Industry experts said “jumping the sinking ship” yesterday of Syranix’s nominated director, Gidon Novick, of the Takatso Consortium deal for South African Airways (SAA) was a sign the transaction was in trouble.
Despite Novick’s resignation yesterday, Takatso said in a statement it and Global Airways were still committed to the deal.
“Takatso, (as funded and led by Harith General Partners) continues to work closely with the team from the Department of Public Enterprises to conclude the acquisition of a controlling interest in SAA. Additionally, Takatso has developed a business plan for a sustainable and competitive SAA endorsed by international aviation experts,” it said yesterday.
Takatso said Novick as a director of the airline LIFT, presented a conflict of interest in the consortium, as he sought to work with SAA outside the scope of the group.
It said LIFT was a competitor to SAA, and the Takatso board had identified the potential conflicts of interest between the Consortium and LIFT, and had sought to manage these throughout the course of the transaction.
This included the establishment of appropriate confidentiality and information management regimes, in the spirit of maintaining fair competition in the South African airline market and in compliance with South Africa’s competition regulations.
“As stated by Mr Novick, LIFT has (independent of Takatso) pursued business relationships with SAA outside of the Takatso-SAA transaction and competition processes, thereby heightening the requirement for Takatso to maintain internal confidentiality over information relating to SAA and the SAA transaction.
“Mr Novick’s resignation will, therefore, assist Takatso in managing these inherent conflicts of interest and maintaining confidentiality over sensitive information on a continuing basis," Takatso said.
Takatso said it had supplemented its technical expertise since identifying the above-mentioned conflicts of interest. It said it was confident of its team’s capability to close the transaction thereby paving the way for Takatso to operate a successful SAA, once the proposed transaction had been implemented.
Takatso is in advanced discussions to diversify SAA’s future industry partnerships, once clearance has been granted by the competition authorities and the transaction implemented, it said.
SAA spokesperson Vimla Maistry said the airline could not comment on Novick’s resignation and referred comment to the Department of Public Enterprises, whose spokesperson Richard Mantu was unavailable for comment.
As questions arose on the implications of Novick’s departure from the deal, analysts were unanimous that the government would continue to bail SAA out and that a fresh start with a few more aircraft to take advantage of its available routes would turn it to profitability.
“SAA is better off with less people, less aircraft and focused on making a small start. It should be careful not to grow too fast. Even the executives at SAA do not want the deal to happen because they would lose their positions in a new structure,” said an industry insider who declined to be named.
He said Novick’s resignation was a sign that the deal was in trouble as it had hinged on the consortium obtaining money from the state or funding entities such as the Public Investment Corporation (PIC) to support it and that with no subventions coming, bailing out was a clear alternative.
He said the deal was bound to fail as the Harith Consortium and Global had been window shopping for funding .
“The resignation is a sign that they are not confident in the deal. The group itself has not put forward any money to commit to the deal. Why should Novick resign now? He is jumping the sinking ship. Remember the same group made an offer for SA Express, but could not put down any money,” the source said.
“There are are lot of conflicting interests in government, you can have five people sitting around a table, but they have different interests in the outcome of SAA,” he said.
Aviation analyst Phuthego Mojapele said it was clear that the deal was in a mess and that claims of conflict of interest by Novick should have been picked up from the beginning, not at this late stage.
“Gidon was instrumental in driving the industry in the right direction. He is the kind of guy who knows that if things go wrong, they can go seriously wrong. Perhaps he has smelled a perception of corruption in the whole business,” he said.
Mojapele also wondered at the unavailability of Public Enterprises Minister Pravin Gordhan last week to answer to parliamentary questions about SAA.
“You know a transaction is in trouble if the minister responsible opts to go to Kenya and not account to Parliament about the entity,” Mojapele said.
Mojapele shared the sentiment that SAA would thrive as a leaner operator.
“If SAA is a smaller operation without all the perks and a lot of personnel, we might see a complete change of the culture of doing things,” he said.