One of the enduring mysteries of President Cyril Ramaphosa’s first full term in office is how he has utterly failed to sell off SAA despite practically announcing it as a done deal in his speeches. The start of the Great Ramaphosa Reforms it was not.
And now it never will be. In literally the last weeks of his long career, public enterprises minister Pravin Gordhan pulled out of the deal on Wednesday. When he goes after the May 29 election his department is likely — perhaps not immediately — to be wound up and discarded. Its state-owned enterprises (SOEs), among them Eskom and Transnet, would then be returned (only the ANC could think this madness is sensible) to the departments they originally belonged to.
There was talk about creating a holding company or structure for these SOEs, and maybe that still fizzes quietly in some dark corner, but it is not easy getting a coherent answer on the future of the department. Certainly, Gordhan will be impossible to clone and this has been his deal.
His departure will leave the future of SAA still up in the air. Ultimately, he was defeated politically, as the deal he nurtured — the sale of 51% to a local buyer, Takatso, with the state holding on to 49% — met increasing resistance within the ANC, and as became clear on Sunday, from finance minister Enoch Godongwana as well.
Tito Mboweni, when he was finance minister ahead of Godongwana, couldn’t wait to sell off SAA. It was while he was still in government that the Takatso bid for SAA was accepted. Under the deal, the state would clear SAA debt and Takatso would buy its controlling stake for R51 and inject R3bn working capital. But Mboweni left the Treasury before the deal was ever done and under Godongwana the state’s enthusiasm for the acquisition has withered and now died.
SAA went into business rescue in late 2019, just ahead of the pandemic. It didn’t fly for almost two years. Once it was out of business rescue in 2021 the inevitable happened. The directors and board started to think well, hell, here we are in Jet Park and there are planes down on the apron ... why don’t we, um, start flying?
So they did and immediately began burning cash, though both CEO John Lamola (a thoughtful academic and communications guy with no significant airline experience) and the chair, former ANC minister Derek Hanekom (whose knowledge of how to read a set of accounts may be worse even than mine), seem to insist now that SAA is flying profitably.
I doubt that. SAA leases expensive aircraft and owes mountains of money in frequent flyer miles. Accounts disclosed to parliament by Gordhan in 2023 show it made a R3.7bn pretax loss in 2021/22. It is now opening routes to Australia and Brazil. What could possibly go wrong?
In parliament recently Gordhan has been trying to hide from MPs the details of the Takatso offer and the shortlist of bidders Takatso beat to the deal. Just the other day he relented and allowed the documents to be seen but not disclosed as, suddenly, it seemed the deal was being “renegotiated”.
Under pressure
Really? Gordhan was under pressure from critics who argued the effective R1 a share implied in the Takatso deal vastly undervalued SAA. This was a bit rich about a company that has slaked in more than R50bn in bailouts in the past 20 years. But nothing prevented the current management from selling off properties that critics of the Takatso deal claim are worth a fortune. Do high property valuations explain why the SAA top brass kept insisting the company is in a “positive equity position”?
Godongwana’s own mask as a neutral observer slipped last weekend though, when he told Sunday Times reporters that “I don’t know how much SAA has been sold for and what are the terms”. Of course he did. He just didn’t agree with the price or the terms, hence: “What I’m reading is that SAA assets are bigger than R51 and we have cleaned the debt, and paid all the debt. So somebody who would be buying SAA would be buying a clean asset without any debt obligation.”
So that was a “no” from the Treasury to the current deal. It may explain why progress was so slow after Godongwana became finance minister. And it seems clear there are other potential buyers about, some perhaps even knocking on Godongwana’s very door. It’s worth saying here that the Takatso consortium is headed by the owner of this newspaper and the Sunday Times, and hence my ultimate boss, Tshepo Mahloele.
What you have to be open to, given the political fussing around the deal, and with the finance minister himself openly stoking the fires, is the horror in what former president Kgalema Motlanthe told Carol Paton in a Financial Mail cover story way back in 2008: “This rot (corruption in the ANC) is across the board,” he said then. “It’s not confined to any level or any area of the country. Almost every project is conceived because it offers opportunities for certain people to make money.”
That’s the problem some of the voices you now hear have had with selling off SAA to Takatso. Where were the political spoils, the kickbacks, the middlemen? And if there were none, what was the point? Perhaps Godongwana will find a new private sector partner happy to stump up for offices and real estate no recovering airline should need, and for Heathrow landing slots SAA doesn’t use.
I think Mahloele has been extremely lucky to get out. I hope he gets as far away from SAA as possible. There are other ways into airlines if you must. But the moment you do business with the SA government you’re also in business with the ANC, and you wouldn’t wish that on your worst enemy. The party has mouths to feed.
• Bruce is a former editor of Business Day and the Financial Mail
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