SA Express’s employees are set to become its owners, after getting the go-ahead late Tuesday (September 22) from its business rescue practitioners Daniel Terblanche and Phahlani Mkhombo and the Department of Public Enterprises to buy the troubled state-owned airline.
Accepting the bid by its employees means SA Express, which went into business rescue in January after it could not pay a R11.3 million debt, will not be liquidated.
The move to have SA Express’s employees become its owners happened quickly, says Thabsile Sikakane, a spokesperson for Fly SAX, a special purpose vehicle the employees created.
Sikakane says the idea to have the employees take ownership was first floated by acting Public Enterprises DG Kgathatso Tlhakudi a few weeks ago.
Soon after, the employees were contacted by equity crowdfunding platform Uprise.Africa CEO Tabassum Qadir to see if it could assist. Aside from Uprise.Africa’s involvement, Sikakane says the employees’ bid got a further boost when they were also contacted by prospective investors about backing the venture.
One of SA Express’s unions also backed the move to have its employees become shareholders.
National Union of Metal Works of SA (Numsa) spokesperson Phakamile Hlubi-Majola says that while it preferred the airline to remain in state hands, as it is a strategic asset, it supports the move on the part of its employees.
Long road ahead
Although getting the buy-in of the business rescue practitioners and the state were important steps, Sikakane says a lot of hard work still lies ahead, as putting together a crowdsourcing bid to save an airline has never been done before.
She says one of the things that still must be figured out is the institutional arrangements between other prospective shareholders and the employees. At this stage, for instance, the people providing financing might want to bring in their own management structure.
While the details of the ownership and management structures still have to be worked out, Sikakane says the staff already have some ideas about how they want the new SA Express to be run.
For her part, Uprise.Africa’s Qadir says the moment for this type of crowdfunding has come.
“Equity crowdfunding certainly comes as an alternative way of funding to realise their dreams in a time of economic crisis where mainstream funding solutions are harder to break into.”
Equity crowdfunding is where mostly small investors get shares in a company in exchange for investing in it.
The newness of equity crowdfunding in SA, however, means Uprise.Africa will be taking some precautions to protect all involved, Qadir says.
A due diligence, for example, will be carried out by external aviation experts and will be “facilitated by the anchor investor who has shown keen interest to subscribe for shares before it is open for initial public offering”.
Uprise.Africa will also adopt a screening process to identify between “sophisticated and non-sophisticated investors”.
If an investor is deemed “non-sophisticated”, they will be urged not to invest more than 10% of their net investable assets via the equity crowdfunding platform. This is to prevent non-sophisticated investors from allocating a disproportionate amount of their net worth to this alternative asset class.
Investor registration is set to start in October, and registered organisations and individuals will be able to make an investment pledge in November.
Investors looking to exit eventually will be able to do so via ZARX, an alternative stock exchange that has entered into a partnership with Uprise.Africa.