NUMSA has written to SCOPA stop the corrupt transaction involving SAA and the Takatso Consortium

18 May 2023

The National Union of Metalworkers of South Africa (NUMSA) condemns the Competition Commission for recommending that the Competition Tribunal should approve the proposed merger between Takatso Aviation and SAA despite its glaring governance gaps. Takatso intends to acquire a 51% stake in SAA and the deal has been engineered by the minister of Public Enterprises, Pravin Gordhan.

We have been saying that the SAA deal which Gordhan engineered, stinks of corruption and we are disappointed that the Competition Commission has decided to legitimize a process which was illegitimate to begin with. We are raising, the alarm once again, on this dodgy deal because there is no accountability from the DPE and parliament is failing to protect this national asset.

Parliament has failed to hold Gordhan accountable for his actions. They have failed to ensure that South Africans get answers on details of the deal. It seems this deal will go through without any intervention from oversight bodies, even though the law clearly states that this airline cannot be sold outside of a parliamentary process.

Minister Gordhan is allowed to do as he pleases, including engineering the sale of the airline to friends and former senior leaders of the governing party. Jabu Moleketi is the former Deputy Minister of Finance and also, the former MEC of Finance in Gauteng. He also served in the ANC NEC, and he just happens to be director of Harith General Partners, which owns a majority shareholding in the Takatso consortium. This deal is corrupt.

Below we highlight six reasons why the SAA/Takatso deal must be stopped:

1. SAA exists because of an act of parliament, and yet, the entire process of appointing Takatso remains shrouded in mystery because Gordhan refuses to disclose to the public, or to parliament, how he came to the decision that Takatso were the right organisation to choose as equity partner. Gordhan has not disclosed the ‘due diligence’ process on how Takatso was chosen, we are simply expected to take his word for it that proper processes were followed, when they were clearly not followed.

2. It is unheard of that a consortium is sold a company, especially one the size of SAA on the basis of their potential to raise capital. You either have the capital, or you don’t. Bidders win a bid to buy companies on the basis of proof of capital. Proof of capital normally comes in the form of bank guarantees or bonds or cash into an escrow account. Where is Takatso’s proof of capital which would have been part of the decision to award them the airline? As we speak, Takatso has no balance sheet therefore, the only conclusion we can come to is that this is a corrupt deal.

3. Whereas Harith may have successfully raised capital in the past, we also know that most of their money comes from the PIC, the employee pension fund they used as their piggy bank. Capital markets are less favourable to airline investment post covid-19 it is therefore, misleading to use Harith’s historical capital raise programme, which were highly indexed towards the PIC, to make forward looking statements about Takatso’s ability to raise money. There is no known history of Harith raising money for aviation assets before, where does this newly found confidence from DPE come from?

4. Workers at SAA have paid the highest price for the restructuring of the airline through the loss of at least three thousand jobs. Those that stayed are suffering because benefits and conditions have been completely eroded. Takatso has not paid a cent to acquire the airline it has not sacrificed an ounce of blood for it. If the sale goes ahead they are effectively being gifted with a complete company for nothing.

The DPE is more concerned about spin doctoring this corrupt deal than it is about accounting to the public. The DPE is also acting as de facto spokesperson for Takatso by attempting to cover up this wrong doing. The DPE has not demonstrated to the public what due process was followed for it to pick Takatso above all other contenders. The public has a right to know who all the other potential bidders were, and why their bids were rejected, in favour of Takatso.

5. Prior to business rescue SAA was valued at R14 billion. We found out later that Takatso, conducted its own valuation which valued the airline at R 3 billion and this was confirmed by Derek Hanekom, the board chairperson of the interim SAA board. Whereas we see nothing wrong with any potential buyer of an asset making its own valuation of the asset they want to buy, what is troubling is the fact that DPE has accepted the zero valuation of SAA by Takatso and is giving them the airline for free.

The 2017 financial statement put land owned by SAA at the value of R1.3 billion and we have not seen any publicized process through which SAA would have disposed such land for its value to be Zero. Land does not depreciate, its value increases instead. SAA should have had external, independent parties conduct the valuation to get a real sense of the value of the SOE. SAA was deliberately undervalued by Takatso. We suspect that Takatso will sell SAA’s assets in order to raise the capital, it does not have, to fund the airline. It is in their interest to but it very cheaply so that they do not have to pay the full value of the airline.

6. We disagreed with Pravin’s valuation of SAA from the beginning because all debts and liabilities of SAA are guaranteed by the state and it is our view that by the time of announcing the Takatso Consortium, these debts were already liquidated through the Business Rescue process. The very same statement on the about different valuation outcomes is troubling because DPE through this statement admitted that a different person arrived at a different valuation for SAA. How can there be differences in the valuation? This is nonsensical. The underlying assets of SAA have not changed and the valuations were done post-business rescue process and therefore the debt position would have been determined already at the time of concluding the Takatso transaction.

We do not support sale of SAA at all. Even if we were to concede to partial sale of the airline, which is unlikely, a new and legitimate and transparent process would have to be undertaken, not this sham of a process. If the president allows this process to proceed unchecked, NUMSA will demand a commission of an enquiry into the sale of SAA because we see this entire process as another form of state capture, which has been officially sanctioned by Pravin. And sadly, parliament is folding its arms doing nothing to stop this heist.

NUMSA has written to the chairperson of the Standing Committee On Public Accounts (SCOPA), the honorable Khayalethu Magaxa on the 30th of April, requesting an audience with the committee in order to stop the deal. We have not heard back from any of them. This delayed response leads us to wonder if there is any political will to hold Gordhan accountable for this dodgy deal.

Issued by Irvin Jim, NUMSA General Secretary, 18 May 2023