The consortium planning to buy a 51% interest in SAA says raising the R3bn for the airline's relaunch is the least of its worries.
Gidon Novick, CEO of Takatso, said in an interview this week that the consortium had received approaches from international investors but turned them down because it preferred local backers.
"We would like it to be locally funded and for South Africans to benefit," he said.
In terms of the agreement, announced by the department of public enterprises last week, Takatso, with its proposed 51%, will have the majority shareholding and operational control. The government will have a 49% interest.
Takatso consists of pan-African infrastructure investor Harith General Partners and local aviation group Global Aviation, the owner of low-cost carrier Lift.
Takatso said last week that funding would come from capital markets, and the final funding structure and capital requirements would be determined afterthe due diligence process, which is under way.
The department of public enterprises said on Friday that after undertaking a due diligence examination of Takatso, it was "satisfied the consortium has the necessary assets, infrastructure and financial resources including the required technical and operational expertise".
"This will ensure a sustainable, agile and viable South African airline is created," it said.
This week Novick, who is from Global Aviation and co-founder of Lift, said funding was "absolutely . not an issue".
"Harith are 100% the right funding partners and they will deliver on the funding. Good businesses get funded and bad businesses don't.
"We've turned down funding from other parties, who have come to us and said: 'We like this idea you have to acquire SAA and use your expertise and skills and agile business model, and we'll back you with funding'," Novick said.
The expressions of interest the group had received were the reason he did not have "any concern or stress around that funding being available and accessible", he said.
"There is still a massive excess of liquidity in the world. Too much money looking for opportunities and South Africa is no different. Bear in mind we are talking about equity funding here. And we haven't even started talking about potential debt facilities."
Novick said it was "inevitable" that some debt would come into the funding equation at some stage as SAA ramped up its flights because of the consortium's proposed business model. The model is aimed at owning aircraft rather than leasing them. He said this would give SAA the ability to downscale or upscale its fleet according to passenger demand and protect its profit margins.
The expenses of leasing aircraft would eat into what were already thin margins in the airline industry, he said. The plan was to keep SAA's debt levels as low as possible as "part of our agile model . to limit debt and keep it low because debt is what gets businesses into trouble, especially airlines".
Since Takatso was named as the preferred strategic equity partner for SAA, there has been speculation about the consortium's funding and that the Public Investment Corporation (PIC), which owns 30% of Harith General Partners, could possibly bankroll it. The PIC dismissed the speculation this week, saying it was "not involved in this acquisition, nor were the assets that it managed on behalf of clients".
Novick is adamant that no public funding will be part of the R3bn.
As for how much the 51% interest will cost the group - the R3bn in funding is for the relaunch and is not the purchase price for the 51% stake - he said "that's still got be determined through the due diligence process".
"The liabilities - we are quite clear about that - will be settled by government. The assets side of the business is at this point in time not crystal clear to us and that will be part of the due diligence process. And bear in mind, there are assets and infrastructure coming from both parties."
He said there would be tangible value in SAA, but also from Harith and Global, which had infrastructure, assets and aircraft. It was an "oversimplification" to suggest that a "R3bn cheque" was going to be needed on "day one" - this was the funding requirement they estimated would be needed over three years.
Novick is confident SAA will pass Takatso's due diligence process because, through the SAA business rescue process, a lot became known about the airline's liabilities. The most important part of the due diligence was assessing SAA's contracts. The timeline is eight weeks, "but I hope we can do it in less".
He said the consortium was at "a stage where we want to engage with the organisation". Takatso was due to do a conference call with SAA's executive team "to introduce ourselves and get to know them".
The plan was to build the best possible team at SAA, and he had "no doubt South Africa has the talent and experience to build the top management team in the industry".
The Black Business Council said: "We are pleased there is a South African group that has said it is equal to the task. We need to support the Takatso consortium and wish them the best in their endeavours ..."
"We are quite relieved that SAA will be flying again and pleased there will be further competition in the airline space," said president of the council Sandile Zungu.
"It's an important brand in the South African space. It requires bravery to invest in an airline. We just hope that this consortium has done its homework on the commercial viability on their endeavour and that the due diligence they are undertaking will authorise them to go ahead with the transaction."
Zungu hoped once SAA was growing again, Takatso would "claw back" jobs lost. SAA's workforce was cut from 4,700 to 1,000 through voluntary severances and retrenchment.
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