SAA could soon be a stock in your portfolio

EDINBURGH — South African Airways (SAA) has been sucking billions out of taxpayers’ coffers, as former president Jacob Zuma and his friends used the airline as a place of employment for friends who had no idea how to run an organisation of this nature. Until recently there hasn’t been the political will to cut SAA loose from state entities and allow private players to run the airline. But, President Cyril Ramaphosa’s team has been making noises that it does not make sense to keep SAA. Sources have told respected news agency Bloomberg that SAA could sell shares to the public to shore up finances. The national airline is in a financial mess, so picking up its stock could be risky. On the other hand, there are opportunities for SAA to rebuild the business across Africa. – Jackie Cameron

By Loni Prinsloo

(Bloomberg) – South African Airways could sell shares to the public as the state-owned carrier seeks ways to end years of losses and reduce the need for bailouts, according to people familiar with the matter.

The move would enable the government to cut its stake in much the same way as it did with former phone monopoly Telkom SA SOC Ltd. almost two decades ago, said the people, who asked not to be named as the information is not public. However, the carrier would first need to make progress with a turnaround plan designed to reach break-even in three years, they said.

The logo of South African Airways sits on the tailfins of Airbus Group NV A340, left, and A330-200 aircraft parked at O.R. Tambo International airport in Johannesburg. Photographer: Waldo Swiegers/Bloomberg

While the sale of a stake to an equity partner has been aired repeatedly over the years, this is the first time it’s been suggested that SAA should list on a stock-exchange. Pretoria-based Telkom’s initial public offering in 2003 raised almost $500 million and the government’s shareholding is now just under 40 percent.

SAA declined to comment.

The airline’s Chief Executive Officer Vuyani Jarana is facing renewed pressure from his bosses in government, which last month put aside R5 billion ($352 million) to help SAA repay debt. Last week, Finance Minster Tito Mboweni said it was his preference to shut down the carrier rather than continue to stretch state finances, while his counterpart at the department of public enterprises, Pravin Gordhan, warned on Monday that “radical things need to be done” for the airline to survive.

Nigeria flights

More immediate plans than the share sale include holding discussions with potential commercial joint-venture partners including Air Mauritius, one of the people said. That could lead to cost savings on routes to the Asian-Pacific market as the airlines would share operating costs.

SAA will also consider a resumption of flights to Abuja, the Nigerian capital, which it abandoned in 2017, the person said. The carrier would apply for a local license – or find a partner – to help Nigerians travel to the US.

Jarana, 48, a former executive at South African mobile-phone market leader Vodacom Group Ltd., was hired a year ago, in part for his experience in the private sector. He also has no connection with previous management, which has been embroiled in the corruption scandals that plagued state-owned companies during ex-President Jacob Zuma’s almost nine years in charge.

SAA fired its former CEO and chief financial officer in June after finding them guilty of misconduct, while former Chairwoman Dudu Myeni has also left. Under their leadership, SAA failed to properly value assets or correctly record irregular or wasteful expenditure, according to an Auditor General report released earlier this year.

SAA has had an equity partner before. The government sold 20 percent of the carrier in 1999 to Swissair, which pioneered the concept of an alliance anchored via minority stakes, only to buy the shares back in 2002 when the European carrier went bankrupt.