A positive outcome of the pandemic has been the cementing and strengthening of relationships with our stakeholders.

MESSAGE FROM THE CHAIRMAN OF THE BOARD

Dr Sandile Nogxina

Chairman of the Board

The rapid spread of COVID-19 early in 2020 changed the world. The pandemic compelled governments across the globe to act quickly and decisively, without much information to guide them. Countries implemented national lockdowns which disrupted travel. Our government responded swiftly by implementing a strict lockdown from late in March until the end of April 2020, closing our airports during this period, save for repatriation flights. Global aviation is among the most impacted industries by the COVID-19 pandemic and recovery to 2019 levels is projected to be slower than initially anticipated. We have a long road ahead but I am confident we have the fundamentals in place to return to our former standing. Leadership stability, a considered and solid recovery plan, a solid financial base and strong relationships with our stakeholders will stand us in good stead as we adapt to shifting conditions while pursuing stability and growth.

The magnitude of the COVID-19 pandemic has had an enormous impact on our plans and prospects. The drastic reduction in air passenger traffic decimated our revenue and the outlook for short-term recovery remains bleak. In response to the pandemic, an amended 2020/21–2022/23 Corporate Plan, approved by the Board in August 2020, was submitted to Parliament. It is this reviewed Corporate Plan we are reporting on to our stakeholders.

In managing the human and business impact of COVID-19, we are striving to position our business to contribute to rebuilding the South African economy. In the face of the pandemic, this shared responsibility has never been as important.

WELCOMING THE NEW GUARD

COVID-19 hit as the newly appointed CEO, Mpumi Mpofu, joined the Company in February 2020 and shortly afterwards, in May 2020, Siphamandla Mthethwa took up the position of CFO. Leadership stability at this juncture was critical to our response to the crisis. Their leadership considerably enhanced the Group’s ability to navigate the uncharted waters that unfolded in the first half of the year and the swift and effective review of the strategy that followed. The CEO and CFO provided clear priorities, made swift decisions amid uncertainty, communicating effectively while demonstrating empathy. Our dedicated Executive team responded to the complete disruption in our market with agility and resourcefulness, always keeping an eye on the horizon and not losing sight of our development mandate. In the process of readjusting the strategy and financial plan, the CEO and CFO brought a fresh view, questioning the previous status quo and prompting the Executive team to take a step back from the familiar and view the business holistically. The ability at leadership level combined with the trust and support of the Board created a culture of agility and decisive action when it was needed most. 

A STRONG RESPONSE TO COVID-19

The development of a revised strategy to survive the downturn for the next five years began with the review of our Financial Plan. This entailed rigorous engagements with our investors, lenders, Moody’s, the Economic Regulating Committee, our shareholders, the Portfolio Committee on Transport and our employees. These stakeholders provided us with unequivocal support. The Board approved the Recover and Sustain Strategy, which is our roadmap to seeing the Group through this pandemic. We also reviewed our Investment Strategy to ensure the sustainability of the Group. The outcome was a decision to dispose of our offshore investments and monetise the assets we could. The extraction of equity within these non-core assets, specifically the investment property portfolio, offer a significant level to enhance liquidity. The sale of shares in Mumbai International Airport Private Limited was concluded in February 2021 and the sale of our stake of the Guarulhos International Airport is underway. As part of the Group’s response to the impact of the pandemic and in a move to secure long-term financial sustainability, the issuance of ‘A’ preference shares valued at R2.3 billion was concluded with the majority shareholder, the Department of Transport in March 2021. The transaction bolsters the Group’s liquidity and demonstrates the government’s confidence and support in the business. Our reviewed strategy remains premised on our   strategic pillars of Run airports, Develop airports and Grow our footprint. In the short term, our primary focus will be on our core business – running airports – to maintain our financial and operational sustainability. We are ever conscious of our responsibilities and role in being a catalyst for recovery in passenger travel and air cargo growth. In running our airports, we will work closely with our strategic partners and government agencies. (For further details on the Group’s strategic response and revised strategy, please see the Message from the CEO here and Our Strategy here.

COLLABORATING WITH OUR STAKEHOLDERS

A positive outcome of the pandemic has been the cementing and strengthening of relationships with our stakeholders. Building on existing strong relationships, the Company’s engagement with stakeholders and implementation of stakeholder plans was commendable and created considerable value. Through a proactive, consultative approach by management influenced by solidarity in this shared crisis, the Company is well on the way to achieving the goal of building win-win partnerships with our stakeholders. The preference shares that have been bought by the government, have provided the muchneeded liquidity for the Group. The COVID-19 pandemic had a devastating impact on our tenants in our airports and we granted rental reprieves.

TRANSFORMATION

Transformation is a constitutional imperative that underpins our future growth and the success of our business operations. Our drive to maximise profitability is aligned with our commitment to transformation. Our success as a group depends on the degree to which we deliver value to society. The Group plays a critical role in the transformation of the aviation industry by facilitating economic activity and enabling sustainable growth and development by moving capital to where it is required. We continue our purposeful journey to advance the operational and developmental procurement spend on black-owned businesses and increase black-owned business commercial entrants into our precincts. We had to reduce our capital expenditure for the year under review as a consequence of COVID-19.  

LEADERSHIP AND GOVERNANCE

The agility of our governance processes in making quick decisions was tested to the limit and we had to adapt to the new normal of holding virtual meetings. The Board provided its unequivocal support to management and the Board members availed themselves for special meetings to counter the negative impact of delayed implementation. The members of the various Board committees were actively involved in overseeing and monitoring the Group’s response to the pandemic. This included business continuity management, operational risks, cost reduction, liquidity and market risks.

LOOKING AHEAD

The global economic outlook remains clouded by the uncertainty as to the path of the COVID-19 pandemic and possible new variants that could reduce the efficacy of existing vaccines. The slow vaccine roll-out will lead to a slow and protracted recovery in global traffic volumes. South African consumers remain under pressure amid high unemployment and rising fuel and electricity prices, which is likely to undermine recovery in domestic traffic volume. As part of our business planning, we have identified strategies to create new revenue streams and enhance our operations. What we have achieved is a testament to the strength of the business – as a result of astute strategic investments that have paid off – and has bolstered our financial sustainability and the skills and fortitude of Executives across our business.

LOOKING AHEAD

Many lives have been lost during this pandemic. Our sincerest condolences to our employees and stakeholders who have lost loved ones during this period. Thank you to our team of 2 733 employees; you remain committed to achieving our purpose and serving our customers during this turbulent time that has changed our ways of work and travel and heightened our hygiene consciousness. A measure of your success is the positive feedback in terms of the experience of the customers through our airports. People feel safe in the airports in airports, which is the fundamental achievement during the pandemic. We thank the CEO, CFO and management for their astute and incisive leadership during this period. From the outset, the management team was responsive and accountable, taking tough decisions when necessary and bringing agility within the Company to the fore. We thank our shareholders for their unwavering support as we walk together on this journey of dramatic change.

Dr Sandile Nogxina

Board Chairman