisane is quoted saying that “if the deal falls through, if the government cannot put more money into SAA, then the option we have all worked hard to avoid would have to be taken and that is the liquidation of SAA”. (…) This led to a press story casting an impression that the future of SAA is in peril.” SAA stressed that it still working on the completion of the deal with Takatso, but added: “The transaction is beset with delays emanating from legal requirements to comply with aviation regulatory conditions, and the Competition Commission. We can confirm that both SAA and the DPE are working on a time horizon of end of March 2023 for the substantive conclusion of the transaction.” Conflicts of interest But events since last week have cast new doubts about the acquisition. On November 14, Takatso issued a media statement to announce that Gidon Novick had resigned from the Board of Directors. In the media, Novick cited the lack of progress in completing the transaction. But Takatso said that there were “inherent conflicts of interests”. Not only is Novick involved in the Takatso transaction with SAA but through Global Aviation, he is also involved with Lift, another South African airline. Although a direct competitor of SAA, Lift independently of Takatso pursued business relations with South African Airways. “Mr. Novick’s resignation will therefore assist Takatso in managing these inherent conflicts of interest and maintaining confidentiality over sensitive information on a continuing basis,” Takatso said in a statement. Citing inherent conflicts of interest between the SAA acquisition and Lift caused Gidon Novick to resign from the Takatso Board of Directors. (Lift) The announcement led to media reports claiming that Lift (through Novick) had been seeking a merger with SAA, but that this fell through over “an unrealistically high price” to be paid by Lift. This prompted the Ministry of Public Enterprises to issue its own statement on November 18, in which it once again reiterated its commitment to the Takatso-SAA transaction: “The government is awaiting the completion of the regulatory processes and thereafter will finalize Takatso’s acquisition of the 51 percent shareholding in SAA. The deal is not at risk.” In strong words, the DPE statement said: “We condemn the deliberate misinformation and casting of doubt about the transaction and regulatory processes since the resignation of Gidon Novick as a board member of the Takatso consortium. This distortion of facts will not succeed in derailing the creative solutions to ensuring a positive future for the airline - and its pilots and staff. The public should be aware of the efforts of competitors, detractors, and other forces to undermine our efforts to save jobs and ensure a viable airline. The traveling public is being fleeced because of the shortage of seats,” DPE said. It added that the 800 jobs at SAA “are being endangered by the selfishness, reckless behavior and greed of certain elements.” 'Window is closing fast' In an interview with South African website Moneyweb Gidon Novick said today that he believes that the ZAR 3.0 billion in funding to be provided by Harith is still not confirmed. “The deal always needed two things. It needed skills and it needed capital; we were supposed to be the skills, and Harith was supposed to bring the capital. I suppose they are both in [doubt now] because, on the question of the capital, which was one of the questions I needed to understand better as a director, it certainly seems like it has not been committed,” Novick is quoted on Moneyweb. Harith General Partners CEO Tshepo Mahloele, who is also CEO of Takatso Consortium, denied this and said that the finance is in place but is contingent on the approval of further steps in the process. However, he warned that conditions in the market have changed since June last year and that “the window is closing every month very fast.” Mahloele said he hopes more progress on the SAA deal within the competition commission will come in January. “It is a very long process, which is very frustrating, but we remain committed to closing this transaction. There are challenges but we are seeing some real traction in terms in the form of engagement. We pray there can be a proper commitment to resolving the business rescue process, because that is a major issue that needs to be resolved”, Mahloele told Moneyweb. SAA currently operates just seven aircraft: three Airbus A319s, two A320s, one A330-300, and one A340-300. The four A350-900s that joined on November 2019 have been returned to their owners.

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