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R51 sale of South African Airways terminated

South Africa terminated a deal to sell a controlling stake in its flagship airline, after failing to agree on a value and other terms after three years of negotiations, Public Enterprises Minister Pravin Gordhan said.

The government had planned to dispose of 51% of loss-making South African Airways (SAA) to the Takatso group, which is made up of closely held Global Airways and private equity firm Harith General Partners, but the talks were called off, Gordhan told reporters in Cape Town on Wednesday.

“SAA will revert to be 100% owned by the state,” he said.

“We are convinced that SAA can sustain itself in the next year to 18 months, and that there are various other ways in which immediate financing can be obtained. But at no stage will SAA will get money from the fiscus,” after a number of government bailouts.

Gordhan, the 74-year-old former finance minister, had made the successful privatization of SAA a central goal while running the ministry overseeing state enterprises. He plans to retire after national elections scheduled for May 29.

Coronavirus Hit

SAA was on the verge of being liquidated when the state entered into talks to sell the stake.

The prospects of a revival took a hammering during the coronavirus pandemic, when global air travel ground to a near-halt. The carrier’s assets were valued at just 2.4 billion rand at that time.

Its fortunes have improved over the past three years, and the business was subsequently determined to be worth 1 billion rand and its buildings at 5.1 billion rand, meaning the government wouldn’t get fair value if it proceeded with the sale deal, the minister said.

Takatso said the original transaction had been renegotiated and the revised terms were no longer considered to be in its shareholders’ best interest.

“All work and negotiations on the proposed transaction have ceased. Neither party will be required to pay the other a termination fee or other consideration as a result of the mutual decision to terminate the agreement,” it said in a statement.

“It is in our respective best interests to move forward independently.”

New Routes

The collapse of the deal, first announced in June 2021, is a blow to the government’s efforts to sell off non-core state entities and bring state debt under control.

The government is open to SAA entering into other partnerships or code-sharing deals, which would be negotiated by its board, according to Gordhan.

He envisions the carrier adding more routes and leasing additional aircraft.

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