Gordhan to be subpoenaed over SAA-Takatso transaction

The Parliamentary Portfolio Committee on Public Enterprises has unanimously agreed that it cannot provide unqualified support for the proposed South African Airways (SAA) transaction that will lead to the sale of the national airline to the Takatso Consortium.

It has also decided to subpoena Minister of Public Enterprises Pravin Gordhan after expressing concern about his alleged failure to assist the committee in its investigation into the proposed sale and the alleged irregularities in the transaction.

This follows the committee meeting on Wednesday to discuss and consider the evidence submitted by both Gordhan and former Department of Public Enterprises (DPE) director-general Kgathatso Tlhakudi on alleged irregularities in the transaction.

The committee said on Thursday it “is disappointed and unhappy” about Gordhan’s refusal to provide the committee with two crucial documents that would have enabled it to finalise its investigation.

These documents are the list of shortlisted entities after the final determination was made and the sale and purchase agreement.

Confidentiality clauses

Briefing the committee on Wednesday, parliament’s legal advisor Andile Tetyana said among the reasons given by Gordhan for this failure to provide the requested documents are the confidentiality clauses in the sale documents that were agreed upon with other parties in the sale.

The committee said that as it has not seen these documents, it is unable to make a well-documented resolution on the matter, and the only documentation available to the committee is that supplied by Tlhakudi.

Committee chair Khaya Magaxa said its report would indicate that the committee did not get the necessary assistance from Gordhan.

He said this report would then be submitted to the National Assembly speaker, who would determine the way forward.

Magaxa said some committee members recommended establishing an ad hoc committee to investigate the matter but indicated the committee had not pursued legal or other avenues at its disposal.

He said the committee must subpoena Gordhan, as it has a right to do so.

‘No information to provide’

The DPE on Thursday refuted claims of non-cooperation with the committee in its examination of the Strategic Equity Partnership (SEP) transaction for SAA.

DPE spokesperson Ellis Mnyandu said any assertions that the proposed purchase of the 51% shareholding in SAA by Takatso was not conducted in a transparent and fair process are malicious and patently false and are intended to detract from the work of stabilising SAA.

“The department has done everything according to the prescripts of the law. There is no information that is within our legal remit to provide on the SAA transaction that the DPE has withheld from Parliament.

“Some of the information being requested is commercially sensitive and confidential,” he said.

Mnyandu said at no point has the DPE been offered the option of presenting any of the requested information in camera, adding the DPE will account fully to parliament, and all information will be available once a strictly commercial transaction is concluded.

Tlhakudi fired

Gordon fired Tlhakudi, who made several allegations about the transaction.

Gordhan told the committee in September this year that the allegations levelled against him by Tlhakudi were unfounded and unsubstantiated and were part of a political smear campaign.

Read: A new broom at SAA to sweep it all under the carpet?

The allegations include that Gordhan interfered and handpicked the Takatso Consortium as the preferred bidder to purchase the 51% shareholding in SAA.

Partner search

Responding to a parliamentary question on 31 October 2023, Gordon said the SEP process started during the 2020/21 financial year, the period when the impact of Covid-19 had a debilitating effect on the aviation sector and, as a result, some parties that had expressed interest could not provide the capital required to operate SAA as required.

Gordon said the government required a SEP that could provide all the finances for SAA following its exit from business rescue.

He said the transaction advisor assessed and evaluated the expressions of interest of potential SEPs, but none of the potential SEPs had an offer that could be accepted by the department.

Read: Potential funders for SAA put their hands up [Jun 2020]

Gordon said the entities could not provide evidence of immediate funding to restart SAA’s operations, resulting in RMB and the department agreeing in January 2021 that the SEP transaction was unlikely to be successful, RMB’s mandate being terminated, and the DPE taking over the process.

Proposals were subsequently made to the department, including one by Harith General Partners and Global Aviation, which later became the Takatso Consortium.

Read:
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Competition Tribunal conditionally approves SAA acquisition

“After evaluating the proposals, Takatso was then appointed as the preferred SEP. Takatso had the requisite combination of financial and operational capabilities required for the successful relaunch of SAA.

“Their composition would advance the transformation agenda. The preferred SEP was thereafter approved by Cabinet.

“This offer satisfied the department’s requirements, including the ability to provide the funding needed to restart operations,” he said.

Working capital requirements

Gordhan said Takatso has agreed to meet SAA’s working capital requirements, adding that initial funding of R3 billion is projected for SAA’s growth path, leading to stability.

He said all the financial obligations would be borne by Takatso, absolving the government of further funding support.

“The fulfilment of this financial commitment by Takatso is critical as, without it, the transaction cannot be concluded,” he said.

Read/listen:
SAA’s preferred bidder disappointed with airline’s further R1bn bailout [Feb 2023]
‘Government bailout era is over for SAA’

Gordon said the initial valuation of SAA was undertaken in 2020 when the company was not operational due to the business rescue process and the effects of the Covid-19 pandemic, which inevitably impacted its assessed value.

A subsequent valuation was carried out in October 2021 as SAA was resuming its operations, and the overall aviation industry outlook was still uncertain.

“Given that Takatso was selected as the preferred partner in June 2021 and more than two years have elapsed since, another valuation of SAA is prudent to ensure alignment with prevailing market conditions for an updated and equitable value for the state.

“In light of this, the DPE has initiated a new valuation,” he said.

‘Price to be determined through negotiations’

Gordhan said the price Takatso will pay for the 51% stake in SAA will be determined through negotiations, taking into account the updated valuation of the 51% share. This will ensure the settled amount accurately reflects the current worth of the stake and provides a fair transaction for both parties.

He said Takatso has agreed to engage in negotiations aimed at finalising a transaction amount, which ensures the concluding agreement is based on the prevailing market conditions.

The public and parliament will be informed of all details once all processes have been concluded, he said.

DA member of the Standing Committee on Public Accounts (Scopa) Alf Lees criticised Gordhan’s response, claiming it failed to provide clarity on the process followed to get Takatso appointed as the private partner for SAA, with Gordhan making a bland statement about proposals received from other interested parties but failing to provide details of where and from whom these offers were received.

Lees said the question about the R3 billion guarantee Takatso is supposed to provide has not been adequately answered, and it now appears Takatso is wavering on the point that it ever made such a guarantee.

“This creates considerable doubt as to the ability of Takatso to come up with the money when they are eventually called upon to deliver it,” he said.

Lees said it is also astounding the deal appears to be under renegotiation in terms of the latest valuation of SAA, adding it remains seriously doubtful Takatso would be prepared to renegotiate the price it will pay for SAA given that the 51% of the SAA shares were to be “sold” for a token amount of R51.

The DA previously said this amount was outrageous and failed to take into account the real value of a debt-free SAA.

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