Business Maverick


SAA privatisation deal reaches the end of the runway, but fails to take off

SAA privatisation deal reaches the end of the runway, but fails to take off
Illustrative image | Pravin Gordhan; SAA (Photos: Guillem Sartorio / Bloomberg)

Public Enterprises Minister Pravin Gordhan announced that the sale of SAA to the Takatso consortium of private sector investors has been terminated — delivering a massive blow to President Cyril Ramaphosa’s reform agenda.

After 2½ years of attempting to get the sale of SAA over the line and privatise the state-owned airline, Public Enterprises Minister Pravin Gordhan has called off the deal. 

On Wednesday, Gordhan announced that the sale of SAA to the Takatso consortium of private sector investors had been terminated — delivering a massive blow to President Cyril Ramaphosa’s reform agenda. 

Introducing private sector investors into beleaguered state-owned enterprises (SOEs) such as SAA was a centrepiece of Ramaphosa’s reform agenda, as it would pave the way for such investors to inject capital into SOEs to wean them off constant taxpayer-funded bailouts. 

In June 2021, Gordhan announced the sale of a 51% shareholding in SAA to Takatso, which initially included Harith General Partners (an infrastructure company that owns Lanseria Airport in Gauteng), Global Aviation and Syranix (both of which are partners in the aviation industry and co-owners of SA’s newest domestic airline, Lift). 

After a Cabinet meeting on Wednesday, Gordhan said the Takatso-SAA deal had been terminated by “mutual consent” as there was “no clear path for it”. 

The deal has been beset with problems since it was announced. 

First, the Competition Commission ordered Global Aviation and Syranix to exit the Takatso consortium and sell their 20% shareholding in the consortium, with the competition watchdog raising concerns that the companies would be a dominant player in the commercial aviation industry, owing to their exposure to Lift and possibly SAA.

Read more in Daily Maverick: Minority shareholders that plan to buy SAA will fight Competition Commission ruling

Daily Maverick understands that Global Aviation and Syranix had begun a process to sell their shares in Takatso and identified potential buyers. 

Second, the terms and conditions of the sale of SAA have been shrouded in secrecy, with Gordhan refusing to publicly disclose details of how it will be structured. The public remained in the dark about how much SAA (an asset in distress) was valued by the government or Takatso, or how much Takatso would shell out to the government for a 51% shareholding.

Read more in Daily Maverick: Pravin Gordhan doubles down on the need for secrecy around the sale of SAA

It was suspected that the assets of SAA needed to be revalued by the government because the airline’s valuation during the Covid pandemic (when the sale to Takatso was negotiated) is rumoured to be different than in current times. SAA emerged as a smaller airline after going through a business rescue process after the Covid lockdowns, with its fleet of 52 aircraft much reduced. 

The third problem was that Takatso (mainly Harith General Partners as the remaining investor in the consortium) promised to initially inject R3-billion into SAA to keep it going. This was believed to be the value ascribed to SAA and its assets. However, it remains unclear if Takatso has already raised the money, and even its growth strategy for SAA has been kept under wraps. 

SAA still carries a debt of at least R1.5-billion, which the government had to settle before the deal could be finalised. This was a condition that Takatso put in place before it injected the R3-billion.

Gordhan said that in a post-Covid lockdown world, the value of SAA was below the R3-billion that Takatso was willing to inject into the airline. He said a new valuation put SAA at about R1-billion, while its properties were separately valued at about R5-billion. However, properties take a long time to sell to free up cash and are not considered current assets. 

Peter Attard Montalto, the managing director at Krutham, is not surprised by the collapse of the deal. 

“Given that Takatso never had the money, could never have agreed to a higher valuation and had no aviation partner, the deal was always going to fail right from the beginning,” Attard Montalto told Daily Maverick

“The fact [that the deal] has been strung out this long raises many questions that will no doubt be answered soon and was a huge distraction to more important things at Eskom and Transnet, where leadership was needed.”

Attard Montalto said SAA did not have the financial resources to last and was likely to ask National Treasury for more financial support in the next two years. “Presumably it won’t get any money then and [will] fold.” DM


Comments - Please in order to comment.

  • Kevin Venter says:

    SAA, Eksom, Transnet, PostOffice, Ports, Police Service, Water Service, Refuse Collection, Education… Proudly stuffed up for you by the ANC!
    And best of all, they believe they are doing a sterling job as do all the idiots who keep voting for a corrupt bunch of thieves who are incapable of governing themselves let along anything else.

  • David Mitchley says:

    I think everyone knew this was coming except those in the ANC. I wouldn’t pay 1 cent for 100% of SAA.

  • Jon Quirk says:

    The ANC Government once had the opportunity to partner SAA with Emirates Airlines, a serious, professional, established, credible, solidly-financed, reputationally rock-solid, with an outstanding international reputable, but, spurned this opportunity, at a time when SAA still had some semblance of reputation and value.

    Instead a “deal of sorts” that could never be fully disclosed it was so shaky, was announced with Takatso, a company with virtually no balance sheet, track record or industry experience.

    The principle of partnering with a credible private sector partner is and was sound; partnering with a Mickey-mouse operation, never was, and never is. The ANC and Pravin Gordhan has played the entire country, indeed the entire aviation industry, in the most amateurish of ways as fools, and has now created a situation where the only possible solution is to go cap in hand, again to Emirates and to ask that organisation to plug the rump of a once-proud, SAA, the second oldest international airline in the World, into the Emirates, or Qatar, structure.

    Well done, Dudu and Zuma, yet another proud South African asset – adding to Eskom, Transnet, Prasa, Ports Authority, SABC et al, you sacrificed on your egos and corruption.

    • Gerrie Pretorius says:

      This was not only dudu and zuma. It was mainly ‘saint’ gordhan. (Connect the dots … the dots have been connected and you are the weakest link) What a complete chop he has been!

  • Johan says:

    How much did the last 2.5 years cost us?

  • Soil Merchant says:

    How much did this “Lead Boeing” of a project cost the tax payer ?

  • mike van wyk says:

    This story very much encapsulated the ANC’s management of state affairs since 1994 – outside of the brief stewardship of the Mbeki / Manual period, everything else simply never took off. What did take off was the pillage of state coffers to the benefit of those well positioned ‘cadres’ within and approximate to the ANC.

  • Alley Cat says:

    No surprise! Why do we need a national carrier? We cannot afford it and it doesn’t make sense to anyone but the ANC who want it so they can give more jobs to cadres who can assist them in stealing more money!

  • Beyond Fedup says:

    All these comments are 100% true and yet none of these lecherous crooks and voracious hyenas have been jailed or called to account for their thieving and rapacious ways. Myeni was wrapped over the knuckles and can’t be a director – big deal! The thief-in-chief and perennial coward Zuma is still a veritable nightmare in SA’s body politic and continues with his delusional destruction of this country. They all used SOE’s and taxpayer’s money as personal ATMs and sunk organizations that were mostly viable. The vile Zuma’s, Myeni’s, Molefe’s etc. of this world together with depraved and immoral enablers like Gigaba’s, Lynn Brown’s etc. are all free, enjoying their stolen wealth and giving SA the middle finger. Some are even earmarked to return to parliament or the NEC. Anything goes in SA with no consequences – there is no accountability, justice or law for the connected anc elite and cadres. Crime pays handsomely in SA and it is only Joe Citizen where the law applies. The people who are law-abiding and pay their taxes get get zero return for it.

  • Geoff Coles says:

    It’s pretty clear that the various deals, compounded by Competitions Board influences, we’re never going to work.
    No reason now why the main elements of the failed takeover cannot be disclosed.

  • Bill Nash says:

    There is no surprise here – at least not for me!
    I was however surprised to hear quite a self-serving advert on 702 the other day, placed by SAA. It boasted of 90 successful years and how well it had done!!
    This despite costing the SA taxpayer over R50Billion.
    The cheek of it amazed me!

  • Trenton Carr says:

    Shame, gonna have to find another way to move those diplomatic bags with the brown envelopes without prying eyes.

  • Rae Earl says:

    Its been a few weeks since I posted my ad nauseum repeats of Ayn Rand’s quote which so accurately encapsulates the the ANC’s style of governance. Here it is especially pertinent:

    “When you see that trading is done, not by consent, but by compulsion – when you see that in order to produce, you need to obtain permission from men who produce nothing – when you see that money is flowing to those who deal, not in goods, but in favours – when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed”.

    Ayn Rand

  • Confucious Says says:

    Boeing, Boeing, gone… was there ever any prospect of success? Wasted time and more wasted money… again!

  • Michael Thomlinson says:

    PG is of the opinion that SAA can see out the next 12-18 months without needing a bailout. He has also promised that none of the employees will loose their jobs and the “government will look after them”. So a little bit of duplicity here, me thinks.
    I have no doubt us taxpayers are going to have to shell out more money to keep his dream alive. Beacause that is all it is. These fools think it is worth something but any credible businessman will look at the bottom line and if there is no profit there then it has no value. What PG and the ANC are doing is simply demonstarting their lack of understanding of business and how that works. SAA is bankrupt. The only course of action is to shut it down, sell off any routes that SAA still has and maybe try and sell the name – SAA brand may still have some value left, who knows?

    • Dermot Quinn says:

      one wonders when one of these planes will behave like Eskom; Transnet; Denel; JHB water; while up in the yonder….
      I’ll fly anything but.

      • Michael Thomlinson says:

        Agree Dermot. SAA has gone from being a very credible airline to one that has no credibilty at all. I don’t know anyone that has flown SAA in the last while. I think it is only flying government employees and if that is the case it is running at a loss. It is easy to run a bankrupt company if someone else is paying!

  • Lounge Lizard says:

    If SAA was shut down tomorrow, no one would bat an eyelid. It is a complete non-entity and waste of money and time. FFS close it, and do not pour 1 more cent of taxpayer money down that black hole.

  • Graham Smith says:

    Right from the start, there was NO clear path for this!! Takatso, harith, never had money! They were waiting for gov to settle the R5bil debt of saa and to get R3bil loan( the sort that you never have to pay back from pic) and then all the assets of saa for 51cents. What a bargain?? Now watch all the paperwork, minutes, etc dissappear. And gordan rides off into the sunset. No repercussions. Why??

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