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51% stakes in South African Airways allegedly sold for 51 Rands (Rs130)

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51% stakes in South African Airways allegedly sold for 51 Rands (Rs130)

Fifty-one rand. According to reports , that’s how much it cost to acquire the 51% shares in South African Airways (SAA) last year.

In return for a 51% stake, Takatso intends to inject ZAR3 billion (Rs7.67 billion) in working capital over two years and pay the ZAR51 (Rs130) as its share of the nominal transaction fee required under South African law. 

This is according to a clarification of the financial aspects of the privatisation deal provided by Public Enterprises Minister Pravin Gordhan, who said an independent expert valuation had placed the total consideration due to the government at “ZAR3,000,000,051 (USD185,201,801)”.

The deal represents a “contingent liability,” the Treasury reportedly said in a document emailed to Parliament’s Standing Committee on Public Accounts that was later withdrawn.

That’s partly because Takatso – said to be made up of a local jet-leasing company and private-equity firm – has the right to assess whether any ongoing liabilities in SAA be settled by the government, the Treasury said in the document seen by Bloomberg.

The sale of SAA was announced in June last year after the airline emerged from lengthy bankruptcy proceedings, during which its planes were grounded for well over a year and the workforce cut by 80%.

The airline, which used to serve destinations across Africa (including Mauritius) and a number of major global cities, hasn’t made money since 2011 and received state bailouts that totalled billions of rand.

The controversy has been picked up online, and social media users have reacted with horror to the purported small print in the SAA deal. Tito Mboweni, the Finance Minister at the time of the sale, posted this indirect response to the critics.

The Economic Freedom Fighters (EFF) has threatened legal action against the South African government over the sale.

Commenting on the matter during a media briefing, EFF leader Julius Malema alleged that the sale of SAA was part of a plan by government to privatise all the SOEs in the country.

“The current South African government had already started the dangerous and evidently unsustainable path of privatisation of state-owned companies. We condemn and oppose the disposal of South African Airways,” he said.

Responding to the outcry, Takatso was cited as saying this: “Structures of this nature are usually characterised by a low purchase price and significant future funding commitments and are typically used for distressed assets such as SAA, which require extensive restructuring and recapitalisation to ensure a sustainable business model”.

SAA currently flies to Mauritius.

With inputs from, Bloomberg, The South African, The Citizen

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The information and opinions expressed in our published works are those of authors/sources believed to be reliable. NewsMoris makes no representations as to accuracy, completeness, suitability, or validity of any information expressed.