Minister of Public Enterprises Pravin Gordhan has announced that negotiations for the transaction to sell 51% of South African Airways (SAA) to the Takatso Consortium have been terminated.
Gordhan announced in a statement on Tuesday after the department spent three years negotiating the deal with the consortium.
He said SAA would revert to being a state-owned airline that the government would focus on refinancing and stabilising.
“We regret to announce that both the DPE (Department of Public Enterprises) and Takatso agreed that negotiations on the transaction have been terminated as there was no agreement on the revised transaction structure,” Gordhan said.
“This arises largely from a new business and asset valuation undertaken by professional firms.”
SAA was on the verge of being liquidated.
The Board of SAA placed the airline under business rescue, which the government had supported before the Covid-19 pandemic that impacted global aviation.
Gordhan said the closure and opening of borders required the government to find a strategic equity partner as directed by Cabinet.
He said the government went on to identify Takatso as this partner.
He said SAA had grown in value as a public asset between 2019-2024, and any sale of shares had to be at a fair market value.
“The process must result in the sustainability of SAA and its growth, in terms of its aircraft and routes that it needs to fly,” Gordhan said.
He said two valuations were undertaken, the first during the Covid-19 period when the airline was grounded. The business and the properties were valued at a liquidation asset valuation methodology that amounted to R2,4 billion.
“However, in the last year three years, it became clear that the market conditions have changed, the economy had improved, the demand for flying had increased formidably, and this required that a new valuation be done,” Gordhan said.
The second business valuation amounted to R1 billion, with a property valuation of R5.5 billion. This reflected a R3,1 billion net increase in property value, while equity value rose from 0 to R1 billion.
“It took almost a year for the Competition authorities to approve the transaction. The Competition Tribunal approved the transaction subject to certain conditions, including the divesture by Takatso of its minority shareholders, before implementing the transaction,” Gordhan said.
“It became clear in the negotiations that the revised transaction structure must take into account public interest and fair market price. However, these requirements were not met in the renegotiations,” he said.
As a result, he said a mechanism to terminate the sale agreement by mutual consent was put into effect.
“It was then decided late last week that there was no purpose in continuing with further negotiations. Cabinet was briefed on this matter this morning and took note of the stance taken by DPE that SAA will revert to being 100% owned by the State and that a corporate plan needs to be devised by the board and the management of SAA,” Gordhan said.
“The new corporate plan will embrace more routes and more aircraft.
“In order to support these next steps, an aviation strategy advisor will be brought to support the board and management. The board needs to be strengthened further,” Gordhan said.
“We are confident that SAA will continue to fly and grow in terms of the number of routes and aircraft that it is able to lease.”
He said a new form of raising finances on the basis of SAA’s assets will be explored with financial institutions.
“We will address the staff on Friday to fully take them on board. There were lots of lessons to be learned both during the business rescue and in the process of these negotiations. SAA now enters a new chapter of its life,” Gordhan said.
