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South Africa agreed to sell the majority stake in the country’s national carrier to a local aircraft leasing company and a private equity firm, removing the government from a unit that has long been draining state finances.
A consortium consisting of JohannesburgGlobal Airways, which recently owns the domestic airline Lift and the private equity firmHarith General Partners will take a 51% stake in South African Airways, Public Enterprise Minister Pravin Gordhan said on Friday. The government will retain part of the minority.
The order strengthened in the news, trading 0.5% stronger at 13.55 against the US dollar since 10:11 in Johannesburg.
The group called Takatso will invest up to 3.5 billion rand ($ 258 million) over the next three years, said in an interview Lift co-founder Gidon Novick and CEO Harith Tshepo Mahloele.
“The government will no longer have financial obligations to the company, outside of the existing obligations they will settle,” Novick said. “The road networks we are still working on, and it will be a phased opening based on the demand that is emerging after Covid.”
The SAA sale comes about six weeks after the airline emerged from lengthy bankruptcy proceedings, having reduced its workforce by almost 80% and cut liabilities to around Rs 2.6 billion. The other challenge is the resumption of international flights, although South Africa remains isolated from most of the world due to pandemic travel restrictions.
The carrier is among a number of South African state-owned enterprises that have deteriorated into a state of financial distress in recent years, in large part due to mismanagement and corruption. However, the abolition of the SAA marks the first effective privatization of a major entity since the sale of the former telephone monopoly.Telkom SA SOC Ltd. about two decades ago.
A long-term goal is to rank the carrier on a stock exchange, Gordhan said. In the meantime, the government will retain special voting rights to ensure that the airline remains in place, among other national priorities.
The deal represents a triumph of sorts for Gordhan, who has argued for reviving the SAA with the help of private investors, while others were calling for it to be liquidated. The carrier has been the beneficiary of numerous government debt bailouts and 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 began Lifting in December last year under Novick, a former head ofComair Ltd., which operates the low cost airline of Kulula of South Africa. Harith invests in infrastructure across Africa and is a co-owner of Lanseria Airport northwest of Johannesburg. The pair will complete due diligence before the deal is finalized.
Read more: New South African airline to fly even when crisis hits market
While the SAA is now “solvent and liquid,” business rescue practitioners said when they delivered the aircraft, subsidiaries, including low-arm Mango and maintenance firm SAA Technical remain under financial strain and are in the process of recapitalizing.
The Department of Public Enterprises and the new consortium will jointly assess the future of the divisions as part of the proper dilution process, Gordhan said.
(Order updates in the third paragraph, further details throughout)
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