BOXES TICKED: Harith Aviation secures Competition Commission clearance to land FlySafair deal

South African aviation company Harith Aviation has secured the necessary approval from the Competition Commission to proceed with its proposed acquisition of FlySafair, clearing a critical hurdle in its bid to consolidate control over key elements of the country's aviation sector. This decision marks a pivotal moment in the ongoing restructuring of the industry, particularly following recent regulatory challenges faced by FlySafair. The Competition Commission submitted its findings to the Competition Tribunal earlier than anticipated, effectively paving the way for the tribunal to consider the merger. Central to the commission's assessment was the concern regarding Harith's intent to operate an airline. However, the commission concluded that the termination of Harith's previous attempt to acquire South African Airways (SAA) in March 2024 did not eliminate any existing competitors or aircraft from the market. Instead, the deal merely shifts ownership from an Irish entity to a South African one, thereby maintaining competition levels within the aviation landscape. Another point of contention centered around Harith's stake in Lanseria International Airport. To ensure fair treatment of all airlines operating at the facility, the commission mandated that Harith and FlySafair commit to providing airline- or airport-related goods and services on non-discriminatory terms. With these conditions addressed, Harith now stands closer to realizing its vision of transforming Lanseria and FlySafair into a prominent hub for both local and international travel, situated near Randburg. FlySafair expressed satisfaction with the progress made, highlighting the significance of the acquisition in securing its long-term stability. The airline had previously encountered difficulties with the Air Services Licensing Council (ASLC), which had determined that its foreign parent structure violated South Africa's 75% local ownership requirement. A temporary reprieve was granted, allowing FlySafair a year to restructure before facing possible license revocation. Although a high court interdict delayed this deadline, the acquisition with Harith resolves this issue definitively. Harith has positioned the acquisition as a cornerstone of its strategic plan to develop regional infrastructure and enhance mobility options. While the exact financial figures remain undisclosed due to confidentiality agreements typical in private equity transactions, Harith's chairman, Tshepo Mahloele, indicated that the FlySafair acquisition constitutes approximately 15% of Harith's total investment portfolio. Given Harith's assets under management exceed $3 billion, this suggests a valuation potentially exceeding R8 billion once currency conversions are considered. The funding mechanism behind the acquisition involves several layers of financial structuring. The Competition Commission identified GP Fund 2 Proprietary Limited as the managing entity responsible for directing capital from the Pan-African Infrastructure Development Fund 2 (PAIDF 2) into Harith Aviation's special purpose vehicle. This arrangement allows for the execution of the FlySafair acquisition through a structured investment framework. Public Investment Corporation (PIC), which holds a 30% stake in Harith General Partners, the asset management arm, will benefit financially from the management fees and performance incentives associated with this acquisition. Additionally, PIC serves as the foundational investor in PAIDF 2, channeling funds from the Government Employees Pension Fund (GEPF). This intricate web of investments implies that a considerable portion of the capital used to acquire FlySafair comes from the retirement savings of South African government employees. This development raises intriguing questions about the extent of public influence in the domestic aviation market. As the PIC and GEPF indirectly support Harith's operations, they gain exposure to a significant segment of the aviation industry, including their existing stake in SAA. While these connections are speculative, they underscore the complex interplay between private enterprise and public investment in shaping the future of South Africa's aviation sector.