SAA, Takatso deal collapses

Following three years of negotiation, Minister of Public Enterprises Pravin Gordhan has announced the termination of negotiations for the transaction to sell 51% of South African Airways (SAA) to the Takatso Consortium.

The collapse of the negotiations – which put an end to the sale to the equity partner – was announced during a media briefing by the Minister in Cape Town on Wednesday evening.

Gordhan explained that while three years ago, a valuation of SAA’s business and assets had been reached, circumstances have now changed – prompting a disagreement on the revised transaction structure.

Three years ago, the airline had undergone business rescue, battled through being grounded and was facing serious challenges following the COVID-19 pandemic.

“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.

“And the new valuation…the business came out now at a value of R1 billion and the property went up to about R5.5 billion which meant that any negotiations on this transaction would have to take into account the new valuations that have emerged,” he said.

The Minister revealed that negotiations continued “for the latter part of last year” and since this year began.

“However, we came to a point where whilst there was meeting of minds…on some of the issues, there were other issues on which there was no meeting of minds.

“So late last week, there was agreement that in terms of a clause in the old sale and purchase agreement, whereby mutual consent, this transaction could be terminated. That clause was put into action and both parties have agreed – after we enquired about the status of the negotiation – that there was no clear path forward as far as the transaction with Takatso is concerned.”

Gordhan insisted that because SAA remains a public entity:

• Cognisance must be placed on its growth over the past five years;
• Fair value must be placed on the sale of the 51% stake in the airline;
• and the process to sell the shares must ensure that SAA is left in a “more sustainable condition than it was in 2019”.

He added that despite the collapse of the deal, the future remains bright for the airline and dismissed any notions that it will rely on government bailouts going forward.

“We are convinced, in terms of the numbers available to us, that it can sustain itself for the next year to 18 months and there are various, other ways in which immediate financing can be obtained.

“But at no stage, in the course of the months that come, will SAA get money from the fiscus. It must run its operations as efficiently as it can and as profitably as it can and sustain itself,” he said.

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Moving forward

Gordhan assured employees of the state-owned airline that their jobs are currently not in danger as a result of the collapse of the deal.

“So the message to the SAA staff…is that you don’t worry about your jobs, you don’t worry about the future of your families, that we will ensure that we work with the board and management…to continue to support the sustainability of SAA and to ensure that the corporate plan that has been developed by SAA is further strengthened,” he said.

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The Minister added that the corporate plan is well fleshed out and projects a growth in the airline.

“That corporate plan actually entails the gradual growth in the number of routes that SAA will take up in the course of the next few years. Currently, it has about 19 routes and that will grow up to 40 routes in a five year period.

“Similarly, it will have the capacity to lease more aircraft, both for domestic use, use within the continent and for inter-continental flights as well.

“All of these plans will be rigorously examined with the necessary aviation expertise to ensure that jobs are secure, that the airline is secure and that there is a future for SAA and its flag to be seen continuously within the country, within the continent and across continents as well,” Gordhan said.