THE PROPOSED sale of a majority SA Airways stake to Takatso plunged into further crisis yesterday after the Public Investment Commission (PIC) distanced itself from the consortium while the Department of Public Enterprises (DPE) yesterday remained mum about further details surrounding the funding structure.
The DPE failed to respond to questions put to it while the National Treasury referred questions back to the DPE.
Corporate advisory firm Deal Leaders chief executive Andrew Bahlmann said the privatisation of an airline required a track record of profitability and no government interference, something missing with SAA.
Bahlmann said this made the acquisition of 51 percent in SAA by a private consortium somewhat adventurous.
“SAA’s long track record of unprofitability poses a grave question as to whether the deal can succeed at all, especially given labour’s resistance to privatisation and the tendency of the government to constantly interfere,” he said.
“Globally, airline privatisation has been followed by a period of market consolidation, something I would not be surprised to see happen in South Africa.
“Should SAA be brought to profitability, I would also expect to see it followed by an IPO.”
Public Enterprises Minister Pravin Gordhan last week announced that the government would relinquish control of SAA to a private company; this after 19 months of uncertainty.
Gordhan said the Takatso consortium would acquire a 51 percent stake of SAA as the preferred strategic equity partner while the government retained 49 percent.
Takatso comprises aviation group Global Airways and fund manager Harith General Partners, which is 30 percent owned by the Public Investment Corporation.
The PIC manages more than R2 trillion in public servants pensions, mostly from the Government Employees Pension Fund (GEPF).
Harith was headed and founded by former PIC head of corporate finance, Tshepo Mahloele.
The Mpati Commission of Inquiry into the PIC recently found that Harith’s establishment was questionable and asked the PIC to appoint an independent inquiry into it.
The PIC yesterday said that though some of the individuals involved in Takatso may previously have been associated with it, it was not involved in this acquisition of SAA.
It said the consortium would undertake a normal due diligence exercise before the transaction was finalised.
Independent aviation economist Joachim Vermooten said this was a start of negotiations within a broad set of parameters of what is possibly a deal.
Vermooten said a number of things still needed to happen before a deal was concluded.
“The government has committed R2 billion to restart SAA, but that is still not enough. The R3bn working capital from Takatso will be repaid to the new SAA,” Vermooten said.
He said SAA’s debt burden has to be cleared by the government as the airline needed R14bn to repay debt while R10bn had already been committed by the government.
“The fundamental issue is that SAA is probably not worth anything, it has liabilities more than assets. R90bn from the fiscus has gone to SAA since 2007 and there is nothing left,” he said.
“The business rescue process may have brought it to solvency, but you don’t become solvent overnight. The economic reality is that SAA is insolvent.”
BUSINESS REPORT