SAA
After an extensive period of three years in negotiations, the much-anticipated deal to sell a majority stake of South African Airways (SAA) to the Takatso Consortium has fallen through. Minister of Public Enterprises Pravin Gordhan made the announcement that officially put the kibosh on the transaction during a press briefing in Cape Town on Wednesday evening.
In an unexpected turn of events for the national carrier, Gordhan revealed that the initial valuation agreed upon years ago no longer held water under the current market conditions. The airline, which had previously undergone a business rescue process and combatted the grounding effects of the COVID-19 pandemic, found itself with a starkly altered valuation in recent assessments.
“Late last year, clearly, we had a different market, we had a different economy, and we had a different flying public in terms of numbers of people that were flying and a new valuation was done,” Gordhan said, delving into the root of the stalemate. The updated valuation placed SAA’s business worth at around R1 billion and its property value escalated to approximately R5.5 billion, reshaping the expectations of the sale proceedings.
Despite ongoing discussions well into the previous year and the advent of 2021, the parties could not converge on certain key issues. “However, we came to a point where whilst there was a meeting of minds…on some of the issues, there were other issues on which there was no meeting of minds,” Gordhan explained the impasse.
The failed transaction was officially terminated by invoking a mutual consent clause from the original sale and purchase agreement. With both parties recognizing the dead end, the plug was pulled on the deal with the Takatso Consortium.
It is crucial to note, emphasized Gordhan, that SAA remains a public asset of South Africa. The following principles must therefore guide any future transactions:
- The growth trajectory of SAA over the past five years ought to be considered;
- Any deal must honor the fair value of the airline’s 51% stake;
- SAA must emerge from the sale process in a more sustainable state than it found itself in 2019.
Dispelling any concerns regarding SAA’s financial health post-negotiations, Gordhan remained optimistic about the airline’s self-sufficiency. “We are convinced, in terms of the numbers available to us, that it can sustain itself for the next year to 18 months,” he declared, categorically ruling out the possibility of government bailouts.
As for the airline’s employees, Gordhan’s message was one of reassurance. With no imminent job threats, the minister promised to work closely with the board and management to fortify SAA’s position. Following the robust corporate plan in place, Gordhan predicted an increase in the number of routes from 19 to 40 in the next five years. The plan also encompasses strategies for aircraft leasing to boost both domestic and international flight operations.
