The debate over the partial privatization of South African Airways (SAA) has reached a pivotal juncture. On March 13, 2024, Pravin Gordhan, the Minister of Public Enterprises (DPE), announced the mutual termination of the plan to partially privatize SAA.
In a memo addressed to SAA employees, it was explained that the DPE’s request for a reassessment of SAA’s value, considering shifting economic and market conditions, failed to yield agreement on a revised transaction structure between the DPE and Takatso.
The sale of the majority stake in SAA encountered several hurdles, including the need for a re-evaluation of the airline’s assets due to the time lapse between the initial agreement and the share sale’s finalization. Gordhan, speaking at a media briefing, attributed the decision to factors such as the post-COVID-19 market impact, leading to a reassessment of SAA’s value.
Gordhan revealed that SAA’s valuation had risen from ZAR2.4 billion ($129 million) in 2020, during its inactive business rescue phase, to a new high in late 2023, reaching ZAR1 billion ($53.9 million) for its business and ZAR5.5 billion ($296 million) for its properties. Despite initial optimism for a successful partnership, Gordhan stated that “Various factors have led us to the decision to cease negotiations with Takatso,” highlighting the mutual agreement reached due to the lack of a clear way forward.
Following the briefing, Takatso confirmed the termination of the sale by mutual consent, revealing that talks on the deal and the current value of SAA had reopened six months prior. However, they concluded that the revised transaction terms were no longer in the best interests of stakeholders, citing cumbersome divestiture conditions imposed by the Competition Tribunal and the need for further legal and regulatory approvals, including the repeal of the SAA Act.
In June 2021, the South African government, under the DPE, had announced a partnership with the Takatso Consortium, aiming to sell a majority stake (51%) in SAA to Takatso, with the consortium committing over 3 billion rand (approximately $164.71 million) to revitalize the airline.
Moreover, the DPE had previously welcomed, in a statement issued on July 25, 2023, the decision to proceed with the privatization of the national carrier, viewing it as an important step in the government’s efforts to revive SAA as a strategic asset.
Additionally, the Competition Commission (Compcom) recommended in May 2023 that the Competition Tribunal approve the proposed sale of 51 percent of SAA to Takatso. However, concerns arose over Takatso’s minority partners, Global Aviation/Syranix, expected to divest fully from the consortium due to competition concerns stemming from Global Aviation’s ownership of Lift Airlines (LIFT), a domestic competitor of SAA.
SAA entered voluntary business rescue in December 2019 due to years of financial losses, suspending all operations the following year. The airline emerged from administration in late April 2021 after receiving 7.8 billion rand ($550 million) in government assistance. Despite this, the investment agreement with the proposed private partners was not finalized, while the airline resumed operations on Sept. 23, 2021.
