Details of the R51 sale of South African Airways (SAA) to the Takatsu consortium, which Public Enterprises Minister Pravin Gordhan is desperately trying to keep secret, will be revealed at a parliamentary portfolio committee meeting on Wednesday, subject to legal advice and its pros and cons. It may become clear. The document he submitted guarantees closure.
The sale was announced in June 2021, and Gordhan only submitted relevant documents to the Portfolio Committee on Public Companies last week under threat of a subpoena.
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Read: Mr Gordhan summoned over SAA-Takatso deal
However, he insisted that the meeting be held in private and that members sign non-disclosure agreements.
The committee agreed to hold the meeting in camera but refused to make it private.
The company is under investigation into the deal after former public enterprises director-general Kgataso Torahakudi accused Gordhan of orchestrating the deal to benefit his supporters.
The committee is “not comfortable with secrecy''
In a letter to Mr Gordhan, committee chair and fellow ANC member Kayaretu Elvis Magaksa said the committee “does not consent to any attempt to unlawfully curtail its constitutionally established oversight role”. he emphasized.
He added: “The committee's acquiescence to an on-camera meeting with you should not be taken as an exaggeration of secrecy over accountability, especially where public funds are involved. No,” he added.
Gordhan attended the meeting last week with a file prepared for all committee members, including the shortlist of SAA bidders, the airline's renminbi valuation and shareholder agreement.
Listen: Holomisa: Gordhan saves money with the truth about SAA sales
The committee then decided to refer the matter to Parliament's Legal Affairs Department to determine whether it warranted a closed session.
“The commission is not happy with that kind of secrecy,” says Mimy Gondwe, the shadow minister for public enterprises.
She said committee meetings must be open to the public as part of the participatory democracy required by the constitution.
Moneyweb has meanwhile learned that members of the committee have filed voluntarily while awaiting legal advice. If you don't support closed-door meetings, the veil of secrecy may finally be lifted.
R51 agreement is 'outrageous'
The 51% stake in SAA was transferred to Takatso just six weeks after the airline emerged from business rescue.
Takatso brought in Gidon Novick, former CEO of Comair, co-founder of Kululu and co-founder of start-up airline Lift, as CEO at the time, and had planned to inject R3 billion into SAA, but this has yet to materialize. Not yet.
Read: Novick: Funding needed to restart SAA 'hasn't been committed' [Nov 2022]
Takatso's main player is African infrastructure investment group Harris General Partners, and Global Aviation would have brought airline expertise. Global Aviation and Novik subsequently left the consortium due to secrecy about their development at SAA.
Read/listen:
Novick resigns due to lack of transparency regarding SAA contract
SAA: Takatso hits back at Novik's resignation
Alf Lees, an MP and member of the Standing Committee on Public Accounts (Scopa), said the parliamentary ANC was able to maintain secrecy about the transactions believed to be claimed by Mr Gordhan due to parliamentary legal advice on the Takatso deal. He said it was very likely that he was hoping for an excuse to do so. I want to maintain it.
“The R51 paid for 51% of SAA shares is 51%, given that from the outset of the transaction with Takatso, SAA was debt-free and held assets including fixed assets, routes and subsidiaries worth billions. The DA has argued that it is outrageous” of Rand. ”
He added: [R3 billion] The funding Takatso is said to be providing will not be an equity injection, but will provide working capital over a three-year period, and is likely to be provided in the form of a secured loan. This R3-billion loan of his will likely be the first profit distribution and/or dividend from the bankruptcy payout. ”
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Mr Leeds said he doubted that Mr Gordhan was keeping the Takatso agreement secret “because, as Mr Tlakdi alleges, it is a bad agreement and very likely to violate the law”. He said there didn't seem to be any room.
“The Takatso deal is in limbo and SAA must be fully privatized before operational losses lead to further taxpayer bailouts and private buyers are scared away.”
Promising expansion plans
SAA is planning a major expansion, although there are question marks over its ownership.
The company plans to nearly double its current fleet of 11 aircraft (all leased) to 21 by the end of this year, interim CEO Professor John Lamola said. He told Aviation Week Network that the optimal aircraft size is 40 to 50 aircraft.
SAA canceled almost all routes outside Africa during the rescue, but has since resumed flights to Sao Paulo, Brazil, and plans to restart flights to Perth next month. Lamola said SAA will rebuild a strong European network with 50% wide-body and 50% narrow-body aircraft by 2028/29.
read:
SAA opens Cape Town and Johannesburg routes to Brazil
Ready to pack your bags for Perth? SAA resumes flights for:
aircraft lease
However, financially the situation is not good.
For the nine months to the end of December, SAA had expected a profit of R92 million, but instead posted a loss of R776 million.
This is because the cost of leasing aircraft is higher than ever. The two major manufacturers, Boeing and Airbus, are competing to deliver orders, and airlines can wait up to eight years between order and delivery.
In a recent webinar hosted by aviation data service OAG, Midas Aviation partner Deirdre Fulton said airlines are increasing the number of aircraft they lease. John Howie of China Aircraft Leasing Group said the increased demand has given lenders more choice in who they do business with, allowing them to limit risk.
Mark Dunachie, head of commercial at ACIA Aero Lease, said at the same event that this situation could continue for another four years.
Aviation economist Joachim Vermoten said lenders would want certainty in this context, but the lack of it regarding SAA's ownership could work against that.
Leeds said he believed SAA was once again insolvent, but lenders may rely on further government bailouts to move forward with leasing aircraft to airlines, but instead have to pay large sums of money. will have to pay a risk premium of
Market forces limit the amount that can be recovered through ticket sales, meaning that taxpayers must pick up the pieces.
Listen to this Moneyweb@Midday podcast with Jeremy Maggs (or read the transcript here):
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