After three years of negotiations, South Africa’s bid to sell a majority stake in its flagship airline has fallen through, leaving South African Airways (SAA) fully state-owned once more. Minister Pravin Gordhan announced the termination, citing inability to agree on terms. Despite SAA’s recent improvement, valuation discrepancies halted the deal. With privatisation off the table, the government eyes alternative financing and partnerships to sustain SAA’s operations and expansion amidst a challenging global aviation landscape.
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By Mike Cohen and Paul Vecchiatto
South Africa terminated a deal to sell a controlling stake in its flagship airline, after failing to agree on a value and other terms after three years of negotiations, Public Enterprises Minister Pravin Gordhan said.
The government had planned to dispose of 51% of loss-making South African Airways to the Takatso group, which is made up of closely held Global Airways and private equity firm Harith General Partners, but the talks were called off, Gordhan told reporters in Cape Town on Wednesday.
âSAA will revert to be 100% owned by the state,â he said. âWe are convinced that SAA can sustain itself in the next year to 18 months, and that there are various other ways in which immediate financing can be obtained. But at no stage will SAA will get money from the fiscus,â after a number of government bailouts.
Gordhan, the 74-year-old former finance minister, had made the successful privatization of SAA a central goal while running the ministry overseeing state enterprises. He plans to retire after national elections scheduled for May 29.
Coronavirus Hit
SAA was on the verge of being liquidated when the state entered into talks to sell the stake. The prospects of a revival took a hammering during the coronavirus pandemic, when global air travel ground to a near-halt. The carrierâs assets were valued at just 2.4 billion rand ($129.1 million) at that time.
Its fortunes have improved over the past three years, and the business was subsequently determined to be worth 1 billion rand and its buildings at 5.1 billion rand, meaning the government wouldnât get fair value if it proceeded with the sale deal, the minister said.
Takatso said the original transaction had been renegotiated and the revised terms were no longer considered to be in its shareholdersâ best interest.
âAll work and negotiations on the proposed transaction have ceased. Neither party will be required to pay the other a termination fee or other consideration as a result of the mutual decision to terminate the agreement,â it said in a statement. âIt is in our respective best interests to move forward independently.â
New Routes
The collapse of the deal, first announced in June 2021, is a blow to the governmentâs efforts to sell off non-core state entities and bring state debt under control.
The government is open to SAA entering into other partnerships or code-sharing deals, which would be negotiated by its board, according to Gordhan. He envisions the carrier adding more routes and leasing additional aircraft.
Read also:
- Best of 2022: Cemair now SAâs #3 airline â expands flights to fill Comair/SAA vacuum
- Best of 2022: Airline veteran Gidon Novick explains why SAâs era of subsidised flights is over; the challenge for SAA; Liftâs success and demise of the âfamily businessâ Comair
- Hanekom: Profitable SAA restarting intercontinental routes, Brazil first
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