Africa-Press – South-Africa. Business Leadership South Africa CEO Busi Mavuso says that the collapse of the private partnership deal with South African Airways is an embarrassment and a disappointing end to a potential lifesaver for the airline – which has accumulated losses of R60 billion over the years.
Public Enterprises Minister Pravin Gordhan announced last week that the long-awaited deal for consortium Takatso to acquire 51% of SAA had been called off following a revaluation of the airline’s business and assets.
The deal was three years in the making and had come under severe public scrutiny when it was announced that the transaction valued SAA’s business at R51, and Takatso was required to inject R3 billion into the airline once it was concluded.
According to Mavuso, the deal held a lot of potential for SAA and was a pragmatic solution to the problematic state-owned company, which was draining the fiscus of billions every year.
“When the government announced in 2021 that it would sell a controlling stake in SAA, I described it as a ‘massive step in the SOE reform agenda’ and a pragmatic resolution of a situation the state had manifestly been unable to resolve on its own,” Mavuso said.
“However, last week, the deal that was purportedly done fell apart, and the government has said it will continue to hold 100% of the airline. This is an example of how not to restructure a state asset and is somewhat of an embarrassment.”
The business lead said that the restructuring of state assets is a priority if South Africa is to put the era of perpetual bailouts behind it.
In its most recent reported financial year, 2022, when it was barely flying, SAA lost R3.6 billion, bringing its cumulative losses to over R60 billion.
“(this is) money that the state has had to pump into the airline to keep it flying. That money could have been spent on service delivery instead of trying to compete where there is no conceivable public benefit to the state operating an airline,” Mavuso said.
She said that the collapse of the deal is still shrouded in mystery, following on from the deal itself, which was also kept hidden from the public.
“A better and more transparent disposal process should have been followed, in which potential buyers submit offers, and the state chooses the best one. Such a process may not have resulted in much money for the government, but it could have taken a headache off its hands,” Mavuso said.
Making matters worse, the whole ordeal is likely to spook future investors – a significant hurdle at a time when the government is seeking private partners.
“The failure of the disposal will leave the private sector cautious about any future engagement regarding state assets,” the BLSA CEO said.
Speaking to the Sunday Times, Presidential Spokesperson Vincent Magwenya said that the strained fiscus can no longer afford to bail out struggling SOEs and that “strategic partners” are needed to turn these companies around.
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