The South African government has recently made the decision to terminate the sales agreement for state-owned South African Airways, which was initially established nearly three years ago. The Department of Public Enterprises in South Africa had intended to sell a 51% stake in the carrier to an investment consortium known as Takatso. However, the termination of the sales agreement was stated to be a mutual decision by both parties involved. Takatso has refrained from responding to an email seeking comment on the matter.
According to the DPE, the primary reason for the breakdown of the deal was the inability of the parties to reach a consensus on a revised transaction price following a substantial increase in the value of South African Airways. The original sales agreement was initially established in June 2021, during a period when the airline was facing financial difficulties due to the Covid-19 pandemic. At that time, South African Airways was valued at 2.4 billion South African rand, equivalent to approximately $128 million.
South African Airways emerged from a yearlong hiatus in early fall 2021 and resumed transatlantic flights later that same season. Presently, the airline operates a fleet of 11 aircraft, as indicated by Planespotters.net. However, flights to the United States have not yet been reinstated. A more recent valuation of the airline estimated its worth at 6.5 billion rand, equivalent to $348 million.
The Department of Public Enterprises stated that during negotiations, it became evident that the revised transaction structure needed to consider public interest and establish a fair market price. Regrettably, these conditions were not met during the renegotiation process, leading to the termination of the sales agreement. The government has expressed its commitment to exploring alternative avenues for financing South African Airways. Additionally, plans are in place to appoint an aviation strategy advisor to provide support to the SAA board.
The termination of the sales agreement for South African Airways marks a significant setback for the carrier’s privatization plans. Moving forward, it is imperative for the government to devise an effective financial strategy to ensure the sustainability and growth of the airline in the long term.