The first law of holes is known by most: If you find yourself in a hole, stop digging. The second law of holes is less well known but no less important: When you stop digging, you are still in a hole.

And so it is that we can apply the law(s) of holes to the situation at SAA. The government analysed the situation correctly — and frankly, it’s not as though it needed anything that would commonly fall under the category of “analysis”. The airline was at one point losing R500-million a month and the government came to the correct decision that the first law of holes applied.

And so, SAA went into bankruptcy protection and emerged as a much smaller and more modest loss-maker (at least, we think as much, we don’t actually know because the communication on this issue and others has been just appalling). In any event, the government did the right thing, selling off a 51% stake to the Takatso Consortium in a deal announced over a year ago on terms that were necessarily fabulously generous. 

But having made the correct decision regarding the first law of holes, the government is doing an absolutely abysmal job of recognising the second law of holes. The whole process, so to speak, has been a terrible mess and it got worse this week when a luminary of the aviation industry, Gidon Novick, resigned from the board of the consortium.

Novick was part of the reason the consortium won the bid, something the government acknowledged when the agreement was set. But in what was apparently a fit of pique, Public Enterprises Minister Pravin Gordhan lashed out at Novick.

Gordhan told Parliament’s public enterprises parliamentary committee that Novick was just a small and relatively minor party in a transaction.

“Just because he happens to be somebody with experience somewhere in his past, as all of us do, doesn’t discredit everybody else, nor does it mean that what he puts on the table is something that one must take seriously,” Gordhan said.

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Well, forgive me but that is a massively short-sighted and misguided statement. Novick was the CEO of Comair for many years as well as the founder of Kulula.com. He more recently started Lift airline, which is currently operating locally and has a significant stake in the industry after starting from nothing. To claim that he is a nobody and to dismiss his concerns argues a kind of hubris and highhandedness that will make things more difficult for everybody.

It is true, as Gordhan pointed out very pointedly, that Novick is the minority partner in the consortium; the majority partner is Harith General Partners and interestingly, Novick has resigned from the board but has not given up his interest in the consortium.

But on the subject of still being in the hole, the Takatso Consortium still needs to raise an enormous amount of money, as does the government. And precisely the issue that caused Novick to resign — the extraordinary lack of information about anything from anybody — is one of the reasons why it’s taken more than a year since the announcement for some minor semblance of forward movement to emerge, not to mention making it extremely difficult to raise sufficient capital.

This is because, it turns out, Gordhan did not take the Treasury fully into his confidence before signing the deal with Takatso, which understandably pissed off the Treasury. This was more than just a communication issue, since the agreement with Takatso requires the government to cover R3.5-billion in SAA’s remaining debt.

The terms of the deal were also kept shrouded in secrecy and only because of some righteous action by the DA’s representative on the public accounts committee, Alf Rees, did we find out that the cost of a 51% stake would be R51 — I am not making this up — but also that the government would have to put more money into SAA further down the line should that be required. It remains a shareholder, after all.

This was not the “stop digging” notion the Treasury signed up for

So in the recent mini Budget, Finance Minister Enoch Godongwana made no mention of SAA, which suggests that the notion the ministers have declared a truce is not quite the full story. And to make things worse, Gordhan claims the deal is still on but refuses to explain what the hold-ups are in finalising it, claiming things are at a “sensitive stage”. But, you know, they always are.

The people I feel for most in this catalogue of missteps are the representatives of Harith, notably group executive director Tshepo Mahloele, who now have to go out and try to raise the R3-billion the consortium had undertaken to invest in SAA in circumstances in which the responsible minister is taking potshots at the most knowledgeable and experienced member of their consortium. WTF?

The unfortunate spat illustrates some very fundamental differences between the government and the private sector that the government is going to have to get past very quickly if the whole notion of the private-sector-supported infrastructure rebound is actually going to happen.

Government ministers like to swagger, play politics, and demand a kind of fealty from the private sector. Fine, you know, whatever. But if the government and the private sector are going to co-invest — and in some ways, this agreement is a test of that concept — the government is going to have to swallow some of its pride and try to take into account some of the habits of the best parts of the private sector: Move fast, keep people informed, think creatively, and above all, don’t unnecessarily deride your partners. At least not in public.

Or, in short, remember the second law of holes: You are still in the hole. DM/BM