Donwald Pressly
Minister of Public Enterprises Jeff Radebe announced on Thursday a national sweetener after months of inertia on the privatisation front and ironically he referred to it jokingly as a “nationalisation”.
Radebe, who was suffering from flu, was nevertheless unable to contain his pleasure at announcing that South Africa in the form of Transnet had bought back Swiss-air’s 20% stake in the national carrier, South African Airways (SAA), for just short of R1-billion less than it sold it for in 1999.
The minister said as a result of SAirGroup’s financial difficulties towards the end of last year and its subsequent filing for a moratorium on debt enforcement, “an event of default was triggered” under the shareholders’ agreement between Transnet and the SAirGroup (the umbrella company under which Swissair falls).
An administrator was appointed to oversee the winding up of SwissAir.
In November last year the Cabinet approved the repurchase of the interest and on February 8 the administrator approved its disposal for a purchase price of R382,5-million. Radebe explained that this was equal to the agreed upon fair value of the stake less a 15% default discount stipulated in the shareholders’ agreement.
Radebe, at a media briefing at Parliament, said this reaquisition price was informed primarily by the volatile market conditions prevalent in the airline sector which had been caused by a significant global economic downturn and the impact of September 11.
Describing the bonanza as “a significant discount”, Radebe said part of the deal was that Transnet had agreed that in the event of it reselling a stake of at least 10% of SAA to an airline or strategic investor within 18 months “Transnet will pay 50% of any gain to the SAirGroup in proportion to the percentage shareholding resold up to a ceiling of 20%.”
With months of delay in the Telkom share offer caused mainly by the downtown in the telecoms sector internationally, and sluggish movement on the sale of state forests, this is an ironic and unintended windfall for the government’s purse when the opposition Democratic Alliance is screaming that it has not achieved enough privatisation fast enough.
Sources close to public enterprises said the deal was indeed viewed as a windfall. The department was clearly pleased that when the sale agreement was struck in mid-1999 the conditions for a buyback were viewed by SwissAir as unimportant. It detailed that SAA would have first option to buy back. This was done when there appeared to be no threat on the horizon for the airline industry.
In recent negotiations SwissAir was provided a sop for its shareholders in the form of an undertaking to pay the 50% share of the gain on a sale of a chunk larger than 10%. It is pointed out by government interests that it is unlikely that in the present climate a stake of SAA would be sold off within the 18 months so a payout to SwissAir is unlikely.
Meanwhile government is optimistic that the listing of Telkom will go ahead with speed this year.
Radebe is also expected to make an announcement to the public enterprises portfolio committee later this month about the concessions of the Orex (iron ore) and Richards Bay rail links as part of the restructuring of Spoornet.