This is how the SAA deal with Takatso collapsed

Minister of Public Enterprises Pravin Gordhan said the SAA was called off after new valuations. Picture: Leon Lestrade/Independent Newspapers

Minister of Public Enterprises Pravin Gordhan said the SAA was called off after new valuations. Picture: Leon Lestrade/Independent Newspapers

Published Mar 14, 2024


The collapse of the deal between South African Airways (SAA) with the Takatso Consortium has led to more questions about the doomed sale, with political parties calling on Public Enterprises Minister Pravin Gordhan to come clean.

Parliament’s portfolio committee that oversees State-Owned Entities said it hoped the SAA chapter would provide lessons for the country.

Minister in the Presidency Khumbudzo Ntshavheni said on Thursday it was disingenuous for Takatso to call the Competition Tribunal cumbersome.

“It is disingenuous for Takatso to call the Competition Tribunal process red-tape. It is not red-tape, it is part of due diligence that is required to make sure that there is no monopoly, but there is also no unfair, uncompetitive behaviour by business, The competition tribunal process cannot be deemed as red-tape, not at all”

“In addition, if you recall when the Takatso Consortium transaction was being considered by the Competition Commission they were told about a director or partner within the Takatso Consortium who was already running a competing airline, which is uncompetitive,” said Ntshavheni.

No uncompetitive behaviour was allowed in any business, she said.

But this is what we know so far about the deal.

Gordhan said new valuations had changed the complexity and nature of the deal. During Covid SAA’s value was sitting at R2.4 billion. But after the pandemic new valuations were conducted and the value of the airline increased.

Takatso said it pulled out of the deal because the “revised transaction” had created “risk and uncertainty.”

It said despite signing the deal two years ago, it agreed to re-negotiate the share purchase agreement.

“These negotiations have been protracted, and the resultant revised transaction structure has introduced unacceptable levels of risk and uncertainty.

“Given the magnitude and materiality of the of the proposed changes, it had also become clear that the transaction would possibly need to be re-submitted for competition regulatory processes, which would have further compounded the complexity and drawn out the process even further,” said Takatso.

It added that the new terms of the deal were not acceptable.

Ntshavheni said on Thursday Cabinet gave the green light for the deal to be scrapped because it was not in the best interest of the country.

She said they were protecting SAA and its assets when government decided to pull the plug on the deal.

The chairperson of the portfolio committee on public enterprises, Khaya Magaxa, said they welcome the scrapping of the deal.

“We welcome the decision by the Cabinet to terminate the Takatso consortium deal. This allows us to re-evaluate and refine the processes we have been undertaking to ensure the best outcomes for our South African Airways. We remain committed to promoting transparency and accountability in the sector.”

But Gordhan said new valuation was the cause of the deal not to go through.

He said there were two valuations that were undertaken in the last four years. The first one was done during Covid and at the time SAA flights had been grounded.

“The business and the properties were valued at a liquidation asset valuation methodology and this amount to R2,4bn. And the business was valued at between 0 and negative.”

But after Covid market conditions changed and the business started improving.

There was now a demand for flights after many countries allowed visitors to come in.

This required another valuation for the airline.

“The business valuation came out at R1bn and the property valuation at R5.5bn. This meant that there was a net increase in the property by R3,1bn in the value of SAA. The equity value had increased from 0 to R1bn.”

Takatso said the new terms of the deal were not workable and they had to go through the Competition Tribunal. This was a cumbersome process.

This would have also required the repeal of the SAA Act, which was withdrawn in parliament a few weeks ago.

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