$4.50 doesn’t buy you a whole lot these days: around two litres of petrol… a one-way train fare… maybe a semi-questionable sausage roll if you’re lucky. But apparently, it’s enough for a majority stake in South African Airways (SAA).
“Cabinet was informed that further progress had been made in the disposal of 51% of shares in the South African Airways to the Takatso Consortium, the preferred Strategic Equity Partner for the SAA,” announces the South African government via its own website.
“The Sales & Purchase process has now been concluded and signed by the Department of Public Enterprises and Takatso Consortium. The next step involves the approval of this transaction by various regulatory bodies. The public will be updated on further developments in this regard.”
Takatso Consortium – which is comprised of both private equity firm Harith General Partners and Global Airways – has acquired 51% of the national carrier for the extremely reasonable price of 51 rand / AU$4.56. But you’d be mistaken in assuming this extremely surprising figure represents the final cost of ownership.
Global Airways’ Lift Co-Founder Gidon Novick and Harith CEO Tshepo Mahloele have outlined intentions to invest as much as 3.5 billion rand / AU$310 million into the perenially beleaguered operation over the next three years to – snickers – get it off the ground.
“Government will have no further financial obligations to the company, outside of the existing liabilities that they will settle,” said Gidon Novick.
“Route networks we are still working on, and it will be a phased roll-out based on demand re-emerging post-COVID.”
So why exactly has SAA been sold at such a bloody steal? Despite having previously served destinations across the entirety of Africa as well as a good number of major global cities, it hasn’t made a cent of profit since 2011, operating under a form of bankruptcy protection since December 2019.
Similar to many airlines, the situation went from bad to worse when the ongoing pandemic kicked off. When the South African government’s relief packages stopped rolling in, the airline was well and truly tapped out and forced to temporarily cease operations. At the time of this writing, billions upon billions of rand in state bailout have already been issued.
According to Bloomberg, SAA is just one of several state-owned companies in South Africa which have “… deteriorated into financial distress over the past several years – in large part due to mismanagement and corruption.”
“The South African Airways disposal, however, marks the first effective privatisation of a major entity since the sale of former phone monopoly Telkom about two decades ago,” explains Antony Sguazzin of Bloomberg.
“A longer-term goal is to list the carrier on a stock exchange, Minister of Public Enterprises Pravin Gordhan said. In the meantime, the government will retain special voting rights to ensure the airline remains in the country, among other national priorities.”
“The objective of bringing in an equity partner to South African Airways is to augment it with the required technical, financial, and operational expertise to ensure a sustainable, agile, and viable South African airline,” adds Miniter Gordhan.
And you thought Virgin Australia had it rough.