The Competition Tribunal ended the first day of hearings into the now Competition Commission conditionally approved takeover of national carrier South African Airways (SAA) by Global Aviation trading as the Takatso Consortium on a tense note, as the large sway of presentations were against the merger, at least in current form.
Tribunal members, Chairperson Mondo Mazwai, Advocate Tembeka Ngcukaitobi and Dr Thando Vilakazi, heard from the Commission, which was on the back foot in justifying its recommendation of the deal. Its principal analyst, Wiri Gumbie said that Takatso Aviation was created specifically for this acquisition and is bidding to acquire SAA operations, SAA Technical and Air Chefs.
He said the second part of the deal includes a “moratorium on merger-related retrenchments and to maintain a minimum number of employees at SAA”.
”The submission prompted an irked response from Advocate MacGregor Kufa representing the dismissed Director General in the Department of Public Enterprises Kgathatso Tlhakudi that the Commission was asking the country to give a company “that is wet behind the ears” a national asset of SAA’s calibre.
Concerns were raised on the prospect on job losses with varying numbers given by Takatso of over 1 000 employees while other estimates put the figure at under 800 workers.
Concerns were raised as the representative for the Department of Public Enterprises, Advocate Michelle Le Roux, conceded that there was no formal bid done as per the procurement act for SAA.
Le Roux said at the time, South African Airways was in a dire situation and the department had to go and look for interested parties to come and save the national airline.
“What happened here, first of all, there was no tender, these were unsolicited expressions of interest given the state of SAA and its performance, so there was no tender run, there was no formal bid, acceptance process or any of those kinds of processes followed,” Le Roux said.
Tlhakudi said the deal was railroaded through when there was more productive engagement from other African airlines including Kenya Airways, Ethopian Airlines and a host of other entities that offered better terms for SAA, to leverage its turnaround and still be retained as a national asset.
He said the consortium would at the most be paying R51 (fifty one rands) for the controlling stake in SAA and that in spite of this, the minority shareholders have come out and indicated that they would be selling their stake, 20% equity, as soon as an independent appraisal of the value of their shares has been concluded.
He said he opposed the proposed deal on the grounds that Takatso sought to defraud the South African public through irregular and illegal strategic equity partner selection process; by deliberately undervaluing SAA assets for the benefit of politically connected individuals.
“The Competition Tribunal ought to investigate the genesis of the transaction, or allow for other institutions of the state to evaluate the illegalities inherent in this transaction.“
Critical among these institutions being the Special Investigating Unit, as confirmed on 13 March 2023 that it was engaged with an internal assessment of the transaction for inclusion into the SAA Proclamation by the President,“ Tlhakudi said.
He said the the Competition Commission erred in accepting the claims of Harith General Partners speaking on behalf of the minority shareholders at Takatso Aviation: Global Aviation and Syrinx, without formally confirming this with the minority shareholders, who on announcement of the Commissions decision on 12 May 2023, came out to say they will not be exiting the Takatso Consortium.
“The Competition Tribunal ought to be concerned of these developments and conduct an investigation into the Competition Commission’s due diligence process, in order to assure South Africans that the ascent of Commissioner Doris Tshepe is not the beginning of a repurposing of the Competition Commission thus perpetuating the capturing of state-owned enterprises and enabling politically connected individuals to apportion themselves public assets under the guise of privatisation/private-sector-participation/strategic-equity- partnership,” he submitted.
The tribunal heard submissions on the Takatso Consortium merger, including how divestiture of two subsidiaries will address the commission’s concerns on competition.
Takatso has also had to reassure the panel that it will be able to manage SAA optimally without its subsidiaries.
Tlhakudi said shortlisted candidates before Takatso were unceremoniously pushed through included Air-A/Lufthansa Consulting – preferred due to being the only entity that had funds to consummate the transaction, however their condition of Airports.
Ethiopian Airlines had been brought forward by Standard Bank who were their bankers.
The proposal for a strategic partnership had been forwarded to the department through the Kenyan President’s Special Envoy – the Minister of Transport, Infrastructure, Housing, Urban Development and Public Works, James Wainaina Machari.
On the ASL/BlueSky Consortium, its inability to provide proof of funding was found to be a handicap.
ASL’s successful management of Fly Safair was a positive. The consortium had offered to interim manage SAA as it returns to operations.
He said about Kenya Airways – the DPE recommended that the tie-up be considered as the next phase depending on the Kenya government succeeding in the restructuring.
A potential to form a Pan-African airline group was a major advantage.
For the Fairfax/Knighthood Capital Consortium, its inability to raise capital was a handicap.
He said Ethiopian Airlines – the airline had offered a franchise arrangement like what they had offered to Chad, Malawi, Mozambique, and Togo where they were operating national flag airlines using own crew and aircraft.
“As can be seen from the above shortlist, Takatso Consortium were not in the shortlist,” he said.
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