/ 13 March 2024

SAA sale officially off after disagreement over airline’s value

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SAA's deal with Takatso collapsed last week. (Delwyn Verasamy/M&G)

Marred by controversy, the government’s deal to sell its majority shareholding in SAA to the Takatso Consortium is officially off.

Public Enterprises Minister Pravin Gordhan made the announcement during a media briefing in Cape Town late on Wednesday afternoon. Earlier that morning, the department briefed the cabinet on the decision, which will see the national carrier continue to be 100% state owned.

According to Gordhan, the sale and purchase agreement between the government and Takatso contained a clause allowing for the transaction to be terminated by mutual consent. “That clause was put into action and both parties have agreed, after we inquired about the status of the negotiations, that there was no clear path forward as far as the transaction with Takatso is concerned,” he said.

The SAA deal — which was first announced by Gordhan in June 2021 — has been the subject of fierce wrangling over the years, spurring on calls for the minister’s resignation.

In December 2019, the national carrier became the first state-owned entity to be placed under business rescue, following nearly a decade of financial losses. After it exited the  business rescue in April 2021, Takatso was chosen as a strategic equity partner to re-launch the restructured airline. 

The decision to call the deal off was made after the department of public enterprises and Takatso could not agree on the structure of the transaction, which had to be renegotiated in the wake of decidedly different market conditions three years after the deal was initially struck.

In a statement, the department noted that it undertook two valuations of the airline. 

The first — which was undertaken when the economy was still in the throes of the Covid-19 pandemic — took place when the airline was not flying and its properties were valued at R2.4 billion. The business was valued at between 0 and negative, according to the department.

“However, in the last 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,” the statement noted.

According to the department, the second property valuation came out at R5.5 billion, a net increase of R3.1 billion, and the business valuation at R1 billion.

“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,” it said.

The decision leaves SAA’s board and the management to devise the airline’s new corporate plan, which will see the airline introducing new routes and leasing more aircraft, according to the department.

“As a consequence we announced today that the engagement with Takatso has ended, and that there will be further steps taken both by this 6th administration and the 7th administration, to stabilise SAA,” the statement notes. 

Last week the department confirmed that Gordhan intends to bow out of politics after a new administration is elected.

“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,” the statement concludes.