Fly SAX is one of the entities bidding to acquire the airline.
Gallo Images/Grant Duncan-Smith
- A group of employees of SA Express is pinning its hopes on a crowdsourcing bid to give them a chance at owning shares in the state-owned airline.
- If approved by the provisional liquidators and creditors of the airline, the equity ownership in the proposed Fly SAX company will offer an investment opportunity in SA Express to retail investors through a public offering.
- No fewer than 17 parties have expressed an interest in the state-owned regional airline or some of its assets.
A group of employees of SA Express is pinning its hopes on a crowdsourcing bid to not only give them a chance at owning shares in the state-owned airline, but to get it up and flying again.
SA Express was placed in provisional liquidation at the end of April this year after its business rescue process failed. No fewer than 17 parties have expressed an interest in the state-owned regional airline.
Should the equity crowdsourcing proposal be approved, it will work as follows: Fly SAX, one of several entities bidding to acquire the airline, will offer an investment opportunity in SA Express to retail investors through a public offering.
This will not be direct, explains Tabassum Qadir, CEO of equity crowd funding platform Uprise Africa and former co-chair of grounded low-cost SA airline Skywise.
Uprise Africa is an “equity crowdfunding” platform that allows investors from around the world to invest capital into South African businesses in exchange for equity shares. In other words, it enables groups of investors to fund startups, small businesses or struggling businesses.
In this case, it’s also a workaround, given that Fly SAX is not publicly listed.
“The retail investors will not be subscribing for shares directly in Fly SAX, which is a private company and is not permitted by law to offer its shares to the public. The Uprise Africa Fund is an unlisted public company and will subscribe for shares in Fly SAX by means of the funding raised in this offering,” says Qadir.
“The Uprise Africa Fund will in turn issue shares in itself to investors, and these shares will be economically linked to SA Express.”
According to Maki Mogoerane, part of a leadership team nominated by some employees to be involved in managing and supporting this bid, the aim is to avoid liquidation of the airline.
“We know and understand the business and spoke to potential investors. These potential investors like our idea, but right now the process is in the hands of the provisional liquidators. We are just putting in our proposal for using the crowdfunding model supported by Uprise Africa,” says Mogoerane.
The hope is that the airline can end up being “owned by the people”, including employees and the wider public interested in trying to save it by means of this equity crowd funding model.
“We cannot force employees to participate in this model, but employees who do decide to participate will have an opportunity to buy into the airline,” she adds.
A long way to go
However, the proposal is still a long way from implementation. Creditors would have to approve whatever bid is selected by the provisional liquidators as the preferred one – if any.
According to Mogoerane, there is a private “anchor investor” part of the bid. The identity of this investor is not being revealed at this stage as certain conditions still have to be met.
The employees supporting this bid and model say in a statement that it is an attempt to serve as a tool for “real, transformative change in the ownership model” of the airline and with the ultimate purpose to vest ownership in the workers. It is the hope of these employees that SA Express could resume operations and save jobs by avoiding liquidation.
“The employees would seek to advance a new democratic form of management and ownership that would value the practical knowledge and skills of workers by involving them in day-to-day decision-making,” according to the statement.
Last week the hearing to determine whether SA Express has to be liquidated was postponed until 28 October. This is to provide for the conclusion of the ongoing sales process, which entails either the sale of the entire airline as a going concern or the sale of the airline assets, the provisional liquidator, Aviwe Ndyamara of the Tshwane Trust Company, told Fin24 on Thursday.
The state provided more than R1.2 billion in urgent financial support for the 2019/2020 financial year. Its shareholder, the Department of Public Enterprises, has in the past acknowledged that mismanagement took place at the airline.
Employees have already received certificates indicating that their termination was due to liquidation. A court date was initially set for 9 September to determine whether SA Express should be liquidated or not.
Offers listed in a confidential document, seen by Fin24, include some interested only in specific assets, mostly related to aircraft engines and components. None of the offers appear to be without conditions to be met, including completing due diligence studies.
A few of the offers appear to be from overseas investors. Legally their ownership in domestic airlines in SA would not be allowed to exceed 25%.
SA Express is not currently a going concern. On top of that, the airline industry has been devastated by the coronavirus pandemic and related lockdowns.
Employees have turned to the Human Rights Commission in an attempt to get their outstanding salaries paid.