Black-owned South African-based Takatso Consortium has been selected as the new 51% preferred strategic equity partner (SEP) of South African Airways (SA, Johannesburg O.R. Tambo), with the government retaining a 49% share, Public Enterprises Minister Pravin Gordhan told an online media conference on June 11.

The consortium comprises of Harith General Partners, a leading investor in African infrastructure and airports including Lanseria, and ACMI specialist and airline management firm Global Aviation Operations (GE, Johannesburg O.R. Tambo), which also owns the virtual airline brand Lift Airlines (GE, Johannesburg O.R. Tambo).

Gordhan said the intention was to list the new SAA to address future funding requirements. The government would maintain a non-dilutable "golden share" of 33% of the entity's voting rights to protect certain areas of national interest such as ensuring that it remained domiciled in South Africa and achieved national transformation goals.

To start with, the consortium would inject over ZAR3 billion rands (USD221 million) into the new SAA and raise further capital as needed. The government would not provide any further funds; it would however take care of SAA’s historical debt of ZAR14 billion (USD1 billion).

The future of both Lift and SAA subsidiary Mango Airlines (JE, Johannesburg O.R. Tambo) were "all in the mix at the moment", Gordhan said. Anything could happen including some of the subsidiaries being closed down, he said.

The Takatso consortium was currently completing its due diligence, including an evaluation of the SAA subsidiaries, which also include SAA Technical and catering company AirChefs, which would have to undergo restructuring.

At this stage, a memorandum of understanding (MOU) has been signed between the consortium and the government, which has completed its own due diligence into the consortium. Once all due diligence processes are concluded, there would be a signing of a purchase-and-sale agreement. In parallel, there would be "relatively immediate flying", and the development of a route, fleet, and restart plan. August has been punted as the targeted restart date of the airline on key domestic and selected regional routes, with international flights within the next two years.

Gordhan said board seats would follow the equity interests of the shareholders and the composition of the management team would reflect South Africa's national demographics and transformation agenda. Staff would be recruited from SAA and the consortium, and an employee share scheme would be established.

The announcement followed approval from the South African Cabinet on June 9, following a year-long process undertaken by Gordhan’s Department of Public Enterprises (DPE) to find a suitable strategic equity partner for SAA.

During this time, Ethiopian Airlines (ET, Addis Ababa) had made public overtures towards SAA. The government had initially received 30 expressions of interest either in SAA as a group or for parts of the business. The transaction advisor, Rand Merchant Bank, narrowed them down to a short-list of five. SAA’s new interim board had interacted with these earlier this year, after which the shortlist was narrowed down further.

SAA exited bankruptcy protection on April 30, 2021, after having been in administration since December 5, 2019. A receivership has been established that will manage the settlement of outstanding liabilities over the next three years.

ch-aviation research found that South Africa’s Public Investment Corporation (PIC), which manages the Government Employees Pension Fund (GEPF), set up Harith Fund Managers in 2007. to manage the investments of the Pan African Infrastructure Development Fund (PAIDF). Harith General Partners was established a few years later to raise money for a second fund, the Pan African Infrastructure Development Fund 2.

Harith Group Executive Director Tshepo Mahloele was the former head of corporate finance at the PIC and was investigated during the Mpati Commission of Inquiry into wrongdoing at the PIC in 2020. Mahloele also chairs the Lebashe Group, which bought Tiso Blackstar’s media assets (including South African newspapers Business Day and Sunday Times) in 2019.

In response to questions being asked about the relationship between the state-owned PIC and Harith, spokesperson Khaya Buthelezi told ch-aviation that the PIC owned about 30% of Harith, the remainder being private shareholders who he declined to name as the company was not listed. "These are two different entities. The PIC is a shareholder, it is not an investor in any of the funds that Harith manages. Harith is strictly a private entity and the PIC happens to be a shareholder. Harith has its own board that operates strictly independently," he said. Asked to comment about the findings of the Mpati investigation which had painted Harith in an unfavourable light, he declined to comment, saying "that matter was dealt with quite extensively".

Global Aviation has a long-standing history in ACMI/wet-leasing, aircraft management, charters, and Part 145 maintenance. It has a fleet of seven A320-200s (three of which are currently in use by Lift) and three A340-500. As previously reported, Global was returning the aircraft to its South African Air Operator’s Certificate (AOC) and had reconfigured them to an all-economy class layout. Global has also been reviving plans for a European operation and has applied for an AOC in Lithuania.

Speaking on behalf of Global Aviation, Gidon Novick (also the co-founder of Lift and Comair (South Africa)'s Kulula Air low-cost brand) said it was an “emotional day” for him and his team and promised to turn SAA into an “iconic” brand once again.

“It’s not often that you can work in an industry that you love and serve your country,” he said. “Many people believe we are crazy to be restarting an airline in this environment. Ironically, it’s the best time. Aircraft models are being challenged around the world. The opportunity to access aircraft at affordable prices and unbelievable talent is an incredible opportunity right now. Timing-wise, I think we have it right, and we are going to build something special. We have all the knowledge, insight, and national interest that government brings, we have the capital and financial insight and experience that Harith has, and we have an incredible depth of experience in the airline industry at Global. We have a lot to do, we have to figure out which routes, which planes, understand the subsidiaries, but we want to win back our loyal customers. We want South Africans to know that this will be their airline,” he said.

Gordhan said the announcement was a “ground-breaking decision” for the government. "The partnership brings together South African public and private sector capabilities to reposition SAA. We have looked long and hard at the proposals submitted, and our clear choice of a preferred partner is the Takatso Consortium. The objective of bringing in an equity partner to SAA is to augment it with the required technical, financial, and operational expertise to ensure a sustainable, agile, and viable South African airline. SAA will contribute to the venture, the brand, the flag, landing slots, route licenses, lounges and a successful loyalty program (Voyager).”

He added: “With this partnership, we believe we are closer to achieving the important objective of having a sustainable national airline. The new SAA will not be dependent on the fiscus. It will be agile enough to cope with the current uncertainty, and improvement, in global travel. As we recover from the impact of Covid on the aviation industry, African countries will reopen their borders, enabling the movement of people, cargo, and trade. We want to relaunch SAA as an iconic South African brand and are confident that we have the right partner to achieve this objective. ”

Editorial Comment: Updated with additional comments by Harith spokesperson Khaya Buthelezi. - 12.06.2021 - 15:32 UTC