South African Minister of Public Enterprises Pravin Gordhan has revealed the calling off of the Privatization of the South African Airways, which was planned to happen with the Takatso consortium.
The minister, who has already announced his intention to retire from active politics and public office after May 29 polls, said to have presented the development to Cabinet on Wednesday.
The collapse of the deal is being blamed to challenges in re-evaluating the airline's assets amidst the COVID-19 pandemic's battering of the airtravel and aviation industry.
The Takatso Consortium, that became the preferred bidder for a majority stake in SAA, couldnot reach an agreement on the carrier's value with the government, despite proposing a corporate plan for its expansion.
Pravin Gordhan said that the result was due to new valuations that have emerged and put SAA at R1 billion and its properties at R5.5bn.
The South African government's plan to privatize the SAA was to reduce its debt burden by selling a majority stake to a private investor. Initially agreed upon in 1999, the sale was only finalized in 2021 when the government partnered with the Takatso Consortium to hold a 51% controlling stake in the airline.
Under the arrangement, the government's department of public enterprises planned to retain the remaining 49% stake, securing a long-term national strategic interest in the airline.
However, the government's efforts to offload shares of SAA took a different turn after the corruption allegations and financial mismanagement came to limelight.
Back in January 2022, the Interim Board of SAA welcomed the publication of the first part of the Report of Corruption and Fraud in the Public Sector, addressing issues within the airline.
However, as of February 2023, SAA's future remained uncertain amid ongoing financial struggles and further corruption investigations, which showed that the airline had been wracked by corruption between 2012 and 2017.
The latest announcement comes after months of drama and fights with the National Assembly's portfolio committee on public enterprises, which has been demanding answers from Gordhan after the former Director-General of public enterprises Kgathatso Tlhlakudi accused him of corruption.
In the Wednesday announcement, Gordhan said the deal was off because they decided to cut their losses with Takatso after new valuations from reputable professional firms.
At no stage will SAA get bailouts, said Gordhan. He added SAA must be able to sustain itself. As per him, during Covid when the valuation was done, the value of SAA was R2.4 billion. After Covid this increased because of changed market values.
"The business valuation came out at R1 billion and the property valuation at R5.5 billion. This meant that there was a net increase in the property by R3.1 billion in the value of SAA. The equity value had increased from 0 to R1 billion."
"Those negotiations continued for the latter part of last year and this year. However, we came to a point where there were other issues, where there (was) no meetings of minds. For example, the exemption of the new entity in terms of paying rental for the property they will utilise in that process," said Gordhan.
"Later last week, which is what we put before Cabinet today, where in terms of the clause on the old sale and purchase agreement where by mutual consent this transaction can be terminated. That clause was put into action."
Despite restart of the closed routes and curtailed operations, including long-haul destinations like São Paulo, Brazil, and Perth, Australia, in 2022, SAA continued to face financial difficulties, recording losses of $1.2 billion (£1 billion) from 2018 to 2021.
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