Officially, the SAA transaction to establish the first post-apartheid black-owned aviation company with the region’s most lucrative landing rights and routes is off the table. The opportunity to demonstrate the liberation promise of black ownership of the commanding heights of the South African economy, by participants who are accomplished in business, evaporated with the transaction’s flows and ebbs.
The Takatso SAA deal would have been an industry game-changer in many respects.Its failure might be judged by history as an epic betrayal of the economic transformation intentions of the post-apartheid state.
To the naked eye, the transaction ended because “with the time it has taken to date, for reasons outside the control of the parties, the change in market dynamics have led to Takatso reconsidering its positions ... it is on this basis that it was mutually beneficial to both parties to terminate the sale and purchase agreement by mutual consent”.
The Takatso statement used the phrases “outside of control” and mentioned “a sale and purchase agreement”. The transaction was consummated and in execution mode, where parties to the agreement only had to meet their obligations.
The transaction was fraught with political considerations, administrative bungling, bureaucratic chokeholds and internal wrangling between government factions. It was bedevilled by debate of whether “to privatise or not to privatise”.
Notwithstanding President Cyril Ramaphosa’s stance that “it is important for the government to look for strategic partnerships with the private sector who will bring along expertise and capital”, the “who is Takatso and who promotes them” issue grew to be a consideration more than the bona fides of the players.
The leadership of the department of public enterprises indeed engaged members of the Takatso consortium after they had expressed interest in the Mango and Kulula assets, to ask them to consider whether they would rescue the national airline, which was, in any event, under business rescue and a candidate for a deep-pocketed international takeover.
Official documents that are gradually entering the public domain confirm that the Takatso transaction was born out of a realisation both inside and outside of the department that the prospects of setting the national carrier on a financially and operationally sustainable course would be best served by the joining of forces of the two top-scoring entities in the second round public enterprises-led expression of interest process.
Under national duty obligations, despite risk assessment warnings over the unreliability of the government when it came to advancing transactions in the national interest, the consortium flirted with the risk and considered the temptation, which looked like a unique opportunity, all things being equal.
The high-level objective of the majority shareholders in the consortium was to consolidate its aviation industry interests, which include a regional airport with the potential to trigger an airfreight business hub northwest of Gauteng.
The deal was fraught with political considerations, administrative bungling, bureaucratic chokeholds and internal wrangling between governing party factions.
Owning an airline would have had multiplier advantages, including for the announced smart city by Ramaphosa and for boosting the northwest-bound tourism industry.
Air traffic decongestion from OR Tambo airport would have been increased by introducing SAA as a passenger and cargo airline landing in Gauteng’s envisaged industrialisation hub.
To this end, Takatso would have paid R3bn, R1bn for an equity stake in SAA and R2bn for operating capital. This amount recognised the business valuation of SAA, which had improved significantly by 2023 compared to the initial valuation when it was in business rescue and not flying in 2021.
This contradicts the maliciously bandied about amount of R51 because, ultimately, there had never been a scenario, either in terms of the initial deal structure or the one the parties had agreed to by the time they walked away from the deal, where Takatso would have paid a mere R51 for SAA. Takatso would have had the state as a 49% shareholder with preference shareholding.
The transaction started to face impediments when the requirement for the SAA Act to be amended to disable its Public Finance Management Act status emerged as a transaction flow issue. If not for the latter act, SAA could have had the state as a significant shareholder outside the governance arrangements influenced by any executive authority.
True private sector involvement is realisable when companies account according to private sector governance principles not influenced by politically exposed persons. The extent to which the South African authorities were ready to let this “power” go, as we observe the wrestling at other state-owned enterprises (SOEs), might have influenced Takatso’s view that “there were reasons outside the control of the parties”.
In addition to the direct advantages this transaction would have had for the regional economy, the investor confidence spin-offs over the seriousness of South Africa to restructure its SOEs through private sector partnerships would have been enhanced.
The collapse of the transaction with a South African-origin company that has proven and demonstrated infrastructure investments, locally and on the continent, begs the question of who can close a “clean deal” with the governing elite. The demand for local participation in foreign direct investment has been hollowed by the government’s inability to insulate the SAA transaction as a flagship to demonstrate “walking the talk” to investors.
Unless the playbook for private sector partnerships excludes black-owned and capable companies, the Takatso transaction failure is an indictment of all rhetoric about black participation in the economy.
Mathebula is a public policy analyst and founder of The Thinc Foundation. He was a consultant for Takatso, but writes in his personal capacity
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