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Employees of SA Express will become its owners, after getting the go-ahead on Tuesday (September 22) from their business rescue professionals Daniel Terblanche and Phahlani Mkhombo and the Department of Public Enterprises to buy the troubled state airline.
Accepting the offer from its employees means that SA Express, which entered a business bailout in January after it failed to pay a debt of R11.3 million, will not be liquidated.
Fast take off
The decision to have SA Express employees become its owners came quickly, says Thabsile Sikakane, a spokesman for Fly SAX, an employee-created special-purpose vehicle.
Sikakane says the idea of employees taking over was first raised by the acting CEO of Public Enterprises, Kgathatso Tlhakudi, a few weeks ago.
Shortly thereafter, employees were contacted by the Uprise.Africa stock crowdfunding platform, CEO Tabassum Qadir, to see if they could help. Aside from Uprise.Africa’s involvement, Sikakane says the employees’ offering received an additional boost when they were also approached by potential investors to back the company.
One of the SA Express unions also backed the initiative to turn its employees into shareholders.
The spokesman for the National Union of Metallurgy of SA (Numsa), Phakamile Hlubi-Majola, says that although he preferred that the airline remain in the hands of the State, since it is a strategic asset, he supports the initiative of his employees.
Long road ahead
While gaining buy-in from state and corporate rescue professionals were important steps, Sikakane says there is still a lot of work to do, as a crowdsourcing offer to save an airline has never been made before.
She says one of the things that still need to be worked out are institutional arrangements between other potential shareholders and employees. At this stage, for example, the people providing the financing may want to incorporate their own management structure.
While the details of the ownership and management structures still need to be worked out, Sikakane says the staff already have some ideas about how they want the new SA Express to run.
For his part, Uprise.Africa’s Qadir says the time has come for this kind of crowdfunding.
“Capital crowdfunding is undoubtedly presented as an alternative form of financing to make your dreams come true in a time of economic crisis where conventional financing solutions are more difficult to obtain”.
Stock crowdfunding is where most small investors obtain shares in a company in exchange for investing in it.
However, the novelty of equity crowdfunding in South Africa means that Uprise.Africa will take some precautions to protect everyone involved, says Qadir.
Taking precautions
Due diligence, for example, will be carried out by outside aviation experts and will be “facilitated by the anchor investor who has shown a keen interest in subscribing for shares before it is open for the initial public offering.”
Uprise.Africa will also adopt a screening process to identify between “sophisticated and unsophisticated investors”.
If an investor is deemed “unsophisticated”, they will be required to invest no more than 10% of their net investment assets through the equity crowdfunding platform. This is to prevent unsophisticated investors from allocating a disproportionate amount of their net worth to this alternative asset class.
Investor registration is scheduled to begin in October, and registered individuals and organizations will be able to make an investment promise in November.
Investors looking to exit will eventually be able to do so through ZARX, an alternative stock exchange that has partnered with Uprise.Africa.
