JACQUES JONKER: Government doesn’t seem ready to cede SAA control

On June 11 Public Enterprises Minister Pravin Gordhan unveiled the Takatso Consortium — comprising Harith Global Partners and Global Airways — as the new equity partner (SEP) for SAA.

On the face of it those in the private sector involved in the “deal” — there is in fact no formal deal yet — possess a wealth of industry experience. Gidon Novick, for instance, who will be CEO of Takatso, is a stalwart, having cofounded Kulula and Lift, the latter owned by Global; he was also CEO of Comair, Africa’s most successful airline.

However, there are numerous concerns surrounding the supposed public-private partnership. Gordhan announced it as a done deal, even though it is still subject to a due diligence exercise by the consortium.

It was then reported that Harith would be investing in SAA, via Takatso, through Paid II, one if its investment vehicles in which the Government Employees Pension Fund (GEPF) is invested. However, Paid II doesn’t have the requisite capital to do this, and Harith confirmed that the vehicle to be used has still not been determined.

The Mpati commission was quite scathing of Harith with respect to its relations with the Public Investment Corporation (PIC), and recommended that the PIC and GEPF assign an independent investigator to look into Harith. The PIC also owns 30% of Harith, yet it apparently has no stake or say in the acquisition of the majority of SAA. This is strange considering that if Harith itself is to be used as the investment vehicle instead of Paid II, the PIC would surely have to get involved as Harith’s part-owner. But if Paid II were to somehow provide the necessary billions, the GEPF would be exposed to SAA’s liabilities and the PIC is the GEPF’s asset manager. Either way, the PIC is intricately involved whether it wants to be or not.

Jabu Moleketi, chair of Harith’s board, also chaired the PIC and was deputy finance minister when the PIC initially extended millions in seed capital to Harith in 2006. Tshepo Mahloele, founder and CEO of Harith as well as chair of Takatso, was singled out in the Mpati report on his benefiting from PIC-Harith relations, though he has maintained his innocence of any corrupt act throughout.

The department of public enterprises also went ahead and prematurely awarded itself a 33% “golden share” in SAA. This is not getting as much attention as it warrants, which is disconcerting to say the least; Gordhan and his cohorts in the ANC haven’t exactly acted in a hands-off manner during SAA’s year-and-a-half-long business rescue proceedings.

In February of 2020 the ANC’s former secretary-general, Ace Magashule, made it clear that the party would “step in” if the decisions taken by SAA’s then-business rescue practitioners weren’t to government’s liking. According to the ANC, the business rescue practitioners reported to the government in its capacity as sole shareholder, which apparently gave the governing party carte blanche to blatantly flout and ignore numerous provisions of chapter 6 of the Companies Act, which deals with business rescue proceedings.

A month later Gordhan echoed Magashule’s sentiments by making the constitutionally dubious assertion that the business rescue practitioners, as the new accounting officers, were subservient to SAA’s executive authority — the minister himself. The minister did, however, attempt to butter his bread on both sides; a mere fortnight later he claimed the department “have no authority here” with respect to the business rescue practitioners’ leaked draft rescue plans for SAA, which stirred some controversy.

Fast-forward to the present and Gordhan seems anything but ready to relinquish control. The partnership has plans to potentially list SAA, the effect of which would, of course, be the dilution of current shareholders’ interests. But the department was very careful with its wording in its announcement of the deal. It specifically said it would have a 33% golden share pertaining to voting rights.

Section 37(2)(b) of the Companies Act allows for disparities to exist between the proportion of shares and the proportion of voting rights held, should a company’s memorandum of incorporation (MOI) provide for it. Ergo, if the “new” SAA’s MOI were to provide for it, the department could possibly maintain a minimum of 33% of voting rights even though its equity interests might be diluted to below one-third. The department would then have seemingly “privatised” SAA yet possibly maintain almost a full third of the voting rights. Of course, this will depend on what the MOI provides for, the number of shares that will be issued, and how concentrated the shareholding will be.

It is noteworthy that there is no clarity regarding what would happen to both the consortium’s proportion of shares and its proportion of voting rights held should SAA be listed. It is, however, reasonable to infer that the department isn’t planning on handing it a similar golden share, otherwise the minister surely would have mentioned it for the sake of complete transparency.

So why the golden share for the department of public enterprises? What is  Gordhan planning to do? Perhaps dilute the other partners’ voting rights to below government’s golden third eventually? Takatso would surely not allow this, given that it would put government back in control for the most part. Then again, considering the level of “cadre-isation” that seemingly “private” corporate entities have undergone, nothing is off the table. After all, Harith is the majority owner of Takatso, so Mahloele and Moleketi’s proximity to political power might just be what Gordhan needs to sway Takatso’s vote his way.

Harith co-founder and Takatso chair Tshepo Mahloele is the chairperson of Arena Holdings, which publishes the Business Day and other titles.

• Jonker, an associate of the Free Market Foundation, works in the field of public policy research. He writes in his personal capacity.