Pretoria short-lists three equity partners for SAA

The South African government has short-listed three potential strategic equity partners (SEPs) for its bankrupt flag carrier and will make a decision on which one to pick in “the next month or so,” according to Public Enterprises Minister Pravin Gordhan. He told Bloomberg TV the newly appointed interim board of South African Airways (SA, Johannesburg O.R. Tambo) was engaging with the bidders before the government would make its decision. This was confirmed to ch-aviation by Department of Public Enterprises (DPE) spokesperson Richard Mantu. “The Department, assisted by the transaction advisors, has identified three Strategic Equity Partners. The interim board is currently engaging with all three parties subsequent to which Government will make a decision about which recommendation of the board will be suitable as SEP for SAA,” he said. DPE has engaged Rand Merchant Bank as the transaction advisor after receiving about 30 expressions of interest. It earlier this month said a decision on a SEP could be expected by March this year, following the expected conclusion of the business rescue process by the end of February and the establishment of a receivership to process claims by creditors and employees. SAA has been in administration since December 2019 and has been mothballed since September 2020. It hasn’t flown commercially since South Africa went into COVID-19 lockdown in March 2020. DPE has steered clear of mentioning the names of interested parties. However, news reports have named Fairfax Africa Holdings, the listed subsidiary of Toronto-based investment firm Fairfax Financial Holdings; and – repeatedly – Ethiopian Airlines (ET, Addis Ababa) as interested parties. However, Ethiopian’s Chief Executive Officer Tewolde GebreMariam said the airline was not interested in taking on SAA’s debt, nor in injecting cash into the airline. More recently he said it was in fact keen on a management deal, providing aircraft, crew, and technical support as part of a joint venture with SAA. Ethiopian provides management and technical assistance to other airlines on a secondment basis. Signing up SAA would be a major coup for Ethiopian as it already commands the lion’s share of the pan African network of east-west flights across the continent. Analysts have cautioned such a deal would relegate SAA to becoming a feeder to Ethiopian’s hub at Addis Ababa, a market dominated by Ethiopian Airlines and protected by its government. In reality, it appears Ethiopian Airlines has been making slow progress in talks with SAA. Speaking during an online CAPA conference recently, Gebremariam said discussions with the South African government “have been a challenge so far”. “We are still discussing, but I would say it has not made the expected progress,” he said.