As SAA gears up to report its first profit in several years, its new interim chair, Derek Hanekom, says the airline plans to add routes to African destinations and lease more aircraft as part of a turnaround strategy.
This week, public enterprises minister Pravin Gordhan announced the appointment of Hanekom, a former tourism minister, as the chair of an interim eight-member board. In an interview on Thursday, the ANC veteran said the plan this year was to expand routes and find a way to lease additional planes.
“We can’t do it with the current seven aircraft,” he said.
SAA, which has 2,000 employees, currently flies two domestic routes and 10 routes to other destinations in Africa.
Hanekom, citing business confidentiality, declined to say what new routes SAA was contemplating.
In his budget in February, finance minister Enoch Godongwana allocated R1bn to settle part of the airline’s historic debt, which was initially about R13.5bn.
The interim board will remain in place until the introduction of strategic equity partner Takatso Consortium.
The consortium will buy a 51% stake in SAA and is expected to inject R3bn into the business. But the deal is subject to SAA settling its debt.
Hanekom said Takatso was not “going to find itself coming in with a historical debt, it won’t be like that”.
“We don’t want to place an unnecessary burden on the Treasury ... As SAA moves ahead we don’t expect any bailouts and we are going to work hard to do the best we can to ensure that SAA will look after itself,” he said.
These fundraising efforts are at an advanced stage, and we are quite happy with their progress
— Takatso
Takatso Aviation’s spokesperson Thulasizwe Simelane said the company had “for some time now” been engaging third-party funders to secure the funds needed to meet its obligation to invest in SAA’s growth.
“Naturally, we are not at liberty at this sensitive stage of the process to disclose anything more regarding these commercial transactions. Suffice it to say that these fundraising efforts are at an advanced stage, and we are quite happy with their progress.
“The equity commitments are in place, and it is on that basis that we can confidently confirm our readiness to make this investment into SAA’s operational costs, as per the transaction conditions.”
Simelane emphasised that “no portion of the funding for this R3bn operational costs investment will be raised from the Public Investment Corporation or any of its clients, as is often reported. The PIC’s role ends at it being a minority shareholder in Harith, with all attendant rights and responsibilities.”
We don’t expect any bailouts and we are going to work hard to do the best we can to ensure that SAA will look after itself
— Derek Hanekom
Takatso Consortium is majority controlled by Harith.
Asked when the transaction was likely to be finalised, Simelane said it and the department of public enterprises had been working on fulfilling the conditions, which include Competition Commission processes.
“Given the current market coincidence of an uptick in demand and a gap in supply in the aviation sector, [we are] anxious for the transaction to move apace, to enable SAA to take full advantage of these conditions that won’t last too long.”
But at the same time the company said it was “grounded in the reality that the process still has some ‘runway’ to go. We continue to emphasise that time is of the essence, in light of the market conditions.”
Simelane described Godongwana’s allocation in February as a key milestone in the transaction. Hanekom said SAA was expected to finalise its financial statements for the year to end-March in the next few weeks.
“Indications are that there will be a modest profit. But SAA remains in a fragile position and we have to be careful about the decisions that we take. It’s not out of trouble but at the same time it’s moving out of the process,” he said.
A number of things had to fall into place, including the leasing of new aircraft, “which is absolutely essential”.
“We are on a corrective path.”Hanekom said the board was still in the process of getting full information about SAA operations, but added: “My understanding is that the CEO commissioned a reputable valuer, and valuation for domestic assets has been done, but not yet the valuation for the international assets.”
He noted that at one time SAA was a “formidable airline with offices around the world … So a whole inventory of assets has to be done properly. It’s required of us as the accounting authority to look after the entity we are responsible for.”
Hanekom declined to comment on the Takatso transaction or when it might be concluded, but said: “We can’t stand still. There could be unexpected delays, so we certainly have to continue planning.”
Whatever plans were made or progress was achieved between now and the finalisation of the deal with Takatso, they would benefit the shareholders and SAA.
“We just have to make sure we don’t incur debt that we can’t pay. It is not our intention to get into irrecoverable debt and we have no intention of relying on bailouts.”
SAA has been in deep financial distress for years and in 2019 it entered business rescue.It exited business rescue at the end of April 2021 before taking to the skies again in September that year.
Takatso was announced as the government’s preferred strategic equity partner in June 2021.
Meanwhile, the suspended director-general of the department of public enterprises, Kgathatso Tlhakudi, has accused Gordhan of improper and illegal conduct, saying that he orchestrated the disposal of SAA to “benefit a few privileged individuals who were favoured by the minister in an irregular manner”.
In a statement, the Ministry of Public Enterprises said it had followed a fair and transparent process to achieve the government’s objectives of finding a strategic equity partner (SEP) for SAA.A due diligence of Takatso Consortium members was done, and it added that Harith had a proven track record of executing large-scale infrastructure projects across the continent.
Harith has previously raised $3.4bn (R61bn) from investors and it currently manages over $1bn in assets.
“DPE is satisfied in Takatso as the SEP ... and with Takatso shareholders’ track record of building a portfolio of assets across the continent.”
It added that “to our knowledge, Takatso has already secured internal approvals for their equity contribution in this endeavour”.
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