The Ministry of Public Enterprises (DPE) has followed a fair and transparent process in its pursuit to achieve the government's objectives of finding a strategic equity partner (SEP) for South African Airways (SAA), following the airline's exit from the business rescue process. The selection of the SEP aimed to bolster SAA's competitiveness in a cut-throat market, ensure its commercial viability and sustainability, and contribute positively to the country's economy instead of burdening the fiscus.
Takatso, a special purpose vehicle established to acquire a 51% shareholding in SAA, is majority-owned by Harith General Partners (Pty) Ltd ("Harith"), with minority shareholders in Syranix (Pty) Ltd ("Syranix") and Global Aviation (Pty) Ltd ("Global"). DPE's due diligence focused on these individual entities.
Global and Syranix operate Lift, a joint venture running Lift Airline. Although Lift had recently been established at the time of DPE's due diligence, significant emphasis was placed on the 20-year history and capacity of Global as an aircraft wet lease specialist, along with the aviation expertise of all shareholders involved.
Harith, established in 2007, is a prominent Pan-African infrastructure investor and developer with a proven track record of executing large-scale infrastructure projects and complex deals across the continent. Throughout its existence, Harith has successfully unlocked and mobilized capital of US$ 3.4 billion (R61 billion) from both intra-continental and global investors. The firm currently manages over US$ 1 billion (approximately R18 billion) in assets and has made significant investments in a variety of sectors, including energy, transport, and digital infrastructure.
Renowned for its involvement in key infrastructure projects, Harith has invested in the Beitbridge Border Post, Southern Africa's busiest border crossing, as well as Africa's largest wind energy farm in Lake Turkana, Kenya. Additional notable investments include the Henri Konan Bédié expressway bridge in Abidjan, Ivory Coast, Community Investment Ventures Holdings (CIVH) – a holding company that wholly owns South Africa's largest and most recognized telecom brands – and MainOne, a Nigerian telecom services and network solutions provider that Harith recently divested to a Nasdaq-listed entity. Harith is also responsible for investing in Lanseria International Airport, South Africa's sole privately-owned and operated airport.
DPE is satisfied in Takatso as the SEP, particularly with Harith's interest in growing its transport platform, particularly aviation, to complement existing related assets. DPE is satisfied with Takatso shareholders' track record of building a portfolio of assets across the continent, contributing to the African narrative of large-scale, impactful infrastructure projects. Shareholders have provided the necessary financial, empowerment, technical, and governance credentials.
Suggestions that Takatso will not be able to raise the necessary capital to grow SAA are unfounded, as Harith has already raised funds from a diversified investor base and obtained internal approvals for their equity contribution.
The DPE is confident in Takatso's shareholders' track record and profile, which includes building a diverse portfolio of assets across the continent. These projects have contributed to the African narrative of large-scale, transformative infrastructure developments. Moreover, our due diligence was reinforced by shareholders who demonstrated the requisite financial, empowerment, technical, and governance credentials.
As such, any suggestions that Takatso might be unable to raise the necessary capital to support SAA's growth are unfounded. This is particularly true considering that Takatso's financial partner, Harith, has a history of raising funds from a diversified investor base. To our knowledge, Takatso has already secured internal approvals for their equity contribution in this endeavour.
Regarding the outstanding R3.5 billion required to finalize the business rescue process, the Minister of Finance allocated R1 billion in the February Budget Speech, with the outstanding amount to be provided by the government.
Independent third-party firms, granted access to SAA's financials and asset registers by SAA management, carried out valuations of SAA's business and properties. These firms had no prior connections or affiliations with Takatso. One of the valuation firms has previously partnered with DPE in valuing SAA. These companies operated independently of both DPE and Takatso.
Adhering to best practices, independent parties were engaged for these valuations to guarantee unbiased results. DPE and Takatso agreed on the terms of reference for these service providers, with Mr. Tlhakudi overseeing the process from the DPE side. After completing the valuation processes, the reports were presented to Mr. Tlhakudi and his DPE team during a meeting he attended.
SAA's widely-publicized financial difficulties led to the launch of the business rescue process in December 2019. An independent valuation firm was employed during this process to determine SAA's value, with their findings publicly accessible in the Business Rescue Plan.
It is crucial to acknowledge that valuations represent a company's worth at a specific moment, reflecting the information and market conditions at that time. Consequently, different valuations may yield varying results depending on the circumstances and data available.
Upon SAA's exit from business rescue proceedings, Takatso conducted due diligence, commissioning two separate firms to assess the business and its assets. The Department of Public Enterprises (DPE) endorsed this process as it was vital for developing terms of reference that satisfied both parties. The transaction value is based on the previous valuation.
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The share purchase agreement includes an adjustment mechanism to account for potential overstatements or understatements of assets not listed in the asset register. This mechanism involves making fair value adjustments to the underlying assets as per accounting policies. By adjusting the financial statements in this manner, the transaction value reflects a more accurate representation of the company's worth.
The valuations were carried out based on information provided by SAA management. However, up to this point, an updated asset register supporting the revised valuation, as alleged by the suspended Director-General, has not been provided to the department, following the governance processes established by SAA.
The Ministry appreciates the public's interest in the SAA transaction and recognizes the significance of transparency. We kindly request your patience and understanding as we await the completion of the regulatory processes. Once this process is finalized, we will be more than happy to address any further queries or questions.
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