SAA wants investors on board – but government in the cockpit

 ·3 May 2024

Both the government and leadership of South African Airways (SAA) are still open to the possibility of a private equity partner investing in the state-owned airline – but it won’t be looking for a majority owner.

This comes after Public Enterprise Minister Pravin Gordhan called off a recent attempt to sell a 51% stake in SAA to Takatso Consortium, a private equity partner.

Like last time, the objective of a private equity partner is to secure capital to help stabilise the airline’s finances, reduce its dependence on tax-payer-funded bailouts and ultimately, propel it to new heights.

Unlike last time, rather than the government taking the back seat by selling a majority of the state-owned enterprise (SOE) to a private equity partner (as it unsuccessfully tried to do with Takatso Consortium), they would now remain in control by maintaining the majority of the shares.

This was revealed by interim board chairperson of SAA, Derek Hanekom in a recent interview with the Daily Maverick.

“SAA wants potential investors to buy a minority stake of up to 20% in the airline, while the government would retain the remaining 80%,” said Hanekom.

Back in 2019, SAA, which had around R28 billion in liabilities and was seen as a black hole for taxpayer-funded bailouts, was placed under business rescue (which it exited in 2021).

Gordhan said that placing the SOE under business rescue was to restore confidence in the airline, safeguard its good assets, and help to restructure and reposition the entity into one that is stronger, more sustainable and able to grow and attract an equity partner.

Hanekom said that despite strides made by the airline since, such as a massive restructuring and reducing its liabilities, trying to woo potential investors to put money into SAA is an uphill battle.

“SAA is more stabilised, effectively running well and expanding, but even with all of this, to get anyone to buy a minority shareholding in a state-owned company is a tough ask,” said Hanekom.

Hanekom mentioned that the task is difficult because SAA has a history marred by corruption during the years of State Capture, with frequent government interference in its operations, the airline has been significantly restructured through a business rescue process, and the recent failure of the Takatso deal has further complicated matters.

However, interim group CEO John Lamola told Business Day that there was no “desperation” for a new equity partner because the airline “will not collapse”.

“Any new investor in the business would really need to expand SAA into another dimension [as] currently we are working on an SAA that is resized and we have a plan that we can execute,” said Lamola. 

Ultimately, SAA’s main short-term goal is to stabalise its finances to reduce its reliance on taxpayer-funded bailouts.

According to a recent answer by Gordhan in Parliament, taxpayers have sunk R33.136 billion into SAA since 2019.

This long-standing history of taxpayer funded injections into SAA is something that government and the airline’s leadership want to move away from.

“The previous glory of SAA was artificial because it was funded by taxpayers’ money,” said Lamola.

“The SAA we are building is one that can generate its own revenues and cover its own operational costs,”  he added.

Read: Now hiring: Permanent CEO for SAA

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