SAX employees have created a Special Purpose Vehicle (SPV) called Fly SAX, which has submitted a bid to buy the airline through a privatisation venture that will be funded by private investors and crowd funding.
“The capital raised for the SPV will be structured through an equity funding model anchored by a reputed anchor investor to finance and scale employee ownership conversions in a worker-centric and transformative way. The social capital will serve as a tool for real, transformative change in the ownership model,” said Thabsile Sikakane, spokesperson for Fly SAX, the acquiring entity that is bidding for SA Express.
She explained to Tourism Update that the creative model would be partly funded by a few private investors, who would only be named once Fly SAX got the bid. The remaining funds would be raised through a crowdfunding scheme engineered by Uprise Aviation, which would create a platform for employees, as well as local and international applicants, to invest money in the airline in exchange for shares.
Sikakane stressed that the goal of the proposed model was to improve wealth distribution and productivity at SAX due to increased motivation of employees who would now be the owners of the airline.
“The benefits of accepting this funding model include the possibility of the business enterprise being positioned to resume operations and save a significant number of jobs through the avoidance of liquidation,” she said, adding that the proposal would also allow creditors to receive returns sooner than through a liquidation scenario.
“Those who have the knowledge should be at the core of the design and operation of services as nobody knows better how to run the airline than those who have spent their lives doing so. South Africa will see a genuine broad-based employee ownership plan that will be privately held and publicly traded. It will be founded on pro-public, democratic principles and a fundamental framework of democratic ownership,” said Sikakane,
LLB, MBA and finance specialist, Brett Evans, commented that SPVs were often used for once-off, non-standard financing.
“A large investment company may be interested in investing cash in a venture with potential and is more motivated to do so if it knows that any losses that may arise will not reflect on its own balance sheet if the venture fails. An SPV isolates financial risk as it creates a separate legal entity and balance sheet.”
Evans said while he had not had sight of the bid, he speculated that Fly SAX could be making use of a popular B-BBEE empowerment model that enables employees to invest immediately in a company through the use of their pension funds as collateral for shares.
“This scheme allows employees who do not have access to large amounts of capital, to gain shares from day one while they pay off their loans working for the company. Sadly, these schemes are often too esoteric to impact an employee’s motivation as the small share percentage that an employee is able to purchase does not impact their day-to-day life or result in high involvement in strategic decision-making. If the company fails, their retirement investments are also lost,” said Evans.
Sikakane said the position of the bid was still too sensitive to allow her to comment on the exact structuring of the funding but commented that it would not be compulsory for the employees to invest money in the scheme.
An airline expert with many years of experience, who did not wish to be named, said the plan did not outline any material change to the airline’s failing operations that would see it turn itself around during the difficult economic conditions that had adversely affected airlines around the world.
“I’m not sure why the same employees, working in the same jobs would suddenly be able to turn the airline into a profitable entity. The privatisation of the airline will also see it separate from the mother ship and could see it losing its ability to leverage off of SAA’s airline code and infrastructure – advantages that have kept the airline afloat for many years,” said the source.
Sikakane remained hopeful that Fly SAX would win the bid, saying it was time for SAX employees to take back destiny into their own hands.