OUR MATERIALITY PROCESS

Airports Company South Africa identifies the economic, environmental, social and governance matters that have the potential to significantly impact our ability to create sustainable value by executing its strategic objectives.

Our material matters are influenced by our internal and external operating environment, our key stakeholder concerns and the risks impacting our business. These matters inform our business model, strategy, capital resource allocation and our stakeholder engagement process. The determination of these material matters starts with identifying relevant matters from information drawn from a range of sources, as indicated below.

Analysis essential to the identification and management of material matters

Active management of material matters

External environment analysis

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The virtual collapse of aviation markets in the wake of the global pandemic necessitated a swift response and deft strategic review to ensure the continued sustainability of the Company.

Read here for an overview of the year.

Stakeholder analysis

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Proactive and transparent stakeholder engagement in the year under review has been vital to the continued operation of our business. Considering our stakeholders’ needs and expectations and ensuring their buy-in underpins the success of our strategy.

Read here for an overview of the year.

Risk analysis

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Risk may affect our ability to create value in the short, medium and long term. In our risk analysis, we consider risks in relation to our strategic objectives and highlight strategic initiatives that mitigate relevant risks.

Read here for an overview of the year.

Material matters analysis

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Material matters are continuously managed at Executive level with quarterly reporting done internally. Our reflections on the most pertinent issues relevant to our material matters are publicly disclosed in our Integrated Annual Report annually.

Read here for an overview of the year.

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External environment analysis

The COVID-19 pandemic has pushed the global economy in 2020 into a deep recession, surpassing the recent 2008/9 global recession. It is estimated by the International Monetary Fund that the global economy contracted by 3.3% with advanced economies recording a GDP decline of 4.7% while emerging market and developing economies contract by 2.2%.

The South African economy contracted by 7% in 2020*, faring slightly better than initially anticipated at the onset of the pandemic. However, the reduction was the largest in decades and it is likely to take years to reach pre-COVID-19 levels of economic activity. The historically standing relationship between air travel and economic performance was for the most part of the financial year broken owing to a market dislocation induced by lockdowns and travel restrictions. It is largely for this reason that despite the slightly better GDP performance, air traffic recorded notably poorer performance.

Although a gradual recovery path for traffic began to gain momentum in the third quarter, this was undermined by the emergence of a second wave of high new COVID-19 cases that prompted reintroduction of tighter restrictions on the economy, and the discovery of a new COVID-19 variant (501.V2) associated with South Africa thereby subduing the attractiveness of the country as tourist destination.

Globally, the devastating impact on the international aviation industry is evident in the predictions that the industry will achieve only 50% of pre-2020 revenue figures for the next seven to eight years. The International Airlines Transport Association (IATA) estimates airlines will lose USD 314 billion in revenue this year – 55% less than 2019, owing to the impact of COVID-19 – and will require USD 200 billion in government aid.

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Air travel collapsed 66% in 2020 returning to 1998 levels.

At the low point in April 2020, global Revenue Passenger Kilometres (RPK) were down 94% compared to April 2019 (RPK is an industry metric based on the number of passengers and the distance travelled). COVID-19 has been an unprecedented shock to air travel and is envisaged to have a far greater and longer lasting negative impact than previous industry shocks, as evident in the graph below.

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Overview of the year

Surveying the challenges and opportunities ahead

  • Vaccines may go some way to allaying passengers’ fears of contracting COVID-19 while travelling, but the global roll-out will be protracted.
  • Demand for air travel remains very subdued for both South African travellers and foreign tourists, who not only dominate international air travel in South Africa but also contribute to domestic traffic as they connect to our regional airports.
  • South Africa’s top international tourist markets – France, UK, Germany and USA – which account for 40% market share of total tourist arrivals, are projected to observe contraction in real economic activity, which paints a bleak outlook for air travel demand from these markets, especially for leisure.

Stakeholder relations management

Stakeholders are at the heart of what we do. Since 2018, we have been on a journey to become more stakeholder-centric guided by our Stakeholder Relations Management Strategy. The pandemic has highlighted the role of stakeholder engagement in value creation and our long-term sustainability. This cultural shift, across the company, has increased our level of engagement and encouraged us to be more proactive in all situations.

During the year under review, we prioritised engagement with the following stakeholders:

  • The financial community and government on our response around funding initiatives, liquidity management and the long-term sustainability of the business.
  • The aviation industry and government entities on the closure of airports, repatriation flights and cargo movement.
  • The government, aviation industry and the private sector on the initiative to ensuring the business’s sustainability.

The following cycle outlines our plan to continuously engage stakeholders.

Our stakeholder groups

Our stakeholder categories

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