Seeking Advice

Govt appoints consultants to help decide future course for airlines

- Keith Campbell

A notice on the website of the National Treasury has confirmed that a joint venture between Bain & Company South Africa and Abacus Advisory has been appointed the “professional service provider(s) for developing the optimal group corporate structure for the realignment of the State-owned airline assets”.

The Bloomberg news agency reported that the contract was valid for three months and had been awarded in October.

This follows comments by Finance Minister Pravin Gordhan in his Medium-Term Budget Policy Statement in late October. “There are a number of processes under way to rationalise State entities,” he said.

“These include the . . . appointment of transaction advisers on restructuring the State airlines and the possible introduction of a strategic equity partner . . .” South Africa’s State-owned airlines are the South African Airways (SAA) group, composed of SAA itself, low-cost carrier Mango and SAA Technical (a maintenance, repair and overhaul business) and regional airline SA Express. Both airlines are able to function only because of State financial guarantees. In the case of the SAA group, State financial guarantees worth R14.4-billion were increased by a further R4.7-billion in September. SA Express has a guarantee of R1.1-billion.

Last month, Deputy Finance Minister Mcebisi Jonas told the Parliamentary standing committee on finance that any recapitalisation of SAA would not be funded by the State.