Gordhan to SAA and Mango: Reach an agreement or no sign off on the proposed sale

Minister of Public Enterprises Pravin Gordhan has informed South African Airways (SAA) and Mango’s rescue practitioner that he will not consider an application to approve the proposed sale until they have addressed previous concerns about the matter.

This is only a few weeks before the date set by Mango’s rescue practitioner, Sipho Sono, for the low-cost airline to resume operations.

According to his latest report to creditors, Gordhan sent a letter to SAA on October 26 directing its board to work with Sono to resolve reservations the state-owned flag carrier had raised about the proposed sale.

The nature of these reservations was not revealed. According to Sono’s previous report, SAA submitted an application directly to Gordhan in September under the Public Finance Management Act (PFMA), but it was accompanied by a list of concerns SAA had about the proposed sale of the low-cost airline.

Sono believes SAA’s concerns are “of a mere housekeeping nature” and not material.

The DPE informed Parliament’s Portfolio Committee on Public Enterprises in mid-September that it wanted to conduct its own due diligence on the buyer before signing off on any deal proposed by Sono. SAA’s acting chair, John Lamola, told the committee that the domestic airline market in South Africa is still risky, which any investor in Mango would have to consider.

Sono claims the committee was not given an accurate picture of Mango’s situation because he was told not to attend the briefing at the last minute. On the 5th of October, he responded to SAA’s concerns.

Gordhan then wrote to SAA and Sono, instructing them to engage with one another and then providing him with written reasons why the PFMA application should be approved. Sono claims to have met with the SAA board and is working with the organisation as directed by Gordhan.

He is optimistic that SAA’s concerns will be addressed and that an updated PFMA application, with SAA’s approval, will be submitted to Gordhan by the end of November.

Sono also confirmed that all aircraft leases used by Mango have now been cancelled and the planes returned to lessors. A buyer would be responsible for making their own leasing arrangements.

In July 2021, Mango was placed in voluntary business rescue and has not flown since. Sono desired that Mango resume operations on December 2, 2021. The Department of Public Enterprises (DPE), SAA’s shareholder, made it clear that this could only be done if an investor purchased Mango.

Sono chose a consortium, the identity of which has not yet been revealed, as the preferred bidder to purchase Mango after a due diligence process.

If the PFMA application is approved, then the Competition Commission and other regulatory approvals will be required.

If the investor process fails, Sono will implement a wind-down procedure that was already included in the business rescue plan.