Mounting Pressure and Secrecy: The Controversial Sale of South African Airways Scrutinized in Parliament

The Sale of South African Airways (SAA) to the Takatso Consortium for a nominal R51 has faced intense scrutiny, with recent developments indicating a possible end to the secrecy enveloping the deal, first announced in June 2021. After prodding by a parliamentary portfolio committee and the threat of a subpoena, Public Enterprises Minister Pravin Gordhan finally relinquished the relevant documents. Despite his push for a closed-door discussion, the committee atop by ANC chair Khayalethu Elvis Magaxa expressed unease about the veiled process and deferred the decision to legal advisors.

At the meeting arranged last week, Gordhan brought detailed files for each committee member, including the shortlist of bidders for SAA, the RMB valuation, and the shareholder agreement. However, a motion for committee members to sign non-disclosure agreements was declined, emphasizing the committee's commitment to their oversight role—precisely the transparency that Committee member Mimmy Gondwe argues is vital for public engagement and democracy.

Amid allegations by Kgathatso Tlhakudi, former director-general of the Department of Public Enterprises, that Gordhan manipulated the transaction for personal preferences, the committee awaits a determination from parliament's legal office. If the content does not justify private discussion, it would indeed lift the veil of secrecy, potentially revealing hidden facets of the contentious sale.

The Takatso deal promised to inject R3 billion into the flailing airline, but these funds have not materialized. Notably, Gidon Novick, ex-Comair CEO and initial member of Takatso, has dissociated from the consortium, signaling internal dissent and a lack of transparency about SAA's future.

Critics like DA MP Alf Lees have assailed the sale, deeming the R51 transaction 'outrageous' given SAA's debt-free status and retained assets after emerging from business rescue—assets which include fixed properties, routes, and subsidiaries valued at billions of rand. The supposed R3 billion from Takatso is seen less as an equity input and more as a potential secured loan, positioning Takatso in a prime seat for profit allocation or dividends, should financial ruin recur.

Lees, echoing Tlhakudi's concerns, suspects the veiled nature of the deal might point to violations of the law, rendering the transaction disadvantageous and possibly unlawful. The he warns that the ballooning operational losses could dissuade potential private investors, should SAA not transition to complete privatization.

Despite the uncertainties clouding SAA, interim CEO Professor John Lamola conveyed ambitious plans for the airline, such as doubling SAA's fleet and resuming international routes. However, the financial state of SAA appears dire, with the airline recording a substantial loss against an anticipated profit, exacerbated by costly aircraft leases and a delay-plagued manufacturing industry.

With the lessees wielding higher bargaining power in an environment of elevated demand and limited supply, SAA's uncertain ownership status could prove detrimental. Lees suggests SAA might already be verging on insolvency, and without assurance of further government bailouts, leasing companies are likely to hedge against the risk with higher premiums, a burden that may ultimately fall on the South African taxpayer.