DAR-ES SALAAM, Tanzania, October 16, 2002
—The International Finance Corporation (IFC) has advised the Government of Tanzania in the privatization of Air Tanzania Corporation (ATC), the national airline.
On September 19, 2002, South African Airways (SAA) submitted a technical and financial offer for the purchase of 49 percent of the shares in Air Tanzania Company Limited (ATCL), a new company created to hold the core assets of ATC. On the same day, two other potential bidders, Kenya Airways and Nationwide of South Africa, submitted letters declining to bid, but stating their continued willingness to work with the Government of Tanzania on the formation of a regional airline, or some other form of cooperation.
Following an evaluation of SAA’s technical offer, their sealed financial envelope was opened, on September 24, 2002. SAA submitted a binding offer of a total of US$20 million; of which $10 million would be paid in cash to the Government; plus a $10 million capital injection into ATCL. In its business plan, SAA stated that one of its core objectives is to develop Dar-es Salaam into a hub for regional and intercontinental air traffic. The offer has been formally accepted by the Government of Tanzania, and financial closing is expected before the end of November.
Brian Samuel, Principal Investment Officer in the Private Sector Advisory Services (PSAS) group, expressed satisfaction with the outcome. “A high level of competition and transparency had been maintained throughout the process, with good results for the Government and people of Tanzania,” he said. “SAA is the largest airline in Africa; with extensive training and technical support facilities; and is an excellent strategic partner for ATCL.” Samuel added that it is particularly satisfying was that the transaction was carried out under a fully liberalized and competitive market structure, which should bring tangible benefits in terms of the quality and cost of air transport services to and within Tanzania.
This project was supported by a Technical Assistance grant from Denmark that assessed the strategic and operational performance prospects of Air Tanzania Corp as input to the options and prospects for privatization. In addition, through IFC’s own Technical Assistance resources grant funding was provided to augment management processes, and implement specific initiatives required to reduce operating costs. Additional bilateral grant resources were provided by the UK Department for International Development to enable the Tanzanian Privatization Agency to engage legal advice needed for the privatization to move forward.
IFC’s mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses. Since its founding in 1956 through FY02, IFC has committed more than $34 billion of its own funds and arranged $21 billion in syndications for 2,825 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY02 was $15.1 billion for its own account and $6.5 billion held for participants in loan syndications.
