South Africa Hires Bain, Abacus to Advise on State Airlinesby and
SAA, SA Express survive on state guarantees, Mango made loss
Options may include sale of minority stake, non-core assets
South Africa hired Bain & Co. to advise on the strategy and corporate structure of the country’s three loss-making state-run airlines to improve the benefit to the state from owning the carriers.
Bain, based in Boston, was awarded the contract as part of a joint venture with a South African company, Abacus Advisory, according to a posting on the National Treasury’s website. The contract was awarded in October for a three-month period, a spokesman for the Treasury said in e-mailed comments on Monday.
South Africa’s government is seeking advice on the corporate structure of South African Airways and South African Express, which could lead to the sale of a minority stake in the airlines and the disposal of assets that aren’t central to their businesses, according to a separate invitation-to-bid document. The state is also seeking advice on how to improve their financial performances, reduce risk and develop a “well-coordinated strategy,” the document shows.
Both SAA and SA Express are surviving on state debt guarantees at a time when the government is trying to rein in spending and raise revenue amid slowing economic growth. The cabinet approved a new board for Johannesburg-based SAA on Aug. 31 to overhaul management of the airline, which hasn’t made an annual profit since 2011. The carrier said last month it presented a corporate plan to the government that indicated a return to profit in 2021.
SAA’s low-cost unit Mango Airlines, which is also included in the scope of the contract, made a loss of 36.9 million rand ($2.6 million) in the year through March, Johannesburg-based news website Fin24 reported last week, citing documents provided to lawmakers.
Ratings companies, including S&P Global Ratings Ltd., which is due to deliver revised assessments on South Africa’s debt in the next two weeks, have identified the country’s state-owned companies as a risk to the fiscus. Reforms of government companies is one of the items that Fitch Ratings Ltd. wanted to be briefed about in a visit to South Africa last week, Deputy President Cyril Ramaphosa said following the meetings.