South African government engages investors keen on state carrier

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Despite South African Airways having faced a rather turbulent decade, the South African government has initiated discussions with private investors who have shown an interest in buying into the state carrier.

The Director General of the Department of Public Enterprises, Kgathatso Tlhakudi together with advisers from FirstRand Ltd’s Rand Merchant Bank commenced negotiations with as many as four potential private investors, who have not been named but have relayed proposals for South African Airways. In the past, the government has revealed that private entities and potential partners have engaged them for discussions on the carrier. According to Bloomberg, among them is Ethiopian Airlines Group, which would be a favourable suitor with its attractive track record in the sector and Ethiopian Airlines standing at the most profitable and dominant African airline.

Tlhakudi stated in an interview last Wednesday that the South African government aims to resume the carrier’s operations by the end of the year, this venture requiring a minimum of 10 billion rands ($583 million). Tito Mboweni, South Africa’s Finance Minister has however reiterated that any new capital injections must ideally come from private entities as the National Treasury has already committed to providing debt guarantees amounting to 16.4 billion rands ($983 million), raising concerns on the amount of taxpayer money being funnelled into the airline.

As part of the carrier’s revival, the state has shown an interest in adopting the approach implemented in the privatization of former state monopoly Telkom, in which the telecommunications firm was partially sold to external investors prior to its listing on the Johannesburg stock exchange.

In detailing SAA’s plan Tlhakudi stated: “That proved to be a very good model for Telkom as it brought into the company management discipline and the important discipline of delivering a product on time to the market.” This highlighting the potential listing awaiting South African Airways if negotiations are successful.

By the end of September, SAA’s administrators together with the government and labour groups, have agreed that the process of sliming the airline’s workforce from 4000 to 1000 employees will be complete.

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