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AWARDS AND RECOGNITION

Airports Company South Africa is consistently recognised as a leading global airports operator. During the reporting period, the following awards and achievements were made by local and international industry authorities and other organisations.

CURRENT OPERATING ENVIRONMENT

OVERVIEW

In terms of our business model, our strategy defines and informs the way in which we operate as well as the ways in which we respond to internal and external influences within our operating environment.

This section aims to give a thorough overview of how we do this as a prelude to the following section, in which we present a performance review for the reporting period. Here we examine the major environmental factors that impacted on our operations during the course of the reporting period and present factual information about our most significant risks, the ways in which we handle those risks and the ways in which we engage with our stakeholders.

MACROECONOMIC ISSUES

As in the previous period, our operating environment continued to be defined by the ongoing COVID-19 pandemic and the mandatory measures that had to be implemented to contain the spread of the novel coronavirus.

At global level, supply chains continued to be constrained and the rand demonstrated a high level of volatility, especially towards the end of the reporting period. And as air travel all but ground to a halt in 2020 and the first half of 2021, we had to continue mothballing large sections of our infrastructure in order to contain costs.

While South Africa’s economy began to recover when lockdown restrictions started to be eased, the country’s annualised growth rate of 4.9% for 2021 did not fully offset the contraction of 6.4% in 2020, effectively placing it on a similar level to the third quarter of 2017 (Stats SA) by the end of the calendar year (Stats SA). This naturally had far-reaching socio-economic consequences, which were graphically demonstrated by the country recording its highest unemployment rate ever during the course of the year. And as analysts predict that growth in 2022 is likely to be much lower than it was in 2021, it is anticipated that the economy will take many years to recover to pre-COVID-19 levels.

Events like the civil unrest in KwaZulu-Natal and Gauteng in July 2021 and the return of Level 4 loadshedding in early 2022 only served to dampen consumer and investor confidence further, exacerbating the constraints on the aviation industry in general and on Airports Company South Africa in particular. Airlines had no other option but to cut flights and even routes, resulting in some local operators not being able to sustain their businesses.

A further shock came in the form of the war in Ukraine, which soon resulted in an increase in fuel prices, introducing yet another level of uncertainty into the aviation industry. Although passenger travel, particularly domestic travel, began to recover in the third quarter of the reporting period, passenger numbers remained markedly below pre-pandemic levels. Our network nevertheless recovered 49% of its pre-COVID-19 passenger throughput during the reporting period, largely due to the implementation of our Recover and Sustain Strategy and our revised Financial Plan.

With ongoing uncertainty in travel and tourism, we are continuing to diversify our business into areas of non-aeronautical revenue to secure long-term sustainability. Our operating model has been adapted to reflect this and is given below.

OUR OPERATING MODEL

TOP RISKS

Identifying the top risks to our business is standard operating procedure but was more important than ever during the past two periods. Our risk universe has remained dynamic since the advent of the COVID-19 pandemic and continues to be subject to many external factors, including natural disasters and global political risks.

Our most immediate concerns during the reporting period remained business continuity, business sustainability, safety and security. The risks were managed primarily through the development of our Recover and Sustain Strategy and our revised Financial Plan as well as through the implementation of the pandemic management protocols mandated by the World Health Organisation (WHO), the International Civil Aviation Organisation (ICAO) and IATA. COVID-19 crisis committees and the war room remained in place throughout the period to ensure full and complete implementation of all regulations at our airports, while operations had to remain flexible in the face of regular adjustments to lockdown levels.

Cognisant of the challenges that lie ahead in the post-COVID-19 world, we simultaneously put a new Corporate Plan and Growth Strategy into place to allow for new realities. Both provide frameworks for managing growth over three time frames to 2030 and for the development of infrastructure to support diversification into non-aeronautical revenue streams.

A risk assessment of uncertainties that could hinder the achievement of our objectives was conducted and is reviewed on a regular basis. A description of the top strategic risks we continue to face and what we do to manage them is given in the tables below

HOUSING SCHEME

The housing scheme aims to help employees to purchase a home and to improve their quality of life and personal security. In terms of our revised Financial Plan, all new applications for rental renewals, bond subsidies, upfront deposit subsidies and debt consolidation were put on hold effective 1 August 2020. Employees who were beneficiaries of this scheme prior to the advent of COVID-19 did, however, continue to benefit from it. They make up 70% of the total employee target population for this benefit.

The employee transport scheme that was introduced in 2020 proved to be challenging to manage and, during the course of the reporting period, we opted for providing a trave allowance instead. This is designed to ease travel difficulties for our employees, particularly those in operations that work shifts.

BURSARY SCHEME

Airports Company South Africa offers the children of employees in Grades A to C bursary support to pursue studies in disciplines identified in the South African National Scarce Skills list. The programme also offers workplace exposure through vacation work, providing learners with practical work exposure and, ultimately, with permanent employment where opportunities exist. During the reporting period, number bursaries were awarded to the value of Rnumber.

TRADE UNION REPRESENTATION AND ENGAGEMENT

Since the advent of COVID-19, we have worked closely with representative unions, including the National Education, Health and Allied Workers’ Union (NEHAWU), which represents 33% of our employees, and the National Union of Metalworkers of South Africa (NUMSA), which represents 22% of our employees, in order to manage the impact of the pandemic on our staff.

Both unions have been engaged and sup portive partners throughout the past two years and we commend them for their collaboration at such a challenging time in the history of our business.

OUTLOOK

The realignment of our business in response to the pandemic has ensured that we have been able to remain functional and sustainable in the face of a drastic decrease in revenue over the past two periods. Within the context of a more streamlined and agile operating structure, we remain committed to the wellbeing of our staff and other stakeholders and we continue to actively engage with them in order to fulfil this commitment.

We will continue to operate according to our Recover and Sustain Strategy and associated strategies and plans during the current period and will re-focus on growth and development once revenue permits.

STAKEHOLDER ENGAGEMENT CYCLE

Engagement with our stakeholders is conducted according to established procedures. The following diagram outlines the way in which we continuously engage with our stakeholders.

STAKEHOLDER CATEGORIES AND METHODS OF ENGAGEMENT

When we reviewed our strategy and corporate plan in 2020, we updated the way in which we categorise our stakeholders in order to facilitate more active and effective engagement. The following tables illustrate how we categorise stakeholder groups and engage with them.

OUR STAKEHOLDER CATEGORIES

The following table illustrates how we categorise stakeholder groups and has been updated in the year under review.

Company Secretary

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Director Demographics

SKILLS

  • Financial management
  • Business administration
  • Governance
  • Aviation
  • Logistics and transport
  • Law
  • Forensics
  • Technology and innovation
  • Compliance
  • Stakeholder management
    and communication
  • Strategic leadership
  • Risk management
  • Public administration

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ABOUT OUR BOARD

As an entity, the Board holds the overall responsibility for the leadership, control and performance of the Company in line with legislation, regulation and best practice. Each Board member has a fiscal and fiduciary responsibility to act in good faith and in the best interests of the Company and all of its stakeholders.

The Board delegates certain responsibilities to the Committees of the Board without abdicating any of its responsibilities. There are five permanent Committees and one ad hoc Committee. The five permanent Committees met as scheduled and the details of their activities are provided below. The ad hoc Board Economic Regulation Committee only meets as required and did not meet during the reporting period. Each Committee operates within formal terms of reference, which were reviewed during the reporting period.

The Board is satisfied that the delegation of authority framework provides role clarity and supports the effective exercise of authority and responsibilities.

DIVERSITY

The Board embraces gender, ethnic, race and age diversity as a prerequisite for ensuring its continuing relevance and effectiveness in a complex business landscape. Our shareholders,

who are responsible for nomination and appointment of Board members, recognise the need for diversity and support its application.

In addition, a diverse and inclusive culture is embedded within the Board. Our Directors are confident that robust discussion results in the deliberation of wide-ranging views and that, as directors, they serve in an environment where bias, discrimination and harassment are not tolerated.

The majority of Board members are independent directors, as recommended by King IV.

SKILLS AND EXPERIENCE

Board members are appointed based on their knowledge and experience, providing the broad base of skills necessary to achieve the company’s objectives. The capacity of individual members continues to be enhanced on an ongoing basis with skills that are directly relevant to the business. These include competencies in aviation, law, policy, strategy, finance, corporate finance, accounting, auditing, economic regulation, governance, asset and risk management, stakeholder relationship management, international relations, and information and communications technology (ICT), among others.

BOARD EVALUATION

The annual Board evaluation was conducted as scheduled. This included an assessment of the Board as a

whole as well as assessments of the Chairman of the Board, the individual Directors, the Board Committees and the Chairpersons of the Board Committees.

The evaluation of the Board covered the application of governance principles in the following areas of activity:
  • Board attributes and culture
  • Ethical culture and conduct
  • Board meetings and processes
  • Risk Management
  • Environmental, Social, and Corporate Governance;
  • Oversight over the ACSA Strategy
  • Information and Communication Technology
  • Stakeholder management
  • Role of the Chairman
  • Role of the Chief Executive Officer
  • Role of the Company Secretary
  • Board induction, orientation and development
  • Individual director assessment (peer review).

Some development areas were identified, including cybersecurity, IT infrastructure, ESG framework implementation, risk sensing and scenario modelling. There were, however, many areas in which there had been improvement, including stakeholder management, the level of reporting to the various committees and the implementation of a succession planning process. The Board, together with management, also needs to consider assessing in-house skills as a number of employees

were lost during the severance package process that was conducted during the COVID-19 pandemic.

The performance of the Committees of the Board was also evaluated and they were found to have effectively discharged their roles and responsibilities.

The office of the Company Secretariat continues to provide unfettered guidance and support to the Board and the Committees. The CEO continues to ensure the effective implementation of the strategy and related strategic objectives.

The Board and the Committees of the Board will continue to focus on the following critical areas during the current period (FY2023):

  • Financial sustainability and recovery
  • Business competitiveness
  • Risk management
  • Revenue diversification
  • Innovation
  • Cybersecurity
  • Aviation
  • Succession planning
  • ESG

Further details relating to these focus areas are available in the ACSA Governance and Remuneration Report for 2022.

FOCUS AREAS AND PERFORMANCE

Many of the Board’s key focus areas during the reporting period followed on from those in the previous period. These included:
  • Continuing assessment and management of the impact of the COVID-19 pandemic on aviation and, in turn, on the Group.
  • Monitoring the review and implementation of the COVID-19 Financial Plan and Budget based on the Beyond New Normal Scenarios.
  • Reviewing the Key Performance Indicators in the Corporate Plan for FY2022 to FY2024 and the Growth and Non-aeronautical Revenue Strategies.
  • Condoning and writing off irregular, fruitless and wasteful expenditure during the period.
  • Approving the Annual Financial Statements.
  • Approving the FY2022 to FY2024 Corporate Plan.
  • Monitoring the action plan for the Board Effectiveness Evaluation Report.
  • Finalising the Macro Structure.
  • Monitoring performance of the Company through quarterly performance reports.
  • Approving necessary policies and frameworks for implementation of the approved strategy.
  • Monitoring the proposed disposal of ACSA shares in GRUpar.
  • Ensuring strategic risks facing the Company are assessed and mitigated.
  • Ensuring stakeholders are engaged.
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