South Africa agreed to sell a majority stake in the country’s grounded national carrier to a local jet-leasing company and private-equity firm, ridding the government of an entity that has long been a drain on state finances.
A consortium comprised of Johannesburg-based Global Airways, which owns recently launched domestic airline Lift, and private-equity firm Harith General Partners will take a 51% shareholding in South African Airways, Public Enterprises Minister Pravin Gordhan said on Friday. The government will retain a minority stake.
The rand strengthened on the news, trading 0.5% firmer at 13.55 to the U.S. dollar as of 10:11 a.m. in Johannesburg.
The grouping named Takatso will invest as much as 3.5 billion rand ($258 million) over the next three years, Lift co-founder Gidon Novick and Harith Chief Executive Officer Tshepo Mahloele said in an interview.
“Government will have no further financial obligations to the company, outside of the existing liabilities that they will settle,” Novick said. “Route networks we are still working on, and it will be a phased roll-out based on demand re-emerging post Covid.”
The sale of SAA comes about six weeks after the airline emerged from lengthy bankruptcy proceedings, having reduced its workforce by almost 80% and cut liabilities to about 2.6 billion rand.
The next challenge is to resume international flights, though South Africa remains cut off from much of the world due to pandemic travel restrictions.
The carrier is among a number of South African state-owned companies to have deteriorated into a state of financial distress over the past several years, in large part due to mis-management and corruption. However, the SAA disposal marks the first effective privatization of a major entity since the sale of former phone monopoly Telkom SA SOC Ltd. about two decades ago.
A longer-term goal is to list the carrier on a stock exchange, Gordhan said. In the meantime, the government will retain special voting rights to ensure the airline remains in the country, among other national priorities.
The deal represents a triumph of sorts for Gordhan, who has argued for the revival of SAA with the help of private investors while others were calling for it to be liquidated.
The carrier has been the beneficiary of numerous bailouts and government debt guarantees over the years, and Finance Minister Tito Mboweni reluctantly allocated 10.5 billion rand from the state last year to help it stay afloat.
Global Airways started Lift in December last year under Novick, a former head of Comair Ltd., which operates the South African low-cost airline Kulula. Harith invests in infrastructure across Africa, and is the co-owner of Lanseria Airport north-west of Johannesburg. The duo will complete due diligence before the deal is finalized.
While SAA is now “solvent and liquid,” business-rescue practitioners said when handing over the aircraft, subsidiaries including low-cost arm Mango and maintenance firm SAA Technical remain under financial strain and are in the process of being recapitalized.
The Department of Public Enterprises and the new consortium will together assess the future of the divisions as part of the due diliegence process, Gordhan said.