If the marriage is not concluded in time, rumors of divorce are inevitable. It has been a year and 60 days since the Department of Public Enterprises and the Takatso Consortium went on a first date to build a new relationship for South African Airways (SAA). But both Takatso and the department say the parties remain committed to a deal to buy the national airline. On the contrary, some sources in SAA consider the deal doomed. “Takatso remains committed to the SAA deal and is working with the department to meet all the conditions precedent,” says the consortium,…
If the marriage is not concluded in time, rumors of divorce are inevitable.
It has been a year and 60 days since the Department of Public Enterprises and the Takatso Consortium went on a first date to build a new relationship for South African Airways (SAA).
But both Takatso and the department say the parties remain committed to a deal to buy the national airline.
On the contrary, some sources in SAA consider the deal doomed.
“Takatso remains committed to the SAA deal and is working with the department towards meeting all the conditions precedent,” the consortium said, adding that they would release a “more complete statement” next week.
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The expanding courtship between Takatso and the government saw very little coverage.
South Africans know little except the 51 rand “lobola” being paid to the state for a 51% stake in SAA and the promise of up to 3 billion rand working capital to be injected within two years of the deal.
The value of the deal also remains a curiosity, especially compared to SAA subsidiary Mango.
The budget airline, which is still in business rescue, has been put up for sale, but the suitors must show funds of about 200 million rand to resume operations, under its rescue plan.
Mango’s only asset – an engine valued at around 97 million rand – had to be paid for.
And if the airline costs R1 plus the engine, that’s 1.9 million times what Takatso will pay for SAA.
Analyst Phuthego Mojapele questions the abnormal amount of time it is taking to get the SAA deal through the line.
He cites the relative speed of Telkom’s privatization as an example.
And because it is taking so long, the Democratic Alliance (DA)’s Alf Lees expects another bailout could be on the cards.
He estimates that SAA is now losing up to 500 million rand every month.
“Continued relief for taxpayers will continue with another R3.5 billion bailout likely to be included in the medium-term budget policy statement in October,” he says.
“If Takatso or SOEs back out of the deal, it will not come as a surprise. But it would force the government to restore a more transparent and inclusive bidding process. In South Africa, we have no place for under-the-table deals.’
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In June, Toto Investment Holdings said it would sue the government for an exemption from what it called an opaque deal.
In response, the department stated that it will defend its position.
“The provincial agency has serious concerns about the legality of the private investor identification process, as well as the likely unreasonable conditions imposed on potential private investors,” Lees said.
“Even the National Treasury, which was aware of the conditions, had serious concerns but was simply dismissed from intervening.”
The continued secrecy surrounding the deal, the time it will take and another likely taxpayer bailout, Lees says, are forcing the government to once again give South Africans, especially the poor, the middle finger.
Aviation analyst and SA Flyer editor Guy Leach says people will have to be patient if a deal is struck.
He notes that the SAA Act would need to be changed in Parliament, which could add to the time.
“You would also have to apply for the amendment and have it approved by the Air Licensing Board and then amend the airline operator’s certificate, which could take at least six months to a year,” he says. .
The Air Transport Licensing Board finally lifted the finger on SAA and ruffled feathers this week when it threatened to revoke SAA’s operating licenses and route rights.
READ ALSO: DPE considers legal action over SAA/Takatso deal leaks
However, the airline said in a statement that it was committed to providing details of the deal to the board.
If that doesn’t happen, SAA loses a lot of its value and becomes an airline that doesn’t have the licenses it needs to carry passengers and no route rights to go anywhere.
But if that happens, or the deal goes sour, or SAA is shelved forever, who cares?
Economist Davey Rudt doesn’t think so.
South African skies are liberal enough for more private parties to compete and, he says, most of the capacity in the market is already filled by private airlines.
“If you think about it, the airlines have been privatized by the private sector. And this is also happening in the security and postal sector, regardless of government agencies. SAA is another failed public company being replaced by the private sector,” says Roodt.
If the transaction fails, Lees says, “SAA’s business rescue plan must finally be consigned to the dustbin where it should have gone from the start”.
“There should be no further taxpayer funding at all. The only moral and logical outcome is for SAA to be liquidated for good and the staff absorbed by the growing private airlines.’
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