The Competition Tribunal recently conducted a two-day hearing to examine the proposed merger between Takatso Aviation Consortium and South African Airways (SAA).

By Gugulethu Masilela

The hearing into the SAA and Takatso Aviation Consortium merger took place on Tuesday and Wednesday at the Competition Tribunal in Pretoria to discuss the merger between Takatso Aviation Consortium and South African Airways (SAA). The Competition Commission had previously suggested that the tribunal should approve the sale of 51% of SAA shares to Takatso, subject to certain conditions being met.

The members of the Tribunal, which include Chairperson Mondo Mazwai, Advocate Tembeka Ngcukaitobi, and Dr Thando Vilakazi, heard the Commission’s explanation for why they recommended the deal. The Commission had a hard time justifying their recommendation, and their main analyst, Wiri Gumbie, said that Takatso Aviation was created specifically for this acquisition and wants to acquire SAA operations, SAA Technical, and Air Chefs.

Gumbi said the second aspect of the agreement involves a temporary halt on job cuts related to the merger and a commitment to retain a certain number of employees at SAA: “The second part of the deal includes a moratorium on merger-related retrenchments and to maintain a minimum number of employees at SAA.”

There are concerns about potential job cuts, with Takatso stating that over 1,000 employees may be affected, while other estimates suggest the number could be less than 800 workers.

“It has been indicated by many of the unions that they are worried about employment, of course, that stems from the business rescue process which SAA undertook, which resulted in several thousand staff being laid off. That business rescue process is separate from the major process and our preoccupation is to understand whether or not the merger will result in any employment consequences,” sad Gumbi

The Takatso Consortium has acknowledged that while the merger is not expected to result in job losses, it cannot provide an absolute assurance that such measures will not be required in the future, should there be changes in operational needs or shifts in the aviation sector. Takatso emphasizes its objective of ensuring the long-term viability of South African Airways as a sustainable enterprise.

According to IOL, Advocate Michelle Le Roux, the representative for the Department of Public Enterprises, admitted that there was no official bidding process conducted in accordance with the procurement act for SAA, raising concerns.

Le Roux stated that South African Airways was in a critical condition at that time, and the department had to actively seek out potential parties who were willing to step in and rescue the country’s 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 told the hearing.

In his submission, Kgathatso Tlhakudi, the dismissed Director General in the Department of Public Enterprises, argued that the agreement was hastily approved despite the existence of more fruitful negotiations with other African airlines such as Kenya Airways, Ethiopian Airlines, and various other entities. These alternative options presented more favourable conditions for SAA to facilitate its recovery while still maintaining its status as a national asset.

Tlhakudi said he was opposed to the deal because he believed that Takatso was attempting to deceive the South African public by using an irregular and illegal process to select a strategic equity partner. This involved intentionally undervaluing the assets of SAA to benefit individuals with political connections.

“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,” said Tlhakudi.

After the tribunal concludes, it is anticipated that they will determine if the merger can move forward or not. However, their decision is not legally enforceable and can be challenged in a court of law.

Opposition to the merger

In April, the National Union of Metalworkers of South Africa (Numsa) requested Parliament to intervene in the approval of the deal between South African Airways and the Takatso Consortium.

NUMSA National Spokesperson, Phakamile Hlubi-Majola said the deal was shrouded in secrecy.

“The national union of metal workers of South Africa has written to the Parliamentary portfolio committee on public enterprises to request an audience because we feel strongly that the SAA deal with Takatso is very doggy. In fact, as far as we are concerned that deal is corrupt, and we have raised various issues around why we think this deal is corrupt. First and foremost, the minister of public enterprises minister, Pravin Gordhan is the one who engineered this deal. He basically handpicked the Takatso Consortium as the so-called right partner, equity partner.”