Government gives up its majority ownership of SAA

This marks a step-change in the government’s approach to the ownership of troubled state-owned entities. The future ownership model of SAA will be similar to Telkom’s.

By Ray Mahlaka

The Department of Public Enterprises has identified two investors that are set to acquire a majority shareholding in SAA, a move that will see the government no longer wholly owning the troubled airline.

Public Enterprises Minister Pravin Gordhan, the current shareholder representative of SAA, announced on Friday, 11 June 2021 that investors will own a 51% majority shareholding in the airline. The government will hold a minority shareholding of 49%.

The two investors that will own a majority of SAA are part of a consortium, which includes Global Airways, a local jet-leasing company, and Harith General Partners, which funds infrastructure development across Africa. Harith also owns Lanseria International Airport in Gauteng.

The Takatso consortium, which includes well-known figures in South Africa’s aviation industry, will be chaired by Harith CEO Tshepo Mahloele and Gidon Novick, the former Comair CEO who recently launched low-cost airline Lift.

The consortium will initially inject more than R3-billion into SAA – funds that will be allocated to the airline’s working capital and help the restart of its flight operations. SAA, which has been grounded since March 2020, recently emerged from a 17-month business rescue process. Its interim management and board took control of the airline and are planning to restart domestic flight operations in July or August 2021.

The consortium will also fund the future funding requirements of SAA, helping to wean the airline off government bailouts for survival. Gordhan reiterated on Friday that SAA will no longer depend on taxpayer-funded bailouts for survival.

“The objective of the consortium is to relaunch a viable and scalable airline that is not dependent on the fiscus,” Gordhan said at a media briefing.

SAA was last profitable in 2011 and recorded cumulative financial losses of R17.7-billion between 2012 and 2017. From 2008 to 2020, the airline received taxpayer-funded bailouts of R32.3-billion.

Gordhan said a memorandum of understanding relating to the consortium’s involvement/participation in SAA will be signed over the next few weeks. A purchase agreement regarding the sale of SAA shares to the consortium would also be completed during this time.

The terms and conditions of the consortium’s participation in SAA – including the future funding of the airline, whether restrictions on flight routes and long-term labour (including pilots and staff) have been imposed – are not yet known. It also isn’t clear whether the government will give the consortium the space to make business decisions in SAA, without interference, which contributed to the airline’s failure and high-level corruption during the State Capture years.

The announcement by Gordhan also marks a step change in the government’s approach to the ownership and management of state-owned entities. SAA has been owned by the government since it was founded 87 years ago.

The future ownership model of SAA will be similar to Telkom’s.

Telkom was once wholly owned by the government, which started the process in 2003 to partially privatise the company. According to Telkom’s 2020 annual report, the government owns 40.5% of the company. DM/BM

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