Fly Modern Ark and Cerberus Capital Management – a consortium of local and international investors – have made an unsolicited loan offer to SAA to the tune of R21 billion in return for a 51% stake in the bankrupt airline.
In September, media reported that SAA would need R21 billion between then and 2021, when the airline is expected to return to profitability.
In his mid-term budget speech in October, Finance Minister Tito Mboweni had announced a R5 billion bailout for SAA.
Last month, SAA’s acting chief financial officer (CFO), Deon Fredericks, told Parliament that the airline would need a further R3.5 billion between then and end-March 2019.
On Saturday SAA spokesperson Tlali Tlali said lenders had agreed to advance a facility that would see the national carrier through to March next year.
In an email sent last week by Fly Modern Ark’s co-founder, Theunis Crous, to various stakeholders – including SAA chief executive Vuyani Jarana and Public Enterprises Minister Pravin Gordhan – Crous confirms that talks regarding the funding were held between his team and airline officials.
“As indicated, our company – in partnership with local and international financiers – has engaged with Vuyani Jarana, [former interim CFO] Robert Head and [SAA treasury boss] Lucky Ncobela with regard to funding SAA in the short, medium and long term, which included the potential equity transaction related thereto.”
The department of public enterprises has said that SAA needs an equity partner, but has not revealed the size of the stake that it is willing to sell.
Crous’ email reads further: “The above discussions culminated in a teleconference with ourselves, our international partners ... These discussions were constructive and fruitful, and we were to engage after the minister of finance’s mid-term budget vote in October 2018.”
However, the email shows that following Head’s departure from SAA, the meeting did not happen.
Added Crous: “We are firmly of the view that we, as a consortium, would add intrinsic value to the turnaround strategy of SAA over and above the funding requirements.”
Gordhan acknowledged Crous’ correspondence via an email written by a person named Selatswa Masenya: “On behalf of Mr Pravin Gordhan ... I hereby acknowledge receipt of your correspondence ... the contents thereof have been noted and will be brought to the minister’s attention at the earliest opportunity.”
Crous told Press last week that SAA needed an equity partner.
“We are offering them R21 billion as a loan and we are prepared to take 51% and then plough in more money to recapitalise the business. SAA initially expressed an interest in the idea but later went quiet. Cerberus knows how to turn around companies.”
Tlali confirmed that a meeting with Fly Modern Ark had taken place in May at the airline’s head office in Kempton Park.
“Fly Modern Ark wanted an opportunity to present their capability, which they suggested could be beneficial to SAA’s turnaround strategy, including addressing our liquidity challenges. The discussion with Fly Modern Ark did not include any discussion regarding a strategic equity partner.”
He said the troubled airline was not involved in any bid to to find an equity party, adding that if that process did happen, it would be led by the government.
Tlali stressed that the discussions with Fly Modern Ark centred on funding, not the acquisition of a stake by the company. He denied that a teleconference took place.
Adrian Lackay, spokesperson for the public enterprises ministry, said government was currently not involved in talks to acquire potential partners.
“Acquiring an equity partner for SAA would require a significant capital injection from government upfront. For a commitment of this nature to take effect, it is essential that the company is first stabilised operationally in order for government as the shareholder to realise optimal value from a strategic equity partnership.”
The ministry, Lackay said, had received various unsolicited bids from companies wanting to acquire a stake in the airline.
“In terms of the Public Finance Management Act and the Constitution, such bids cannot arbitrarily be considered, entered into or accepted. It would have to follow due process.”
Lackay said that SAA, with government’s support, was working to raise sufficient funding to meet its immediate and medium-term liquidity requirements
Marlboro cigarette maker Altria's $1.8 billion investment in the cannabis producer Cronos is a win-win, according to an analyst.
"Cronos provides Altria a unique entry into cannabis and we do not think Altria is taking on outsized risk while entering a new high-growth category," Vivien Azer, an analyst at Cowen, said in a note out on Monday.
Cronos has a relatively smaller cultivation capacity than most of the other major Canadian cannabis producers, but a higher efficient operating line, Azer says. While Cronos's revenue over the last 12 months - $12 million sales - ranked only the sixth among major Canadian marijuana producers, its gross margin ranked second.
"Cronos has been judicious with capital, and has embraced an asset light model that does not prioritise cultivation (consistent with tobacco)," Azer noted. "Their business model is less capital focused and more reliant on sourcing cannabis from local farmers, similar to tobacco companies."
Moreover, Cronos' focus on rare cannabinoids is a point of differentiation for Altria, Azer said.
"While the potential uses of cannabinoids are vast, Cronos believes the key to successfully bringing cannabinoid-based products to market is in creating reliable, consistent and scalable production of a full spectrum of the ~100 cannabinoids, not just THC and CBD," which are the two primary cannabinoids that occur naturally in the Cannabis, she added.
Azer believes Cronos can leverage Altria's expertise to create value-added form factors while focusing on ingredient composition without reliance on a massive cultivation infrastructure.
Azer has an "outperform" rating and a $74 price target for Altria - a 40% premium to where shares are trading on Monday.
Uber South Africa - which controls 71% of the e-hailing market in South Africa - is considering introducing emergency buttons in cars.
This as Uber drivers face continued intimidation from especially taxi-meter drivers which includes killings, vehicle torchings and acid attacks since the service was introduced in South Africa in 2014. Earlier this year, Uber launched an app which connects drivers to the closest private security response vehicles through built-in GPS, whereafter police can be dispatched if necessary.
“The new emergency button could assist in a case where a driver-partner needs assistance and has lost access to their cell phone and cannot use the Uber app,” Fuller told Business Insider South Africa.
Last month, Uber introduced a "safety toolkit" with new features for clients, including the ability to share their accurate locations with friends or family, and to check a driver’s credibility.
Uber also introduced a new policy earlier this year which forces drivers to go offline for six straight hours after a total of 12 hours driving time, in an effort to prevent drowsiness.
Uber introduced partner injury protection in August which means all drivers and Uber Eats delivery-partners are covered by insurance in an accident or crime-related incident at no additional cost to them.
Local licence holder for Starbucks in South Africa, Taste Holdings, has halted any plans to open more outlets of the US coffee chain as it struggles to make ends meet.
Taste, which also owns the jeweller Arthur Kaplan and Domino's Pizza, suffered operating losses of R87 million in the six months to end-August, with sales down 3%.
The group said that while the store network of twelve Starbucks outlets is profitable at a sales level, it's not producing the required return on its investment.
Setting up a new Starbucks store in South Africa costs between R5 million to R8 million, the group previously said. This is very expensive, says Simon Brown, founder and director of investment website JustOneLap.com. Brown estimates that the actual cost could now be higher than previously stated - perhaps even reaching R20 million.
Hitesh Patel, director of new business at Starbucks competitor Vida e Caffè, says the average cost of setting up one of its stores is only around R1.5 million.
That is is less than a third of the minimum cost of a new Starbucks outlet.
Taste has a 25-year licence deal to operate Starbucks stores in SA - and have to pay royalties to the US brand, which are proving to be costly, says Michael Treherne, retail analyst at the fund manager Vestact.
Due to the royalties and expensive store set-up costs, Treherne says Starbucks South Africa has had to resort to premium pricing - which is not at all good during a recession.
The difference between food prices is more pronounced. We could find a muffin at a Vida e Caffe outlet in Johannesburg for under R20, while the cheapest muffin at a Starbucks was R32.
South African Airways could sell shares to the public as the state-owned carrier seeks ways to end years of losses and reduce the need for bailouts, according to people familiar with the matter.
The move would enable the government to cut its stake in much the same way as it did with former phone monopoly Telkom SA, almost two decades ago, said the people, who asked not to be named as the information is not public. However, the carrier would first need to make progress with a turnaround plan designed to reach break-even in three years, they said.
While the sale of a stake to an equity partner has been aired repeatedly over the years, this is the first time it’s been suggested that SAA should list on a stock-exchange. Pretoria-based Telkom’s initial public offering in 2003 raised almost $500m and the government’s shareholding is now just under 40%.
SAA declined to comment
The airline’s Chief Executive Officer Vuyani Jarana is facing renewed pressure from his bosses in government, which last month put aside R5bn to help SAA repay debt.
Last week, Finance Minster Tito Mboweni said it was his preference to shut down the carrier rather than continue to stretch state finances, while his counterpart at the department of public enterprises, Pravin Gordhan, warned on Monday that “radical things need to be done” for the airline to survive.
More immediate plans than the share sale include holding discussions with potential commercial joint-venture partners including Air Mauritius, one of the people said. That could lead to cost savings on routes to the Asian-Pacific market as the airlines would share operating costs.
SAA will also consider a resumption of flights to Abuja, the Nigerian capital, which it abandoned in 2017, the person said. The carrier would apply for a local license - or find a partner - to help Nigerians travel to the U.S.
Jarana, 48, a former executive at South African mobile-phone market leader Vodacom, was hired a year ago, in part for his experience in the private sector. He also has no connection with previous management, which has been embroiled in the corruption scandals that plagued state-owned companies during ex-President Jacob Zuma’s almost nine years in charge.
SAA has had an equity partner before. The government sold 20% of the carrier in 1999 to Swissair, which pioneered the concept of an alliance anchored via minority stakes, only to buy the shares back in 2002 when the European carrier went bankrupt.
South African researchers say they have made bricks using human urine in a natural process involving colonies of bacteria, which could one day help reduce global warming emissions by finding a productive use for the ultimate waste product.
Although make from urine, the bricks do not have any foul smell.
The grey bricks are produced in a lab over eight days using urine, calcium, sand and bacteria. Fertilizers are also produced during the processes.
The bricks are made using urea — a chemical found naturally in urine and also synthesized around the world to make fertilizer. The process of growing bricks from urea has been tested in the United States with synthetic solutions, but the new brick uses real human urine for the first time, the researchers said.
“We literally pee this away every day and flush it through the sewer networks,” said Dyllon Randall, a senior lecturer at the University of Cape Town’s civil engineering department who is part of the team that developed the brick. “Why not recover this instead and make multiple products?”
One obstacle preventing mass production: the bricks use huge amounts of pee. To make a single brick requires about 20 liters of urine – a couple of weeks’ worth of wee for a typical adult.
“So, I get it from the boys bathroom opposite the laboratory. I put a little sign up and all the university boys contribute to my research,” said Suzanne Lambert, who proved the concept for the research by making the first brick.
“I definitely see commercialization in the next decade or two, but there is still a lot of lab work to be done,” she said.
Durban just added an impressive architectural and engineering marvel to its portfolio of landmarks. The Mount Edgecombe highway interchange was officially opened by transport minister Blade Nzimande and the South African National Roads Agency (Sanral) on Wednesday.
The Mount Edgecombe Interchange linking the N2 and M41 highways.
The interchange boasts a first for Africa, according to Sanral CEO Skhumbuzo Macozoma in an interview with the state broadcaster. He says it features the continent’s longest flyover ramp that stretches for one kilometre, linking the M41 eastbound with the N2 southbound, connecting surrounding areas like Phoenix and Umhlanga with Durban.
The Mt Edgecombe Interchange's flyover ramp stretches for about 1km and is dubbed Africa's longest.
The agency undertook major upgrades to the interchange from April 2013 to ease "chronic congestion of traffic" in the area, notorious for long waiting times, especially during the festive season, when South Africans flock to the coastal region.
The agency intends cutting travel time between the areas the interchange links from 25 minutes to one minute on average. The old interchange had traffic lights increasing waiting time; it has now been converted to a completely free-flowing system with limited stops, says Henk Kaal, resident engineer on the project.
New data from the Central Energy Fund of South Africa shows that the petrol price is set to drop by 3c in November.
The possible decrease is attributed to a strengthening rand and a decrease in Brent crude oil prices.
South Africa’s petrol price jumped to a record-breaking R17.08 in October; this would be the first decrease in eight months.
The South African petrol price is set to drop by 3c per litre in November, the first drop in eight months, new data from the Central Energy Fund (CEF) shows.
But the news is not all good: the diesel price is set for a massive 35c per litre hike.
The possible decrease in the petrol price is attributed to a strengthening rand, and the global decrease in Brent crude oil prices, data from the CEF released on Wednesday shows.
The CEF is a state-owned entity mandated to manage PetroSA and Strategic Fuel Fund (SFF) to secure South Africa’s national energy security.
Hugo Pienaar, senior economist at the Bureau for Economic Research at Stellenbosch University, said things are looking increasingly promising for consumers in South Africa.
“It is not only that the rand, on average, performed stronger against the US dollar, but the oil price also fell sharply from around $86 a barrel in early October, to around $76 today,” Pienaar told Business Insider South Africa.
He said the petrol price may decrease slightly or remain the same as October prices when a formal determination is made.
The local petrol price jumped to a record-breaking R17.08 inland in October, and R16.49 at the cost.
“I think the most important point is that the price [of petrol] will stay roughly the same, which in itself is positive after the sharp increases,” said Pienaar.
President Cyril Ramaphosa set up an inter-ministerial committee in July to investigate possible interventions the state can make to lessen the effect of petrol price hikes on South Africans.
The initial report was set to be completed by September, but has now been postponed to the end of November, energy minister Jeff Radebe said this week.