By Victor Shalton
South African Government Concludes Sale Agreement for South African Airways
The South African government said last Thursday that Takatso consortium will now take up 51% of the South African Airways’ shares after a sale agreement was concluded — marking eight months since the consortium. The agreement that consists of Global Airways, owners of low-cost airline LIFT and an infrastructure investment firm called Harith General Partners was announced as the preferred shareholding firm.
According to an announcement by the Ministry in the Presidency following a Cabinet meeting on February 23, “The Sales and Purchase process has now been concluded and signed by the Department of Public Enterprises and Takatso Consortium. The next step involves the approval of this transaction by various regulatory bodies.”
It is expected that the new partners will pump up to $194 million onto the airline project over the next 3 years. In a statement to Fin24, Takatso said it is “confident that the relaunched SAA has strong growth prospects domestically, regionally, and internationally.”
“The consortium is working with the DPE to fulfill the conditions of the transaction timeously” and that “All matters related to the Business Rescue process of SAA will be resolved during this time.”
According to CH-Aviation, South African Airways will introduce long‐haul commercial flights during the second half of 2022. The flag carrier resumed limited commercial operations in September 2021 in line with plans for a conservative re-entry into domestic and regional markets following a protracted business rescue process started on December 5, 2019, following years of continuous losses.
While in business rescue, the carrier defaulted on 890 million South African Rand (USD.58.5 million) of revenue owed to former franchise partner Airlink from South Africa. It still owes Comair also from South Africa, 750 million South African Rand as part of a South African Competitions Tribunal settlement.
Harith General Partners – the majority shareholder in the Takatso Consortium which has been leading the negotiations with the government – is 30% owned by South Africa’s state-owned Public Investment Corporation (PIC). It manages the Government Employees Pension Fund (GEPF), which continues to be “well funded and financially sound”, according to the 2022 Budget Review. “At the end of March 2021, the GEPF had a net cash flow position of ZAR34 billion (USD2.2 billion),” the document states.
Delivering his 2022 Budget Speech in Parliament on February 23, Finance Minister Enoch Godongwana did not mention any allocation to SAA but warned of “tough love” for state-owned companies going forward. According to Godongwana, the future of state-owned companies was under review by a Presidential State-Owned Enterprises Council. “Their future will be informed by the value they create and whether they can be run as sustainable entities without bailouts from the Fiscus.”
“Some state-owned companies will be retained, while others will be rationalized or consolidated. To reduce their continuing demands on South Africa’s public resources, the National Treasury will outline the criteria for government funding of state‐owned companies during the upcoming financial year,” he said.