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SAA’s historic debt remains responsibility of the government in spite of Takatso stake

TAKATSO is set to provide R3bn in funding and aviation management expertise for the new airline in return for a 51 percent stake in SAA. Picture: Henk Kruger, ANA.

TAKATSO is set to provide R3bn in funding and aviation management expertise for the new airline in return for a 51 percent stake in SAA. Picture: Henk Kruger, ANA.

Published May 11, 2022

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THE DEPARTMENT of Public Enterprises (DPE) has confirmed that the government will be responsible for the SAA historic debt of R8.4 billion, in spite of disposing of the majority of the state’s shareholding in the troubled carrier to a private strategic equity partner (SEP).

Tempers flared yesterday in Parliament as Public Enterprises Minister Pravin Gordhan briefed the Standing Committee on Public Accounts (Scopa) on the sale of a 51 percent stake in SAA to Takatso Consortium.

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In June, the government entered into a sale and purchase agreement with Takatso Consortium, formed by Harith General Partners and Global Aviation.

Takatso is set to provide R3bn in funding and aviation management expertise for the new airline in return for a 51 percent stake in SAA.

Gordhan said that SAA’s debt remained high at R8.4bn, as did the cost of financing debt at R1.4bn, as the airline’s financial position remained weak with equity and reserves remaining negative to the value of R13.3bn.

The minister said that this was after the government provided R10bn during the year under review as capital injection comprising R7.4bn to repay lenders and R2.6bn for working capital.

Gordhan said that in spite of the R3bn contribution that would be coming from Takatso, SAA’s historic debt would remain the government’s burden to shoulder.

“All the historic liabilities, for example voluntary severance packages, the settlement of creditors and previous loans given by banks and so on, will still remain the government’s responsibility and much of that has already been dealt with,” Gordhan said.

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“As far as subsidiaries are concerned, the SEP is looking into the possibility of including Mango and other subsidiaries into the transaction, even though initially it had indicated no interest in Mango due to its financial distress. This will also include SAA Technical and SA Airchefs as well.

“At the conclusion of the SEP process, as a result of a partial allocation that took place in respect of the R14bn that was required for the business rescue plan to be implemented, the final R3.5bn which we are trying to reduce by all sorts of means is an outstanding issue that we will have to settle and resolve.”

EFF MP Veronica Mente asked Gordhan about the relevant legislation followed in privatising SAA.

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“What is strategic about this partner? What is it they are bringing to the table? How was this partner chosen? I don’t understand what due diligence they did to buy SAA with only 2017 audited financials,” Mente said.

“The fact that the minister is hiding behind legal and commercial grounds as a reason for a secretive transaction with public assets is evidence enough that the transaction is rotten.”

However, Gordhan said that the department had met all applicable prescripts and that all relevant legislation had been complied with in regards to the sale.

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He said that a presidential State-owned Enterprises (SOE) council was developing an oversight model for SAA and other SOEs as privatised assets would not be registered in Schedule 2 of the Public Finance Management Act (PFMA) as a government’s commercial entities.

Gordhan, however, emphasised that the transaction to sell SAA had not yet been concluded, thus Takatso was not yet a partner, subject to the satisfaction of all conditions precedent and regulatory approvals.

“That is why we wish that within the next 2-3 months all the regulatory processes will be concluded, but when lawyers are involved you never know which way it is going to go, but that will be our intention,” he said.

DA MP Alf Lees said a lot could have been prevented had SAA been placed under business rescue earlier.

“Had business rescue been implemented much earlier, say 2014, much of this R49bn perhaps may not have been needed,” he said.

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BUSINESS REPORT ONLINE

Related Topics:

air transportSAA

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