Officially, the SAA transaction to establish the first post-apartheid Black-Owned aviation company with the most global, lucrative, and Mandela goodwill dividend landing rights and routes is off the table. The opportunity to demonstrate the liberation promise of black ownership of the commanding heights of the South African economy as private sector participants who earned their industry positions evaporated with the transaction lows and ebbs. The Takatso SAA deal would have been an industry game-changer in many respects. Its failure might be judged by history as an epic betrayal of the economic transformation intentions of the post-apartheid state.
To the naked eye, the
transaction ended because "with the time it has taken to date, for reasons
outside the control of the parties, the change in market dynamics have led to
Takatso reconsidering its positions...it is on this basis that it was mutually
beneficial to both parties to terminate the sale and purchase agreement by
mutual consent". The Takatso statement raises "outside of
control" and "a sale and purchase agreement". The transaction
was consummated and in execution mode, where parties to the agreement only had
to meet their obligations.
The transaction was
fraught with political considerations, administrative bungling, bureaucratic
chokeholds, and inside governing party factional wrangling. The transaction was
held in a crossfire of 'to privatise or not to privatise'. Notwithstanding President
Ramaphosa's stance that "the government needs to look for
strategic partnerships with the private sector who will bring along expertise
and capital", the "who is Takatso and who promotes them, grew to be a
consideration more than the bona fides of the transaction.
Market intelligence
confirms that the DPE leadership engaged the Takatso consortium after they
expressed interest in Mango and Khulula assets to consider rescuing the
National Airline, which was, in any event, under business rescue and a
candidate for deep-pocketed international takeover. Official documents that are gradually
entering the public domain confirm that the Takatso transaction was born out of
a realisation both inside and outside of the DPE that prospects of setting the
national carrier on a financially and operationally sustainable course would be
best served by a joining of forces of the two top-scoring entities in the
second round DPE-led expression of interests’ process. Under
national duty obligations, despite risk assessment warnings on the
unreliability of the governing party in national interest-advancing
transactions, the consortium flirted with the risk and considered the
temptation, which looked like an opportunity ceteris paribus.
The high-level objective
of the majority shareholders in the consortium was to consolidate its aviation
industry interests, which include a regional airport with the potential to
trigger an airfreight business hub northwest of the Gauteng province. Owning an
airline would have had multiplier advantages, including the announced smart
city by President Ramaphosa and exploding the northwest-bound tourism
industry. Air traffic decongestion from OR Tambo airport would have
been increased by introducing SAA as a passenger and cargo airline landing in
Gauteng's envisaged industrialisation hub.
To this end, Takatso
would have paid R3 bn, comprised of R1 bn for an equity stake in SAA and R2 bn operating capital. This
amount recognised the business valuation of SAA, which had improved
significantly by 2023 compared to the initial valuation when it was in business
rescue and not flying in 2021. This contradicts the maliciously brandished amount
of R 51,00 because, ultimately, there had never been a scenario, either in
terms of the initial deal structure or the one the parties had agreed to by the
time they walked away from the deal, where Takatso would have paid a mere R51
for SAA. Takatso would have had the state as a 49% shareholder. The transaction started to experience true impediments when the requirement for
the SAA Act to be amended to disable its PFMA status began to be a transaction
flow issue. Outside the PFMA, SAA could have had the state as a significant
shareholder outside the governance arrangements influenced by any executive
authority. True private sector involvement is realisable when companies account
according to private sector governance principles and are not influenced by politically
exposed persons. The extent to which the South African authorities were ready
to let this ‘power’ go, as we observe the wrestling in other SOEs, might have
influenced the bold Takatso call that “there were reasons outside the control
of the parties”.
Despite the direct advantages this transaction would have had on the regional economy, the investor confidence spinoffs on the seriousness of South Africa to restructure its SOEs through private sector partnerships would have been enhanced. The collapse of the transaction with a South African-origin company that has proven and demonstrated infrastructure investments locally and on the continent begs the question of who can close a 'clean deal' with the governing elite. The demand for local participation in the event of FDI has been hallowed by the government's inability to insulate and curate the SAA transaction as a flagship to demonstrate 'walking the talk' to investors. Unless the playbook for private sector partnerships excludes black-owned and capable companies, the Takatso transaction failure is an indictment of all rhetoric about black participation in the economy.
Comments
Post a Comment