SAA gets 51% private stake, but still government controlled
The Organisation Undoing Tax Abuse (OUTA) eagerly awaits details of the new financial structure of SAA, following today’s announcement by Minister Pravin Gordhan that SAA will have a 51% private equity partner in the Takatso Consortium. Despite the Minister’s claim that SAA will have a new private owner, the PIC’s significant shareholding of 30% in Harith General Partners (a member of the Takatso consortium), effectively means that the State will retain control over the airline, owning a direct share of 49% as well as influence through the PIC.
Minister Gordhan was quick to announce that the taxpayer will not have to foot the bill for future bail-outs, however much of the risk would be carried by the PIC and Government Employees’ Pension Fund through Harith General Partners, who will provide the R3bn capital for the transaction, together with the R2 billion committed to the relaunch of SAA by the government. Government’s pension funds will have to top up the additional funds required in future.
Board seats will follow the equity interests of the shareholders and the government will have a “golden share” of 33% of the entity's voting rights in certain areas of national interest along with a guaranteed right to make “pre-emptive decisions”. These elements clearly pave the way for the government's continued ability to interfere in SAA’s day-to-day management and essentially it will still call the shots.
We would like clarity on whether the bailouts already included in the Budget (R4.3bn in 2021/22 and R1.8bn in 2022/23) will still go ahead in full.
OUTA would also like to know how the Takatso Consortium was chosen as the new partner, as this involves selling a significant stake in a state asset, if there were other bidders and, if so, who they were.
OUTA is also concerned that two key players in Harith - Tshepo Mahloele who fronts the deal and fellow-director Jabu Moleketi - were criticised by the PIC Commission of Inquiry. This is what the Commission's report said: "The Board of the PIC should examine whether the role played by either Mr Moleketi and Mr Mahloele breached their fiduciary duties or the fit and proper test required of a director in terms of the Companies Act."
OUTA is also very concerned about the impact that the government’s oversight bodies have on the competitiveness of the industry as a whole. In particular, we need to be sure that route license allocations do not favour this new government-controlled consortium over others who are also interested in operating cross-border routes, and that the SA Civil Aviation Authority will apply the highest standards to the new SAA, as it does with other airlines.
We would also like clarity on whether the Competition Commission must approve this deal.
Whilst many issues around the restart of SAA within the domestic market, the continued operation Mango and Lift and possible consolidation of these brands, need to be clarified, the impact of private-sector individuals in the due diligence process may hopefully result in a commercial business approach for the new airline.
OUTA is looking forward to the outcome of the final commercial basis on which matters will proceed and the financial and shareholding structural arrangements, to gauge whether it warrants true recognition of a reduced burden on the taxpayer or not.
A voicenote with comment from Julius Kleynhans, OUTA's Executive Manager: Public Governance Division, is here.