SAA subsidiaries search for investors, rescue efforts stall

Recently South Africa’s minister of finance, Tito Mboweni, approved a R10.5bn bailout for South African Airways (SAA) . The state owned airline has been grounded since March and is currently in business rescue. Meanwhile government is scouting for potential investors. Government has also said that it may sell shares in SAA once it has been revived. Anonymous insiders say the airline now has a R6.5bn price tag. South Africa’s Department of Public Enterprises has paid R1.5bn to the administrators of the stricken airline. Administrators say that the conditions that were stipulated for how it should be spent are in contravention of both the Labour Relations Act and the Chapter 6 of Companies Act. SAA’s business rescue plan lists a hierarchy of payments including severance packages for dismissed workers. Labor unions are in an uproar because members have not been paid. Siviwe Dongwana, a business rescue practitioner may have said it best: “No strategic-equity partner wants to deal with legacy issues of SAA, nor any potential investee for that matter.” Will investors want to deal with smaller subsidiaries like Mango airlines and catering unit Air Chefs? Public Enterpises minister Pravin Gordhan says there is a list of 31 interested parties.- Melani Nathan

South Africa seeking several partners for units of state airline SAA

By Paul Vecchiatto

(Bloomberg) — South Africa isn’t just in talks with potential buyers of a stake in the country’s insolvent state-owned airline SAA, it’s also seeking partners for subsidiaries such as low-cost airline Mango and catering unit Air Chefs.

The result will be a number of private-sector entities working with various parts of South African Airways whenever it resumes operations, according to Public Enterprises Minister Pravin Gordhan. The government had 31 expressions of interest in SAA and are currently whittling down the list, he said.

Read also: FinMin questions SAA bailout in late night musings

“At the moment we are not actually looking to raise a specific amount from the strategic-equity partners but rather the viability of their proposals,” he said in a phone interview. “We will only discuss numbers in January.”

The search for a partner for SAA is central to Gordhan’s plan to revive the airline a year after the company went into bankruptcy protection and nine months since it last operated a commercial flight. But the process has dragged on since at least the start of May, and the funds needed to resume flights and pay worker-severance packages remains elusive.

Finance Minister Tito Mboweni allocated R10.5bn ($692mn) to the airline in October, but SAA’s administrators say only R1.5bn has been transferred and with conditions attached that breached certain regulations.

Read also: SAA hefty price tag: scaring off investors? It wants to sell a stake for R6.5bn

“It has been slow progress,” Gordhan said. “The challenge is that the money is coming in tranches and we have to ensure that all obligations in terms of the Companies Act are met.”

Regarding employees, about 4,800 of which are owed severance packages, the minister would only say the issue was a matter being discussed with labor groups and would be “settled soon.” Some workers demonstrated outside SAA headquarters in Johannesburg, saying they hadn’t been paid for eight months.

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