South Africa’s minister in charge of embattled State-owned companies gave an impassioned defense of the sale of a majority stake in the national carrier for about $3 – a deal that’s subject to a lawsuit from one of the spurned bidders.

The privatization of South African Airways is a vital reform for the country’s battered economy, Public Enterprises Minister Pravin Gordhan, 73, said in an interview at Bloomberg’s Johannesburg office. The winning bidder -- a partnership between a domestic aviation group and private equity firm -- was the one left with the most credible financial backing and industry experience, he said.

The airline is an “example of a broken State-owned enterprise that has been loss making, that we have successfully re-positioned and got the private sector involved,” said Gordhan. Discussions with ratings companies suggest the move is “a classic example of reform.”

The acquisition by the Takatso Consortium has been criticized in some quarters for the notional purchase price, lack of transparency around the sale and an ongoing government requirement to settle debts. The group is made up of Global Airways, which owns domestic airline Lift, and private-equity firm Harith General Partners.

The backlash culminated in a law suit filed last month by Toto Investment Holdings Pty, which founder Bongani Gigaba said was unfairly excluded from the sale process. Yet the airline had been a drain on government finances for a decade, receiving numerous state bailouts before entering bankruptcy proceedings in 2019.

The terms of the transaction have been finalized between the parties and the deal is now subject to approvals by South Africa’s competition regulator and industry body, said Gordhan, who was finance minister over two spells under former President Jacob Zuma.

As part of the deal, Takatso agreed to invest about R3-billion in the airline.

“Their commitment remains in place,” the minister said.

NINE DESTINATIONS
SAA has been downsized significantly as a result of bankruptcy proceedings, with the workforce about 80% smaller. The carrier flies to nine domestic and international destinations with a fleet of six Airbus SE jets.

About 30 interested parties were considering a move for SAA, including two “fairly big” foreign entities, Gordhan said. But when the bidding line up thinned out due to the devastating impact of coronavirus on the travel industry, only Takatso was left with the necessary financial backing and aviation experience, he said.

“What is concerning is that there’s still a determined effort by some quarters to disrupt this process as much as possible and to raise suspicions around what has been a very legitimate and legal process,” the minister said.