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SAA to sell some of its stake to the private sector

NEWS24 / 10 JULY 2018 - 17.50 / JUNIOUR KHUMALO

South African Airways has given a written undertaking to South African trade union Solidarity that it will immediately initiate the process of procuring a strategic partner.

This undertaking by the ailing state-owned entity came as a result of Solidarity stating its intention to bring an application to the courts to have the embattled national carrier placed under business rescue.

State-owned airline SAA.

Solidarity chief executive Dirk Hermann revealed the extensive undertaking it received from SAA at a media briefing at its head office in Centurion on Tuesday.

The pertinent revelation was the fact that the state-owned entity would be finally opening up the carrier to some form of privatisation, a move in stark contrast with SAA’s previous stance that the “airline first needed to be turned around before a strategic partner could be procured”.

Head of the Solidarity research institute, Connie Mulder, said SAA had not announced who would be buying a stake into the company as there would be extensive processes put in place before that announcement could be made.

“In the letter sent to Solidarity, SAA group chief executive Vuyana Jarana states that the process of procuring a strategic partner would be starting immediately.

"We do not know what portion of the company would be sold. We have a figure that we have in mind but it will be up to the entity to make that decision,” said Mulder.

The airline would need R21 billion in bailouts from the new strategic partner to effectively turn the business around.

According to Mulder, the best partner that SAA could get was one with not only the financial capability to carry the burden of additional capitalisation of the ailing airline but also with the necessary aviation know-how to resuscitate SAA.

“It’s time to stop partnering with businesses whose only loyalty lays with government officials and get the best suited partner to turnaround the fortunes of the ailing SAA.

"The problems currently experienced by our state-owned entities are due to the assumption that bureaucratic can make good businessmen which has continuously proven to be untrue,” said Mulder.

Jarana confirmed that the South African government announced that the private sector must participate in SAA’s ownership management.

Hermann said Solidarity had suspended the court application because it was effectively scaring away potential partners.

“In view of the SAA’s letter in which comprehensive undertakings are given, Solidarity has decided to suspend its application for business rescue for the time being.

"It is difficult to immediately proceed with litigation if the other party has conceded in writing to most of our demands,” said Hermann.

Mulder concurred and also added that another reason for suspending the court application were because SAA had agreed to 10 demands made by Solidarity: “We requested among other things that SAA carry out a forensic investigation into past and present staff to hold to account those responsible for the demises of SAA.

“We demanded that SAA should not be under government coffers and be a burden to taxpayers as well as transparency in the turnaround strategy as we have had numerous turn around proposals that have not been seen through,” said Mulder.

According to Hermann, Solidarity’s application to finalise business rescue was ready to be served.

“It is a comprehensive application of more than 1000 pages. Renowned South African and international aviation experts, such as Barry Parsons, Guy Leitch, Nico Bezuidenhout and Monwabisi Kalawe, are members of the Solidarity team.

"Business rescue practitioners who have already confirmed their availability also form part of the application,” explained Hermann.

The team was particularly involved in developing an alternative turnaround strategy for the SAA as part of the application but will, however, be awaiting SAA’s processes of seeking a strategic partner before taking any more action.

“We are not naive – the SAA’s written undertakings are sufficient to suspend the application. However, we are very sceptical about the implementation of these undertakings.

"We have confidence in Mr Jarana’s good intentions, and we will give him the benefit of the doubt for the present.

“However, we have less confidence in the shareholder’s political will to make radical decisions on private ownership of the SAA,” said Hermann.

Solidarity’s representatives said they were that the court application, should it have been successful, would have set a precedence which would have been detrimental to state-owned entities.

“This would have been the first time a state-owned entity has been placed under business rescue and with the current state of affairs in our state-owned companies, a majority of them would have found themselves under business rescue,” said Mulder.



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