Employees of embattled State-owned airline South African Express Airways (SA Express) have taken initiative to incorporate a special purpose vehicle (SPV) as an acquiring entity to bid for the airline.
The SPV will be owned by a public limited company, Fly SAX, with the employees as owners.
SA Express was placed into business rescue in February.
The airline operates a route network in Southern Africa using a fleet of Bombardier CRJs and Q400s.
More than 600 employees have been pleading with government to save the airline since business rescue practitioners recommended liquidation proceedings as the only solution to the airline’s indebtedness.
Establishing Fly SAX will help the employees to “take back destiny into their own hands,” says spokesperson of the entity Thabsile Sikakane.
The capital needed to be raised is expected to be structured through an equity funding model to finance and scale employee ownership conversions in a worker-centric and transformative way.
The social capital can serve as a tool for real, transformative change in the ownership model, Fly SAX says.
The proposed funding model is one where the ultimate purpose would be to vest ownership in the workers. The goal is to create a vehicle that leaves more of the value with stakeholders, as well as anchor investors upon exit, a statement by Fly SAX reads.
The proposed employee shares ownership plan will not only improve income and wealth distribution but also improve productivity, because the employees will have ownership of the company, it adds.
“The benefits of accepting this funding model include the possibility of the business enterprise being positioned to resume operations and result in saving a significant number of jobs through the avoidance of liquidation.
“There is also a shorter expected time to get returns and distributions to the creditor than would arise under the alternative liquidation scenario, and that the unconditional consent to sell all assets of SA Express is disposed of for maximum value,” explains Sikakane.
She adds that South Africa will see a genuine broad-based employee ownership plan which will be privately held and publicly traded. It will be founded on pro-public, democratic principles and a fundamental framework of democratic ownership.
Going beyond board representation, the employees would seek to advance a new democratic form of management and ownership that would value the practical knowledge and skills of workers by involving them in day-to-day decision-making.
Those who have the knowledge should be at the core of the design and operation of services, as “nobody knows better how to run the airline than those who have spent their lives doing so,” says Sikakane.
This democratic ownership involves collaboration between public institutions, citizens and workers, and it calls for all players to be involved in facilitating this process, she says.
The proposed approach combines a sequenced mix of interventions, and while it may not be a silver bullet to save SA Express, it holds real potential, particularly if government is supportive of this democratic approach, she notes.
Beyond the potential of this model to enable SA Express to get back to fulfilling its founding objectives, its positive outcomes would be welcomed, since it brings with it immeasurably greater social impact, by limiting the viability of extractive finance that damages workers and communities and increases economic inequality, Sikakane states.
“Therefore, we the employees take pleasure in submitting an offer to acquire the business as a going concern, subject to prevailing terms and conditions,” she adds.