Gordhan promises no more bailouts for SAA

 ·14 Mar 2024

Minister of Public Enterprises, Pravin Gordhan, is seeking to calm the nerves of those rattled by the recent announcement that the deal to sell 51% of South African Airways’ (SAA) to Takatso Consortium is off.

At a press conference on Wednesday (13 March), Gordhan said that employees of SAA do not need to worry about their job security, and assured that the public does not need to fret about the government dipping into state coffers to keep the airline operational as a result of the collapsed deal.

The minister said that as it stands, SAA would be able to sustain itself for the next year to 18 months.

“We want to make that clear; there’s no going back to the past there’s no reliance on government itself… [SAA] must run its operations as efficiently as it can and as profitably as it can and sustain itself,” said Gordhan.

“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,” he added.

“The message to the staff [of SAA]… is don’t worry about your jobs, don’t worry about the future of your families,” as sufficient support has been and will continue to be made to SAA for its long-term sustainability, said Gordhan.

Minimising tax-funded bailouts for embattled state-owned enterprises (SOEs) through introducing private sector investments has been a big part of President Cyril Ramaphosa’s agenda – with the recent termination of the SAA-Takatso deal seen to be a substantial blow for it.

Originally, there was an agreement that 51% of the state-owned airline would be sold to the private company for R51 on the condition that, over time, Takatso would inject R3 billion of capital in the form of a shareholder loan.

Takatso and the Department of Public Enterprises signed Share Purchase Agreement in February 2022.

Six months ago, the parties agreed to re-evaluate and re-open negotiations on the transaction structure and the current value of SAA, given its progress and the changing nature of economic conditions since the initial deal.

However, Gordhan said there were a range of issues where the two parties could not get on the same page.

One of the central disagreements was that of the reevaluated value of SAA – which was predetermined during Covid (when the airline was on the verge of being liquidated).

“It became clear in the negotiations of the revised transaction structure [that it] must take into account public interest and fair market price; however, these requirements were not met in the renegotiations,” said the minister.

Takatso said that “negotiations have been protracted, and the resultant revised transaction structure has introduced unacceptable levels of risk and uncertainty.”

The consortium announced that it is no longer in the interests of its stakeholders to pursue the transaction. “The terms of the proposed revised transaction are simply not workable for Takatso, and we could not, under those circumstances, allow this process to continue to drag on,” it said.

Going forward, Gordhan said that the airline would turn its focus to implementing its corporate plan and expanding its route network.

Read: State companies rack up the losses as taxpayers sink R325 billion into bailouts

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