- SAA's chosen strategic equity partner, the Takatso Consortium, wants the Competition Commission to approve the deal urgently.
- The deal would see Takatso get a 51% stake in SAA, with government retaining 49%.
- Takatso reckons the deal would actually improve competition in the aviation sector.
South African Airways' strategic equity partner Takatso Consortium has made a merger application to the Competition Commission to approve the deal on an urgent basis by no later than 8 July 2022.
Getting Competition Commission approval is one of the outstanding steps needed to conclude the deal, which was first announced almost a year ago.
The application comes as critics continue to question what they regard as a lack of transparency surrounding the specifics of the deal. Public Enterprises Minister Pravin Gordhan has, however, told Parliament in the past that details not provided will protect SAA’s competitiveness.
What is known is that Takatso will acquire 51% of SAA's shares and would need to put in about R3 billion in working capital into the airline over a period of two years.
According to the Competition Commission application document, which Fin24 has seen, Takatso submits that the deal will be pro-competitive because it will keep a key competitor, namely SAA, in the market "sustainably". Takatso denies that the proposed transaction will have a negative impact on competition in the aviation sector.
Takatso also submits that there are no horizontal overlaps between the activities of the consortium's majority partner, Harith General Partners, and its portfolio companies; and those of SAA.
It adds that SAA's market shares are low currently. This, coupled with the fact that Takatso and Harith General Partners do not operate an airline, means the merger will not result in a meaningful change in market structure in South Africa and rather prevent the lessening of competition, according to the consortium.
However, much of the detail of the deal and related structures named in the application document is marked as confidential.
Information not provided, due to claims of confidentiality, include details of the memorandum of understanding between SAA and Takatso, the names and principal addresses of all the firms directly or indirectly controlling Harith, and the firms Harith controls directly or indirectly. Harith's turnover for the financial year ended 31 March 2021, as well as the value of its assets, are also marked as confidential, as well as information on producers or providers to the company. SAA's turnover is marked as confidential, as well as who its top corporate customers are.
As for potential retrenchments, Takatso states that, although the merger is unlikely to lead to retrenchments, it cannot guarantee that it might not become necessary in future, should operational requirements or the aviation industry change and thus to ensure that SAA remains a viable business going forward.
In the meantime, the Democratic Alliance has said that it wants Finance Minister Enoch Godongwana to indicate whether concerns raised by National Treasury in Parliament about the SAA/Takatso deal have been dealt with "to the satisfaction of the National Treasury".
In the view of DA MP Alf Lees, the deal is not transparent and he accuses Godongwana of effectively "washing his hands of any responsibility" for the SAA/Takatso agreement and prior concerns raised by National Treasury.
Godongwana recently responded to Lees in writing that he (Godongwana) was not responsible for the agreement and that once National Treasury had raised its concerns with the Department of Public Enterprises (SAA's shareholder) there was no further role for him or National Treasury to play.
In mid-May Fin24 reported on an apparent truce between Gordhan and National Treasury on the Takatso deal following Treasury's withdrawal of a document that expressed concerns because it played no role in the selection of Takatso and that the deal represented an ongoing financial risk to the state.
Godongwana told Scopa that Treasury now agrees with Gordhan's argument that the Takatso process falls under the Companies Act and not the Public Finance Management Act (PFMA). It is, therefore, run by the DPE.
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