SAA close to sealing the deal with Takatso, oversight committee hears

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The DPE made it clear that it will not be able to provide more capital for SAA going forward.  (Supplied)
The DPE made it clear that it will not be able to provide more capital for SAA going forward. (Supplied)
  • Due diligence for SAA's chosen strategic equity partner, the Takatso consortium, should be completed in the next week or so, Parliament heard.
  • But the Portfolio Committee on Public Enterprises had questions for the DPE on proposed sources of funding and the airline's long-term sustainability.
  • The DPE was also quizzed on why SAA's subsidiaries Mango, SAAT and Air Chefs had not been given a helping hand sooner.  

Due diligence for South African Airways' chosen strategic equity partner, the Takatso consortium, is at an advanced stage and should be completed "in the next week or so", the Department of Public Enterprises said on Wednesday.

This takes the airline one step closer to sealing the deal, which will see Takatso stepping in as controlling shareholder, the department explained during a presentation to the Portfolio Committee on Public Enterprises.

According to the DPE, a draft sale and purchase agreement (SPA) has been produced and is being negotiated. Once the SPA stage has been completed successfully, the department will be able to announce the completed deal to the public, pending regulatory approval.

"The conclusion of the SPA will signify cessation of government control," the DPE said.

But committee members still had questions – notably around funding and the airline's long-term prospects for survival.

Committee member Ghaleb Cachalia (DA) called for transparency on the proposed sources of funding for the consortium. Funding has been a key question since the partnership was announced, as SAA needs some R3 billion to run over the next three years.

DPE director general Kgathatso Tlhakudi made it clear that the DPE will not be able to provide more capital for SAA going forward. "We have been clear about that," he stressed.

Committee member Sibusiso Gumede (ANC) wanted assurance that SAA would be sustainable once it takes off again. DPE Director-General Kgathatso Tlhakudi said public-private partnerships of the kind proposed between SAA and Takatso are done all over the world with the aim of supporting the ability to provide services.

"We want to at least start with domestic and regional operations of SAA. Aircraft have already been leased for this purpose. Regarding its international operations, that would depend on when various destinations open up its Covid-19 restrictions."

According to Tlhakudi, SAA is being prepared for the private sector to play a leading role in the entity and that should be commended. 

"The pandemic meant we will have a much smaller airline. That will determine the fleet. A small fleet has been brought in to enable the start of operations. Going forward the business plan and the new owners will tell us the new routes. Information about that is commercially sensitive and we don't want to compromise SAA's re-emergence," said Tlhakudi.

"There is a direct relationship between the due diligence and the SPA regarding how SAA will be managed. Government has made a significant committed to ensure SAA can start as a leading airline on the continent again." 

SAA's Air Operator Certificate has been renewed by the SA Civil Aviation Authority and the cabin crew and pilots are undergoing retraining, Fin24 previously reported. An interim board and management are in place, while the due diligence process of the consortium is being completed.

The DPE briefing also covered SAA's subsidiaries Mango, SAA Technical and Air Chefs. Government has approved R2.7 billion of R10.5 billion allocated for SAA's business rescue plan, to be reallocated to its subsidiaries.

Committee member Omphile Maotwe (EFF) wanted to know why measures had not been put in place long ago to deal with SAA's subsidiaries.  

A voluntary business rescue of Mango was approved as from 28 July. The DPE acknowledged that Mango is experiencing severe liquidity issues, cannot pay its debts nor meet obligations when they fall due, but said it had to wait for funding in a bid to avoid liquidation.

"We had to ensure we had the funding for Mango's business rescue. If it did not have this post commencement funding, it would have ended in the same situation as SA Express - provisional liquidation, which would mean everyone loses out.

"We hope Mango will not be lost from our skies. We are dealing with major challenges here, including its huge debt," said Tlhakudi. 

"Government has allocated funding to Mango to meet its recapitalisation requirements. However, the funding available will not be enough to meet the current obligations. The business rescue process will advise on the long-term future of Mango. The DPE is hopeful that the business rescue will be concluded within the three months allowed by legislation."

SAAT, for its part, is implementing retrenchments. A portion of appropriated funds from government will be used to purchase spares, pay outstanding salaries and complete long-standing maintenance contracts.

Air Chefs will also be retrenching, and a portion of the appropriated funds from government will be used to pay outstanding salaries.

The court on 28 July granted an extension for the provisional liquidation process of regional airline SA Express. The potential buyer has submitted a revised offer and is awaiting a bank guarantee, according to the DPE.

The National Union of Metal Workers of South Africa and South African Cabin Crew Association have approached the Constitutional Court to challenge the liquidation of SAX without Parliament's involvement. The DPE will prepare an answering affidavit, Tlhakudi said.

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