Government to relinquish shares in South African Airways aimed at saving the airline

Public Enterprises Minister Pravin Gordhan says the sale of shares in South African Airways (SAA) was aimed at ensuring that the State-owned airline is saved and does not undergo liquidation.

Gordhan was addressing Parliament’s Standing Committee on Public Accounts (SCOPA) on Tuesday.

A Strategic Equity Partnership with Takatso Consortium is expected to pave the way for the sale of some 51% of the airline’s shares, pending regulatory and other approvals.

Gordhan told the committee that government’s fiscal position does not allow for SAA to continue being funded purely from the public purse. He, however, said that government will still hold a strong stake in the airline.

“The reality is that there are going to be times when the State doesn’t have all the funding to manage whatever it is holding on to or provide additional investment for a particular entity, enterprise or business to actually grow.

“So this is not privatisation in the sense that we are not selling 100%. Firstly, we’ve got 49%. Secondly, we’ve got the golden share and the golden share means we own the brand, and headquarters [are] in South Africa. Transformation of the staff and management will take place. All of that is prescribed in the purchase and sale agreement.

“We do not have the financial capacity to hold onto everything as the State but our intention was never to privatise. Our intention was to save the airline. Our intention was to avoid liquidation because then everything would have been sold to the private sector. So this was ultimately the best that was possible within the limitations that we had,” he said.

The Minister explained government’s reasons for seeking out a Strategic Equity Partner for the airline.

“The additional partner is required in order to put in money which will enable the airline to expand… in a systematic way, based on commercial criteria and a reasonable chance of success of those routes paying back… its own cost for a start, let alone the profits it would make.

“The issue is not the current way of operating. The issue is the future growth,” he said.

Answering questions on the consortium’s ability to invest some R3 billion into the airline, Gordhan said there is no reason to doubt that it will not honour that agreement.

“We, at this point in time, have no reason to doubt Takatso’s bona fides. We believe that they will deliver cash when it is required and that they will have to solve their own problems, in terms of their own minority shareholders.

“In terms of timelines, the Competition Commission process took about 10 months. The competition tribunal is set for the third week of June…and then there are a few regulation hoops to cross. I imagine that by the end of July/August, we should have completed all the regulatory requirements.”

The Minister said although the aviation industry has endured a challenging period as a result of the COVID-19 pandemic, the sector is recovering.

“Today we find ourselves in a position where at least there’s some more competition in the aviation industry, locally particularly.

“As SAA grows and the acquisition of the Strategic Equity Partner is concluded, we will have even more effective competition as well. The beneficiary at the end of the day will be the travelling consumer more than anybody else,” he said. – SAnews.gov.za