The private (not public) lid may be lifted on the details of the sale of SAA

4 Oct 2022

The High Court in Cape Town has ordered Public Enterprises Minister Pravin Gordhan and his department to share all confidential information with a little-known investment company regarding their decision to sell a 51% stake of SAA.

It has been more than a year since the government announced a plan to introduce private sector investors into SAA’s ownership structure — and the deal has been shrouded in secrecy.

It was announced by Public Enterprises Minister Pravin Gordhan in June 2020 that the government would sell 51% of SAA to a group of investors, including infrastructure investor Harith General Partners and Global Aviation, the aviation company that owns domestic airline Lift. These investors have formed a consortium called Takatso, which seeks to be the majority owner of SAA – leaving the government with minority rights, as it would continue owning 49% of the airline.

Since then, Gordhan and his department have refused to unveil the terms and conditions of the deal, arguing that these are commercially sensitive and the parties involved were bound by confidentiality agreements.

For the public, details around the SAA deal – including how much the 51% shareholding is worth, how much money private sector investors will pump into the airline to keep it going, and plans that the investors have for the airline – would only be unveiled in March 2023. This is when the deal is set to be completed.

But the lid on the deal will be lifted – at least to one aggrieved investor who submitted a bid for the airline’s assets, but was rejected by Gordhan.

Toto Investment Holdings is a little-known investment company founded and headed by Bongani Gigaba.

On Monday, 3 October, the High Court in Cape Town ordered Gordhan and his department to share all confidential information/documents with Toto regarding their decision to sell the 51% stake of SAA. The information must be shared within 20 days on strict conditions.

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Gordhan must now file a confidential and non-confidential record of information about the SAA deal, and all the parties must be bound by confidentiality agreements. In other words, Toto may have the information, but it cannot be shared with the public.

Toto launched a bid for the airline and its assets when the Department of Public Enterprises called for investors to pump money into SAA – in exchange for a shareholding in the airline – and help it to revive its aviation operations, which were grounded in a two-year business rescue process.

Although the business rescue process was completed in April 2020, SAA needs another R3.5-billion – probably from the government – to settle all outstanding debts. This thorny issue has delayed the completion of Takatso’s purchase of SAA.

The department rejected Toto’s bid for SAA for unknown reasons, opting to endorse Harith General Partners and Global Aviation as preferred equity partners.

Toto was aggrieved and approached the high court to force Gordhan and his department to provide it with all confidential documents about their decision to sell the 51% stake in SAA.

Through this process, Toto wanted to determine the methodology used by Gordhan and his department to assess the proposals submitted by investors for a shareholding in SAA, the criteria used for selecting Harith and Global Aviation, and the reason(s) its proposal was rejected.

In response to Toto’s court application, Gordhan and his department argued that details around the SAA sale were “commercially sensitive” and couldn’t be shared.

Refusing to disclose details about an ongoing transaction on grounds of commercial sensitivity is a common practice in the private sector. Parties engaged in an ongoing transaction or deal usually open their financial books, and share information that they would ordinarily not share. This is done to make each party comfortable about a deal they are undertaking, and to determine the merits of the deal.

But arguably the commercial sensitivity argument couldn’t fly regarding SAA for several reasons. First, SAA is a publicly funded entity and its affairs face heightened scrutiny and transparency requirements. And SAA underwent a business rescue process, which paved the way for its financial books, details about its flight routes, assets, and strategy to be shared with the public – information that would be considered to be commercially sensitive. So, the lines of commercial sensitivity have long been crossed.

Toto also wanted the sale to be blocked by the court, but the court rejected this.

The Department of Public Enterprises said the court’s ruling paved the way for it to proceed with the implementation of the Takatso transaction.

“We welcome the judgment as we have stated in our affidavit that the transaction is governed by confidential undertakings and the department was not at liberty to disclose to third parties certain documents related to the transaction, unless under a confidentiality regime.

“It is unfortunate that Toto had to press ahead with this ill-fated strategy after we discussed with them at length about the confidential nature of the transaction,” Gordhan said in a statement.

“Furthermore, the question is, who is Toto Investments, who are the people involved and what is their interest in the matter? Toto Investments must be open and transparent of who they are and who they represent.”

Takatso also welcomed the judgment, which it said “supports the closing of the SAA transaction to achieve government’s sustainability goals for the national carrier without further delay and in an effort to unburden the fiscus”. DM/BM

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