- Investment fund Harith is a key member of the consortium that may end up with a majority stake in SAA.
- But it previously considered being part of a transaction to buy SA Express.
- Its previous potential partner in that deal says Harith "backtracked", describing the decision as "astounding".
Infrastructure investment firm Harith General Partners - which is part of the consortium that may end up with a majority stake in SAA - was considering being part of a deal to buy state-owned regional airline SA Express (SAX), but it has since ditched that bid.
In doing so, SAX could potentially face liquidation.
Fly SAX, the preferred bidder for SAX, says it was "astounded" by what it regards as "backtracking" by Harith on "a key commitment letter".
In a lawyer's letter dated 22 January, which Fin24 has seen, G Nkomo Attorneys writes to the provisional liquidators of SAX that strategic investment group Siga Express, represented by Patuxolo Nodada, and Harith General Partners, represented by Tshepo Mahloele, concluded an agreement with Fly SAX to - as "anchor investors" - give "a firm undertaking" to provide security for the payment of the purchase price for SA Express in the amount of R26 million. The letter states that Siga and Harith's undertaking as anchor investors expires on 30 June 2021.
The state-owned regional airline SAX was placed in provisional liquidation in April 2020 after its business rescue process failed.
Fly SAX – a group of former SAX employees - was accepted as preferred bidder for SA Express last year. In May this year, it submitted a revised offer to the airline's provisional liquidators after the latter found that Fly SAX had breached the terms and conditions of the sale process as "no funds were forthcoming".
A week ago, Harith was announced as a key stakeholder in the Takatso consortium – which also includes aviation group Global Airways – that will hold an effective 51% shareholding in SAA. Government will hold the rest. The deal is still subject to due diligence procedures.
A strategic equity partnership is essential for SAA, not only to have the funds to take off again, but to prevent government from having to fork out more bailouts in future.
Harith confirmed to Fin24 on Friday that it had been "approached for this opportunity [with Fly SAX], but after a thorough assessment, decided not to pursue it".
No deal signed
Thabsile Sikakane, who represents Fly SAX, told Fin24 on Friday that Fly SAX was originally approached by Siga, which indicated it was interested in getting involved in the SA Express deal. Siga then involved Harith, according to Sikakane.
"The lesson Fly SAX learnt is not to put all your eggs in one basket and not to be too trusting sometimes," says Sikakane.
Sikakane says while nothing was signed "directly" with Harith, the lawyer's letter from January showed the intention of Siga and Harith to commit to the deal.
"Since January this year we have not heard anything more. We have been asking for meetings. Then, suddenly, we heard about Harith's involvement in the SAA deal, while we thought it was on board with Fly SAX regarding SA Express," said Sikakane.
"It is astounding that they backtracked only to come out going with our sister airline."
Sikakane said Fly SAX wanted to see if it could revive the ability to provide proper funding by getting another anchor investor or pursue crowdfunding.
Now that Harith is out, G Nkomo Attorneys responded on behalf of Nodada that the SA Express deal is still going ahead and Siga Express "has until 30 June 2021 to act".
"However, as of 9 March 2021, Harith General Partners is no longer participating in this transaction. Thus, Siga Express shall endeavour to act in accordance with the deadline of 30 June 2021," according to the response.
"We cannot and will not accept this backtracking by Harith General Partners should the provisional liquidators pursue to hold Fly SAX responsible for non-repudiation to the first binding offer," Fly SAX said in a separate statement.
"Fly SAX has fought very hard for this airline to be saved and what has happened to us is very painful. We should not be denied the opportunity to take SA Express to the sky again, because of 'opportunistic businessmen.'"
Court matters
In January this year, a court ruling postponed the date to determine if SAX must be placed in liquidation to 29 April, which was then pushed out again to 28 July this year. The aim was to provide more time to try to save the airline.
In addition, the National Union of Metalworkers of SA (Numsa) and the SA Cabin Crew Association (Sacca) have filed an application in the Constitutional Court to try to compel the National Assembly to debate whether SAX should be permitted to go insolvent. The two unions contend that, in the absence of Parliamentary oversight, a state-owned company cannot be finally liquidated by a court.
Zazi Nsibanyoni-Mugambi, president of Sacca, told Fin24 on Friday that Harith "must do the right thing and honour the commitment made to Fly SAX".
"For this to happen to them is shocking and as Sacca we believe that should not be accepted. They are still waiting to receive money owed to them and have worked very hard, with non-existent resources, to raise the required capital for this SA Express bid. It appears now that Harith General Partners has dumped this deal for a more lucrative deal," she said.
"If this is the case, and SA Express people have been duped, then they should be allowed a second chance to file another bid with another investor and not be disadvantaged by the actions of Harith, or their bid should be extended as it was not their fault."