State-owned airline South African Airways (SAA), which exited business rescue in April 2021, and is in the process of being taken over by a strategic equity partner (SEP), has briefed Parliament’s Portfolio Committee on Public Enterprises that that SEP had to assume control as soon as regulatory approvals made it possible. That was essential to allow the airline to regain market share.
SAA’s SEP is the Takatso Consortium, which will take a 51% share in the carrier. The government will retain the remaining 49%.
The airline briefed the Portfolio Committee that its current operating model was “not up to scale for profitability”. SAA currently had a fleet of only seven aircraft. That was not enough to benefit from the growing market demand. The Ministers of Public Enterprises and of Finance had, in February, approved the acquisition of six more aircraft by the carrier. But, by way of comparison, South African private-sector carriers FlySafair and Airlink had much larger fleets; FlySafair had 28 airliners and Airlink had 61 smaller aircraft plus two Boeing 737s, SAA said.
SAA also reported that it currently held only 16% of the domestic market. It was also losing “lucrative” routes within Africa and particularly Southern Africa to its competitors. At the moment, it operated just two domestic routes (Johannesburg-Cape Town and Johannesburg-Durban) and ten regional routes, to Harare and to Victoria Falls in Zimbabwe, Windhoek in Namibia, Lusaka in Zambia, Blantyre and Lilongwe in Malawi, Kinshasa in the Democratic Republic of Congo, Mauritius, Lagos in Nigeria, and Accra in Ghana, all served from Johannesburg. By March next year it planned to serve three domestic, 16 regional and one intercontinental, routes.
However, the National Union of Metalworkers of South Africa (Numsa) has announced that it had written to the chairperson of Parliament's Portfolio Committee on Public Enterprises, requesting a meeting with the committee to urge them to stop the SAA SEP agreement with Takatso. Numsa maintained that the deal is mired in corruption.
Numsa claimed that the SEP deal had been “engineered” by Public Enterprises Minister Pravin Gordhan, to benefit friends and “former senior members” of the country’s ruling party, the African National Congress (ANC). For example, the majority shareholder in Takatso was Harith General Partners, and a director of Harith was Jabu Moleketi, who was a former Deputy Minister of Finance, and who had also been a member of the ANC’s highest executive body, the National Executive Committee.
Numsa also charged that Gordhan had not revealed to Parliament or the public how Takatso had been chosen to be the SEP. Further, Takatso had no balance sheet and no proof that it had the capital it needed to be SAA’s SEP. “Whereas Harith may have successfully raised capital in the past, we also know that most of their money comes from the PIC [Public Investment Corporation], the [South African State] employee pension fund they used as their piggy bank,” asserted the union. It also claimed that Takatso was effectively being given SAA for free.
“This deal is corrupt,” asserted Numsa. “If the President allows this process to proceed unchecked, [we] will demand a Commission of Inquiry into the sale of SAA because we see this entire process as another form of state capture, which has been officially sanctioned by Pravin [Gordhan].”