INTEGRATED REPORT 2019

Messages from leadership

FY2018/19 was an important year for Airports Company South Africa in terms of the constitution and ethical direction of its Board. Our newly constituted Board not only brings a powerful mix of business skills, but ethical prowess of which we can be proud of.”

Message from the Board Chairman

Adv Sandile Nogxina

Board Chairman

Dear stakeholders,

Airports Company South Africa continued to face challenging operating conditions in FY2018/19, though our commitment to bolstering our governance framework and operating model, has seen us lay the groundwork for our next phase as a digital airports business with an ambitious growth path. Our Vision 2025 goals, which will see us becoming the most sought-after partner in the world, work hand in hand with our ideal of inclusive growth.

On behalf of the Group, I would like to thank former Minister of Transport Dr Bonginkosi (Blade) Nzimande, whose passion for skills development not only informs our current strategic direction from the Department of Transport, but was also evident when, as Minister of Higher Education, he formally opened the False Bay College facility at the Swartklip site which now forms a key component of Cape Town International Airport’s master plan for integrated socio-economic development in the City of Cape Town. As an example in a microcosm, this provides continuity in our purpose as an agency of inclusive growth and long-term business sustainability.

I would also like to welcome the incumbent Minister of Transport as of 30 May 2019, Mr Fikile Mbalula, on behalf of Airports Company South Africa. We look forward to a fruitful and constructive relationship in guiding policy and development in the future.

Our external environment

The global airline industry continues to face significant challenges as economic activity remains inconsistent. Between trade war threats, regional political instability, increased competition and flagging economic growth, global air travel no longer promises consistent profitable routes. Moreover, for airport operators, the pressure to become technologically advanced, to be more efficient and streamline the travel process for passengers has intensified, requiring coherent planning and capital expenditure to stay relevant. South Africa’s economic growth looks set to remain constrained below 2% until 2020. We are hopeful that positive fiscal policy moves can reverse Airports Company South Africa’s credit rating downgrade it received in April 2017.

Locally, between the Regulating Committee’s decision to cut the tariffs which govern our core revenue and further decisions anticipated in 2021, we have used the window of regulatory certainty to embark on a capacity expansion drive which will help us to service passengers better but also to reduce our dependence on aeronautical revenue. In this way, we can remain fully self-funding and able to deliver a return on capital and dividends for shareholders. As we embark on capacity expansion projects, our airports management team will be under pressure to meet these targets given the construction disruption, but we believe our customers and stakeholders will see the improved offering that lies in store and will appreciate the work we have put into visualising our next phase.

Our role as a state-owned company

Being a state-owned company means strategically aligning a profit-making motive with our commitment to socio-economic development and transformation as part of our triple bottom line Sustainability Framework. While we strive to meet stakeholders’ expectations of relentless excellent service, economic growth and sound financial performance, precedent-setting models like Cape Town International Airport’s master plan illustrate how we can work with local communities, suppliers and businesses in a way that brings benefits for all stakeholders. Socio-economic development is not a cost; it is a way of formulating an operating model that will uplift the communities in areas in which we operate.

Governance

FY2018/19 was an important year for Airports Company South Africa in terms of the constitution of its Board. Our newly constituted Board not only brings a powerful mix of business skills, but ethical prowess of which we can be proud. Through FY2018/19, we further entrenched our operating model and governance structures to ensure that our supply chain management is beyond reproach, and that our IT infrastructure – an increasingly important component of our future business – receives more attention at Board level.

During the year Siyakhula Simelane and Dr. Matlodi Mabela resigned from the Board, and we thank them for their service to the Group and the industry at large. Existing Board members Deon Botha and Kate Matlou were joined in June 2018 by Dudu Hlatshwayo, a PIC nominee, while the Minister of Transport appointed Bonang Mohale, Ntombifuthi Zikalala Mvelase, Yershen Pillay, Irvin Phenyane, Nosizwe Nokwe-Macamo and Pascalis Mokupo to our Board with effect from September 2018 and myself as chair in November 2018.

These appointments have stemmed the high rate of resignations and retirements from the Board, which now reflects a formidable composition of experience and skills. Bongiwe Mbomvu remains acting CEO, pursuant to the expiry of the contract of Bongani Maseko, with a permanent appointment to be made in due course in the 2019/20 financial year. My colleagues and I are committed to working with the Minister of Transport, the Auditor-General of South Africa and other relevant state organs to move us forward and ensure the effective implementation of good governance, as demonstrated by the signing of the Board ethics pledge in December 2018.

Transformation

As mentioned above, we recognise that trans-formation is an imperative for successful future business operation and growth. Our transformation initiatives are aligned with our Sustainability Framework and guide our efforts to effect trans-formation in the sectors which feed into our business: property, retail, car rental, construction, advertising, ground handling and IT.

In aligning our Group needs with those of our stakeholders, we have awarded work packages that will increase the participation of black-owned businesses in our operational, developmental and commercial procurement. Our record of including emerging SMME contractors in IT projects is an effective model to be replicated in other sectors once litigation has settled and decisions handed down, and this will fundamentally alter the tenant mix in our airports and the way we do business with local communities.

Business development

We continue to assess our current and future involvement in foreign concessions. We have received an offer for our 10% shareholding in MIAL from a third-party buyer and are currently going through the pre-emptive process with the existing majority shareholder, GVK. This process unlocks significant value for our Group shareholders.

Forward-thinking initiatives in conjunction with regional stakeholders have yielded great results in Cape Town, KwaZulu-Natal and Gauteng, where international route development has exceeded expectations. This achievement is now extended to the six regional airports, where there is alignment with local municipalities, investment agencies and tourism bodies to advance route development.

We also believe our training academy will form an integral part of our future business to meet demand for industry training across the continent.

Outlook

Our capacity expansion projects and IT infra-structure overhaul will position us to be a more nimble and efficient network of airports. As global competition for airport hub status intensifies, we believe we can deliver an attractive proposition to the airline industry going forward. The signing of a sister agreement between Airports Company South Africa and the Thailand Airport Authority in 2018 is but one indication of the direction we are taking in developing new markets and unlocking new sources of revenue in order to secure our future as a profitable airports business.

Appreciation

I thank the Ministry of Transport for their support and my colleagues on the Board for their commit-ment. I thank our acting CEO, Bongiwe Mbomvu, for taking the reins when the Group faces many challenges and opportunities. I would also like to thank our outgoing CEO, Bongani Maseko, who led the Group through a series of fundamental changes to ensure that our governance framework and operating model could continue to create sustainable long-term value for our stakeholders.

Our Executive Committee’s commitment to our strategy and objectives is proof that we can continue to deliver excellent service in spite of even the greatest challenges.

I also thank and extend my gratitude to all Airports Company South Africa employees who, at a service level, continue to be the face and heart of this Group, delivering performance that improves our reputation and sets us apart from our peers.

Adv Sandile Nogxina

Board Chairman

TO THE TOP