AIR TRAFFIC & NAVIGATION SERVICES SOC LIMITED INTEGRATED 20 REPORT 18 CONTENTS

Performance highlights 4

About the Integrated Report 5 Scope and boundary of report 5 Navigating this report 5 Referencing content online 7 Feedback 7 Approach to integrated reporting 7 Sustainability statement 7 Assurance 8 Statement of precautionary principle 10 Board of Directors Approval Statement 10

Organisational profile 12 Vision 12 Mission 12 Values 12 Nature and purpose of our business 12 Organisational structure and business model 12 Structure of ATNS’s operations 17 Contextualising our operations 22 Global business context 25 Regional context 25 National context 25 Developmental context 25 Commitment to external initiatives 28 Leadership review 29

1 CONTENTS CONTINUED

Governance and assurance 34 Performance 114 Application of KING IV 34 Ensure long-term financial sustainability 114 Ethical leadership and corporate citizenship 34 Enhancing operational efficiencies in line with global ATM standards 117 ATNS Board of Directors 42 Develop leadership capability in the Africa ATM space 120 ATNS Executive Committee 54 Create a transformative organisation 121 How ATNS’s control framework creates value 60 Build a culture of safety 123 Remuneration 66 Build a skilled and capable employee resource base 126 Code of ethics 70 Manage the organisation’s contribution to Climate Change 126 Manage and preserve scarce and vulnerable resources 128 Material issues 72 Develop enterprise-wide awareness for environmental impacts 131 Clustering of ATNS’s material issues 76 Ensure constructive and collaborative stakeholder relationships 131 Stakeholder engagement 79 Maintain an impeccable governance framework 134 Key stakeholders 79 Ensure regulatory alignment and compliance 135

Strategy 81 Performance against our Shareholder Compact 136 ATNS’s Strategic fundamentals 82 Outlook 144 Strategic drivers 82 Ensure long-term financial stability 144 Strategic imperatives 82 Enhance operational efficiencies in line with global ATM standards 146 Monitoring sustainable development outcomes 86 Create a transformative organisation 148

Creating value through the Capitals 88 Build a culture of safety 148 Build a skilled and capable employee resource base 149 Defining “value creation” 90 Manage the organisation’s contribution to climate change 149 Financial capital 90 Develop enterprise-wide awareness for environmental impacts 151 Manufactured capital 94 Intellectual capital 100 Consolidated 5-year review 152 Human capital 102 List of acronyms 156 Social and relationship capital 105 Natural capital 109 Company information 160

2 3 PERFORMANCE HIGHLIGHTS ABOUT THE INTEGRATED REPORT

Scope and boundary of the report material aspects extend to other entities outside of STRATEGIC OBJECTIVES INDICATOR 2016/17 2017/18 the Company, as ATNS’s operations are located at different airports. Revenue R1,557 billion R1,594 billion This is our 6th consecutive Integrated Report and covers the financial reporting period from 1 April Ensure long- The previous Integrated Report was approved by term financial Operating costs R1,300 billion R1,382 billion 2017 to 31 March 2018. The Integrated Report the ATNS Board on 29 August 2017 and published sustainability combines financial and non-financial performance Net profit R184,5 million R190,1 million for the period 1 April 2016 to 31 March 2017. The in a single report. References to forward-looking 2016/17 reporting suite combined performance information and targets are extracted from the Total capital expenditure R307 million R305 million content, sustainability content and our Annual 2018/19 ATNS Corporate Plan approved by the Financial Statements across three reporting Enhance operational Communication • C: 99,80% C: 99,78% Board of Directors. volumes. A printed version of the three-volume efficiencies in line suite of reports was published and a web-based with global ATM Average The boundary of this report is largely the ATNS version of each report was made available in standards systems Navigation • N: 97,98% N: 96,30% availability legal entity. There may be instances where PDF format. Surveillance • S: 99,99% S: 99,97%

• ATS AIC: 70,01% • ATS AIC: 72,27% • ATS Female: 42,43% • ATS Female: 46,55% Create a Navigating this report • ATNS AIC: 75,12% • ATNS AIC: 76,98% transformative Overall EE representation organisation • ATNS Female: 44,88 • ATNS Female: 47,35% • People with • People with Icons associated with strategic objectives disabilities: 3,31% disabilities: 3,22% Performance commentary in this report pertains to material issues that specifically align with the 2,57 safety events per Build a culture Safety events per 100,000 5,19 safety events per Company’s key strategic objectives. Accordingly, performance commentary is linked to strategic 100 000 air traffic of safety air traffic movements 100 000 movements objectives throughout the report by means of the following icons: movements

Total number of ATS trainees 81 68 Ensure long-term financial Manage the organisation’s

SUSTAINABLE sustainability AVIATION AFRICA contribution to Climate Change 22 (12 Engineering Build a skilled and Total number of engineering 6 learnerships and capable employee trainees 10 graduates) resource base Enhance operational efficiencies in Manage and preserve scarce and line with global ATM standards vulnerable resources Training investment as 8,13% 6,52% percentage of salary bill Deploy and use leading Develop enterprise-wide awareness technologies to the benefit of the for accountable environmental Develop enterprise- Total number of employees ATM community impact wide awareness trained on environmental 316 ATNS employees 0* for environmental training programmes impacts Develop leadership capability in Maintain an impeccable governance Africa ATM space framework Manage the organisation’s Total carbon inventory 23,292.01 tons CO2e 23,440,52 tons CO2e Create a transformative Ensure regulatory alignment and

SUSTAINABLE AVIATION AFRICA contribution to organisation compliance climate change Ensure constructive and Manage and Overall annual electricity usage 20,515,469 kWh 20,358,981 kWh Build a culture of safety preserve scarce collaborative stakeholder and vulnerable relationships resources Overall annual fuel usage 89,761 Litres 81,612 Litres Build a skilled and capable employee resource base Ensure constructive and collaborative CSI spend R3,445,441 R2,521,704 stakeholder relationships

* ATNS e-learning content being developed.

4 5 ABOUT THE INTEGRATED REPORT CONTINUED

Referencing content online Materiality has been determined by the ATNS Icons associated with the six capitals Board of Directors and Executive Management through a process of extensive consultation within The 2017/18 Integrated Report, and ATNS’s Annual the organisation and with ATNS’s stakeholders. Performance commentary in this report further aligns with the Company’s perspective on value Financial Statements are available on our website The process considered ATNS’s strategic objectives creation, and in particular, value creation through the six capitals (financial, manufactured, as downloadable documents: http://www.atns. whilst taking into account the Company’s material intellectual, human, social and relationship and natural). Accordingly, performance commentary is co.za/annualreports. also linked to the six capitals throughout the report by means of the following icons: risks, strategic opportunities and the ATNS value chain. Feedback Financial capital Human capital Read more on the materiality determination process on page 72 and 73. We welcome feedback on our integrated reporting Manufactured capital Social and relationship capital to ensure that we continue to disclose information that is pertinent to all our stakeholders. P.16 Sustainability statement Intellectual capital Natural capital For further queries or suggestions kindly contact: As a signatory to multiple global conventions P.3 [email protected]. – including the Chicago Convention, which P.16 established the International Civil Aviation Icons referencing KING IV principles applied Approach to integrated Organisation (ICAO) as a specialised agency of the United Nations - South Africa’s vision for reporting sustainable development is embodied in the Abridged governance disclosures in this report are accompanied, where applicable, by icons referencing the P.5 applicable KING IV principle by means of the following icons: P.15 relationship between social systems, ecosystems The 2017/18 Integrated Report offers a and economic systems. As a State-Owned comprehensive account of the Company’s Company - and national provider of air traffic P = Principle performance in terms of its ability to create management (ATM) services – ATNS plays a King IV principles are referenced where appropriate in this report. value through the ‘six capitals’, as defined by the significant role in contributing to South Africa’s International Integrated Reporting Council (IIRC).1 sustainability agenda. Our Shareholder mandate, represented by the Minister of Transport and Icons associated with material issues We apply the principle of ‘materiality’ to: the entire Department of Transport, directs us to contribute to both departmental and national • Inform disclosures, so that they are both outcomes by balancing the safe development of Icon denoting one or more of ATNS’s 19 material issues. important to the organisation and relevant in civil aviation, with the responsible consideration terms of our reporting priorities for the year of our impacts on the economy, society and the under review. environment. Icon denoting ATNS’s material developmental and environmental issues. Where appropriate in this report, material issues forming part of ATNS’s material developmental and environmental • Link disclosures on ATNS’s financial, social and We disclose both financial and qualitative (non- issues – as detailed in the online Sustainability Report - are denoted by using this icon. environmental performance to the Company’s financial) performance information in this report strategic objectives, top risks and to the six as it relates to ATNS’s business outcomes and the capitals. Company’s contributions to the country’s overall • Link performance to the Company’s economic efficiency and ATM competitiveness. developmental context, regulatory context, Our sustainability reporting includes Standard commercial context and its global business Disclosures from the GRI Sustainability Reporting context. Guidelines.

1 According to the IIRC: “The capitals… are: financial capital, manufactured capital, intellectual capital, human capital, social and relationship capital, and natural capital. Together they represent stores of value that are the basis of an organisation’s value creation.”

Further: “Integrated Reporting is an approach to corporate reporting that demonstrates the linkages between an organisation’s strategy, governance and financial performance and the social, environmental and economic context within which it operates” (2013a).

6 7 ABOUT THE INTEGRATED REPORT CONTINUED

Assurance ASSURANCE ASSURANCE PROVIDERS ASSURANCE FRAMEWORKS, 2017/18 OUTCOME ATNS’s integrated assurance plan and framework encompass the assurances provided by the Company’s CONTENT STANDARDS AND GUIDELINES Board of Directors, management, internal specialists, internal and external audit functions and other Broad-Based • ATNS Internal Audit • DTI Codes of Good Practice B-BBEE Level 2 business advisers. Black Economic function • B-BBEE Act and associated Charters B-BBEE score: 85,42 Empowerment, • ATNS Board • Generic Transport Public Sector ATNS INTEGRATED ASSURANCE FRAMEWORK FOR THE ANNUAL INTEGRATED REPORTING PROCESS representation • ATNS Social and Ethics Charter and contributor Committee • Relevant Key Performance Areas level • ATNS Human Resource (KPAs) stipulated in the Shareholder ASSURANCE ASSURANCE PROVIDERS ASSURANCE FRAMEWORKS, 2017/18 OUTCOME Committee Compact CONTENT STANDARDS AND GUIDELINES • ATNS Procurement P.2 Committee P.10 Annual • ATNS Board of Directors • Financial Reporting Standards Qualified audit report P.11 Financial • The Company’s • Requirements of the Public Finance for 2017/18. Safety • ATNS Board of Directors • ICAO Standards and Recommended The safety ratio P.12 Statements directors Management Act (PFMA) of South management • ATNS Audit and Risk Practices (SARPs); ICAO Annex 19 attained was 5,19 P.13 (AFS) • External auditors: Africa and Committee requirement for States to implement safety events per P.15 Rakoma and Associates • Companies Act of South Africa performance • External assurance ATS safety management programmes 100 000 movements • Public Audit Act of South Africa provider: South African • The Civil Aviation Act (Act 13 of against a target of • International Standards on Auditing Civil Aviation Authority 2009), supported by Civil Aviation 2 safety events per (ISA) (SACAA) Regulations 100 000 movements. • South African Civil Aviation Risk • Audit and Risk • ICAO Standards and Recommended Risk management Regulations (CAR) Part 40 management Committee (ARC) Practices (SARPs) processes, practices • Relevant Key Performance Areas and review of • Executive Audit and Risk • The King Code of Governance for and systems satisfy (KPAs) stipulated in the Shareholder the efficacy (EARC) South Africa (2016) (King IV) all legislative Compact of internal • ATNS Management • Requirements of the Public Finance requirements • ATNS Safety Management System controls • ATNS IT Steering Management Act (PFMA) of South but have limited (SMS) and SMS Policy (including Committee Africa influence on the • CANSO and EUROCONTROL fraud risk) • ATNS Risk Department • ISO standards relating to safety and control environment. Standards of Excellence • ATNS Legal and environment There are areas Compliance Department • ERM and compliance standards of improvement Environmental • ATNS Board of Directors • ICAO Standards and Recommended For 2017/18 financial • ATNS Internal Audit including guidelines relating to the identified. management • ATNS Social and Ethics Practices (SARPs) year, 23 440.52 CO2e function Risk Management and Compliance and Committee • Relevant Key Performance Areas resulted from ATNS • External auditors: Institute of South Africa performance • Portfolio Project (KPAs) stipulated in the Shareholder operations. The Rakoma and Associates • The Civil Aviation Act (Act 13 of Management Office Compact emission distribution 2009), supported by Civil Aviation • Sustainability Executive • National Environmental Management resulted in 86% tonnes Regulations and Technical Standards Steering committee Act (NEMA) CO2e from scope 2, • Key Performance Areas (KPAs) • Outcomes of the South African Civil 13% from scope 3 stipulated in the Shareholder Aviation Authority (SACAA) Aviation and 1% from scope 1 Compact Environmental Protection (AEP) (graph 13). Therefore, Corporate • ATNS IT Steering • ICAO Standards and Recommended Controls Inadequacies Forum scope 2, electricity Governance Committee Practices (SARPs) were identified, • Greenhouse gas (GHG) Protocol emissions, account and regulatory • ATNS’s Internal Audit • The Civil Aviation Act (Act 13 of there is room for Corporate Standard for majority of the compliance Function 2009), supported by Civil Aviation improvement. • Carbon Disclosure Project (CDP) carbon footprint. (including IT • Compliance Function Regulations and Technical Standards governance) • The King Code of Governance for Integrated • ATNS Board of Directors • The King Code of Governance for Board-approved South Africa (2009) (King IV) Annual • ATNS Company South Africa (2016) (King IV) Integrated Report, • Requirements of the Public Finance Reporting Secretary • Global Reporting Initiative (GRI) G4 consolidating financial Management Act (PFMA) of South Sustainability Reporting Guidelines and non-financial Africa • International Integrated Reporting information • Companies Act Framework V1.0 (International Additional external • Permission applications as mandated Integrated Reporting Council (IIRC)) assurance on by the Regulating Committee in its • United Nations Global Compact certain aspects of Approach Document (UNGC) the nonfinancial • Relevant Key Performance Areas • Carbon Disclosure Project (CDP) sustainability (KPAs) stipulated in the Shareholder information reported Compact in the Integrated • ATNS Code of Ethics Report.

8 9 ABOUT THE INTEGRATED REPORT CONTINUED

Statement of precautionary Board of Directors Approval principle Statement P.5 P.10 Airspace safety performance continues to be at The ATNS Board, assisted by its various the core of our business. Air traffic movements committees, is ultimately responsible for are expected to increase in future. Accordingly, the overseeing the integrity of the 2017/18 Integrated P.3 P.15 flexible optimisation of airspace will contribute to Report. safety and an operationally-efficient environment. The Board has applied its collective mind to the ATNS uses a ‘safety ratio’ to measure the number preparation and presentation of the Integrated of safety events attributed to its operations per Report and has concluded that this report is 100 000 movements. The safety ratio enables us presented in accordance with the International to verify that we are meeting safety performance Integrated Reporting Framework v1.0. The targets. Data is collected and analysed to assess Integrated Report also contains Standard our levels of safety performance. The safety ratio Disclosures from the GRI Sustainability Reporting is calculated using a 12-month rolling average Guidelines. method. Safety performance assurance and investigation activities are both reactive and The Integrated Report was approved by the Board proactive. on 22 October 2018, and signed on its behalf by:

ATNS provides safe operations by applying ‘separation standards’ based on Instrument Flight Rules (IFR). With respect to air traffic control, ‘separation’ refers to the concept of keeping aircrafts a minimum distance from each other to SIMPHIWE THOBELA reduce the risk of collision, as well as preventing Chairperson accidents due to wake turbulence. ATS authorities stipulate minimum separation standards for 22 October 2018 airspace based on ICAO standards. Johannesburg

Root causes for safety events include human- related errors and fatigue, and extends to external factors such as weather phenomena, airspace design, and complex traffic scenarios. ATNS’s Risk Safety Index (RSI) matrix measures the levels of safety risk according to the categories of ‘probability’ and ‘severity’. The Index increases risk visibility and supports management decision- making. Safety meetings are held with General Aviation at unit and regional levels to discuss safety performance, hazards, risks and mitigations.

10 11 ORGANISATIONAL PROFILE

Vision The principal purpose of ATNS is to plan and FIGURE 1: ATNS CORPORATE STRUCTURE operate safe and efficient services in the airspace for which the state is responsible through: P.16

To be the preferred supplier of Air Traffic Executive Authority and Regulatory Oversight Management solutions and associated services to ty Regula areholde mic Regu • Airspace infrastructure provision; fe to Sh r no la a r o to the African continent and selected international S c r E markets. • Development of human capital (ATC, Engineering Technicians and ATM and related Minister of Regulating SACAA Transport Committee Specialists); and Mission • Partnerships and collaboration with other stakeholders. To provide safe, expeditious and efficient Air Traffic Management solutions and associated services The economic regulation regime is specified Accounting Authority in Section 11 of the ATNS Company Act. ATNS ATNS Board and Governance Values cannot levy an air traffic service charge unless it is in possession of a valid written Permission that • Accountability provides a tariff regime to be charged to users • Safety and customer service over a five-year cycle. The Permission is issued Internal Audit CEO Company Secretary • Continuous improvement and innovation by the Regulating Committee, which is required • Employee engagement and development to balance the interests of the Company with the • Fairness and consistency interest of our clients, which includes the safe, • Open and effective communication efficient, economic and profitable operation of Executive the Company. This encourages timely investment Executive Chief Chief Executive Executive Legal ATM/CNS Strategy & Financial Operations Commercial Human and ensures that we are well placed to finance Counsel Planning & Optimisation Officer Officer Services Capital Nature and purpose of our our obligations and have a reasonable prospect of Standards business earning a commercial return. Chief Chief Chief The Company has its head-office at Eastgate Office Principal Technology Information Air Traffic • The Air Traffic and Navigation Service Company ATA Park, Block C, South Boulevard Road, Bruma, Operations Services Limited (ATNS) is a State-Owned Company (Postal code: 2198) in Gauteng. (SOC). • Established in 1993 in terms of the ATNS Company Act (Act 45 of 1993) to provide air Organisational structure and traffic management solutions and associated business model Corporate function Regulated Business services on behalf of the State. P.13 • ATM services accord with International Civil • ATNS is a state-owned entity incorporated as a The ATNS corporate function determines the The principal activities of ATNS’s regulated Aviation Organisation (ICAO) standards and Company. direction of the Company as mandated by the business encompass the planning and operation of Board of Directors. The CEO is responsible for safe and efficient services in the airspace for which recommended practices, and the South African • A Board of Directors, appointed by the Minister formulating and executing the strategy. This the state is responsible. At present approximately Civil Aviation Regulations and Technical of Transport, provides leadership oversight function ensures that ATNS Executives adequately 90% of ATNS revenue is generated through Standards. and guides the implementation of the ATNS plan and utilise resources as guided by the five- Regulated Business. mandate. • ATNS is governed by South Africa’s legislative year permission cycle. Departmental, operational and administrative framework. • ATNS’s structure aligns with international and business plans also drive planning. The ATNS structure enables its unique value chain, • ATNS is a commercialised ANSP operating on legislation, such as the International Civil which comprises three main blocks: the “user pay” principle that relies on current Aviation Organisation (ICAO) ATM Operational Support function revenues and debt funding for its operational Concept and Global Air Navigation Plan (GANP). 1. ATM Operational Concept and Global Air and capital expenditure requirements. The support functions, such as Human Capital Navigation Plan (GANP). (HC), Finance, Information Technology, and Risk 2. Enabling infrastructure and resources. and Compliance create an enabling operating environment governance frameworks, processes 3. ATM and technical support (TS) operations. and professional practices.

12 13 ORGANISATIONAL PROFILE CONTINUED

FIGURE 2: ATNS REGULATED BUSINESS MODEL Traffic Movement Assumptions

With the ATM industry being strongly linked to growth in air traffic movements and overall economic growth, Corporate function ATNS projects the Company’s revenue based on expected growth in air traffic movements. The latter has a • Strategic formulation/execution • Planning (corporate/permission) high correlation to Gross Domestic Product (GDP) at approximately 80%.

REVENUE AND 2017/18 2017/18 2016/17 2018/19 2019/20 2020/21 REVENUE (ATM) (PREDICTED) (ACTUAL) Revenue 1,376,490,388 1,433,597 1,402,408,229 1,497,917 1,590,736 1,722,529 Enabling/ Revenue ATMs 481,840 489,751 480,983 479,840 505,762 516,797 ATM driving ATM operational and TS technology AAGR concept infrastructure operations 0.61% 1.64% -0.18% -0.24% 5.40% 2.18% Our customers (Revenue ATMs)

Note: There is a reduction of 0,18 % on revenue movements for 2017/18 FY when compared with the previous FY due to a reduction in the route network, mainly for SAA flights and socio-economic drivers which drives

Act 45 of 1993 demand for air travel. • ICAO block builds • Define enabling • Provide safe, efficient The ATNS Mandate The ATNS • AFI plan technology and effective air traffic • NAMP • Define driving echnologyt services There is a reduction of 1,79% between predicted and the actual values of 2017/18 FY where an increase of • ATNS roadmap • Develop infrastructure • Operate and maintain • Airspace design • Deploy appropriate infrastructure and 1,64% was expected based on predicted figures. 2018/19FY – 2020/21FY figures are current forecasted values – Procedures resources resources as at 1st October 2018. – RNP/RNAV • ATNS CNS roadmap • Provide air traffic management solutions Air traffic service charges

ATNS AIR TRAFFIC SERVICE CHARGES FOR THE REGULATED BUSINESS Support functions • HR/training • Risk & compliance • Finance • Information technology FORMULAS AND COEFFICIENTS (FCS) MAIN MASS COST CATEGORY COMPONENT AERODROME TMA ACCESS AREA CHARGE CHARGE CHARGE Air navigation services and infrastructure VC R28,29 R28.29 Air navigation infrastructure and services consist FAOR < 5 000 kg BSC R114,94/10 000.MCM R114,94/10 000.MCM of three main components: FC R60,64 R112,03 VC R28,29 R28,29 R28,29 1. Communications infrastructure, Navigation 5 000 kg < MCM < BSC R114,94/10 000.MCM R114,94/10 000.MCM R114,94/10 000.MCM infrastructure and Surveillance infrastructure. 15 000 kg 2. Auxiliary aviation services, such as aeronautical FC R121,30/10 000.MCM R22,41/1 000.MCM R16,08/100 000.MCMM.d information publications, flight procedure VC R28,29 R28,29 R28,29 design and aeronautical surveys. > 15 000 kg BSC R140,75/100.√MCM R140,75/100.√MCM R140,75/100.√MCM 3. Air traffic management. FC R148,57/100.√MCM R274,43/100.√MCM R197,00/10 000.√MCMd

ATNS’s infrastructure and service development are Each rand-value coefficient in the table above is multiplied by: informed by user expectations and regulatory requirements at a global level, as well as new • 100% for a domestic flight; technologies and the needs of the air traffic • 100% for a regional flight; and management (ATM) community. • 100% for an international flight.

The above coefficient formula applies to all charges except in the case of FCs for aerodrome, and TMA access charges at FAOR for aircraft with MCM <5,000 kg, where the coefficient as stated in the table applies.

14 15 ORGANISATIONAL PROFILE CONTINUED

Aviation Training Academy Space-Based ADS-B Structure of ATNS’s operations management (ATM) service delivery component is enabled by an advanced ATM system deployed ATNS’s Aviation Training Academy (ATA) provides ATNS has partnered with the first global air at the Johannesburg and Cape Town air traffic a full range of air traffic services training, traffic surveillance system using a space-based ATNS Services control centres and associated terminal control technical support and related training. The ATA is Automatic Dependent Surveillance-Broadcast units using enabling technologies encompassing also an ISO 9001:2015 accredited institution and (ADS-B) network. This system makes it possible ATNS’s services support seamless gate-to-gate communications, navigation and surveillance has international cooperation agreements with to have surveillance of aircraft in areas where operations. This concept encompasses the taxi-out systems. The illustrated value chain (Figure 3) is partners such as the Embry Riddle Aeronautical it is difficult to deploy traditional surveillance and departure, climb out, cruise, descent, arrival, scalable across the total user-demand spectrum in University, ENAC and WITS, enabling the ATNS systems, or to augment the current surveillance landing and taxi-in phases of a flight. The air traffic the South African airspace. ATA to maintain mutually beneficial partnerships capabilities of the region. The system will enable in the presentation and accreditation of ATS real-time transmission of ADS-B reports from international courses. The ATA holds full equipped aircraft, to Air Traffic Management (ATM) CURRENT AND NEW PRODUCTS AND SERVICES ICAO Trainair Plus membership and has been automation platforms and Air Traffic Controllers designated by ICAO as a Regional Training Centre (ATCs) in every Flight Information Region (FIR). EXISTING PRODUCTS AND SERVICES NEW PRODUCTS AND SERVICES of Excellence. The ATA is currently pursuing IN DEVELOPMENT registration as an academic institute with the ATNS has established a Processing and Department of Higher Education and Training. Distribution point in South Africa to distribute Air Traffic Flow Management (ATFM) Collaborative Decision Making (CDM) this space-based surveillance data for the region. Training Information/knowledge services, (e.g. SMS, Non-regulated business Due to the critical and time-sensitive nature of A-SMGCS, 4D) management information the surveillance data, the distribution option Air Traffic Services (ATS) – Air Traffic Control (ATC) Carbon credits (efficient procedures/technologies) ATNS’s non-regulated business currently would need to have redundancy and could include and Aeronautical Information Management (AIM) contributes approximately 10% of the Company’s terrestrial links as well as the upgraded VSAT revenue. The non-regulated business encompasses network stated above. a long-term strategy to facilitate regional African Centralised Aeronautical Database (A-CAD) NAVAIDS Flight Calibration expansion through a division vehicle presently AIS to AIM Roadmap Implementation known as “ATNS International”. The division will Engineering and Technical support New consulting services (high visibility ATM event enable the Company to take a more robust and ICAO has identified the need for global aviation planning e.g. ASBU) agile stance in the non-regulated business market operators to follow unified and integrated Aeronautical Billing & Collection Service AIS to AIM Transition without posing undue risks to its regulated market processes for ATM as described in its vision and Shareholder. It will also enable ATNS to enter statement: “To achieve an interoperable global air Aeronautical WGS-84 Survey ATMS Support Tools joint ventures and partnerships with external traffic management system, for all users during Consultancy Services Space Based ADS-B companies to harness more valuable market all phases of flight, that meets agreed levels of opportunities while extending its regional influence safety, provides for optimum economic operations, Airspace Management and reach. is environmentally sustainable and meets national security requirements”. Flight Procedure Design The following are some of the major regional based projects that ATNS’s non-regulated business has Therefore, in line with ICAO’s vision, ATNS has MARKET SEGMENTS AND GEOGRAPHIC MARKETS embarked on. focused on guiding aviation decision makers in the region to ensure that the changeover from CURRENT MARKETS NEW MARKETS VSAT Network Value-added Services AIS (Aeronautical Information Service) to AIM (Aeronautical Information Management) happens RSA – Statutory Selected global and African ATM markets in a planned and measurable method. This is to ATNS has recently upgraded the VSAT network RSA – Contractual platform from a legacy protocol-based system to ensure that we comply with the overall objectives an IP enabled platform. The new platform creates of global air traffic management. SADC – Prioritised an opportunity to provide value-added services into the region, as well as to improve aviation systems ATNS has established a regional Aeronautical and services. The current services on the network Information database, which is one of three on include AFTN, AMHS and voice services. ATNS is the African continent. The goal of the database currently determining the feasibility of utilising is to ensure that Aeronautical Information this as a telecommunication platform for services Management in the region benefits from high such as Space-Based ADS-B and the Regional levels of automation and consequently high levels Aeronautical database mentioned below. of Aviation Safety.

16 17 ORGANISATIONAL PROFILE CONTINUED

FIGURE 3: ATNS SERVICE OVERVIEW

Cruising Descending Holding Phases of flight Taxiing Take-off Climbing Climbing Landing Taxiing Fly-over Descending Letdown Fly-over Controlled Airspace Control Zone Control Areas Airways Control Areas Control Areas Control Zone

En-Route Sectors Area Control Terminal/ Reporting Points Terminal/ Approach Approach Control Control Pre-flight planning Pre-flight

Aerodrome VOR/DME NDB VOR/DME Aerodrome Control Control Search and rescue (if required) and rescue Search NDB VOR/DME VOR/DME VOR/DME Communication Air – Ground Ground – Air Radio & Data Link

ILS ILS Navigation NDB VOR/DME & NDB NDB VOR/DME VOR/DME Surveillance Primary En-Route Radar Cover Primary Secondary Primary and Secondary Secondary Radar Visual Radar Visual

18 19 ORGANISATIONAL PROFILE CONTINUED

FIGURE 4: ATNS’S PRESENCE IN SOUTH AFRICA FIGURE 6: ATNS’S EXTENDED SERVICES ON THE AFRICAN CONTINENT AND BEYOND

Polokwane

Pilanesberg Kruger Mpumalanga International ACSA Airports Mafikeng Wonderboom Regional Airports Lanseria Grand Central

Rand OR Tambo ATNS service reach: International • Aerodrome and approach control services: 9 ACSA airports Upington • Aerodrome services: 12 regional Kimberley airports Bloemfontein • Approach procedural services: Pietermaritzburg 4 regional airports Virginia

Additional services: King Shaka • National Aeronautical Information International Management and Oceanic Control Umtata services • Operates Aeronautical Rescue Coordination Centre on behalf of the DoT Bisho East London

Cape Town Port Elizabeth International George

FIGURE 5: ATNS AFRICAN INDIAN OCEAN (AFI) REGIONAL AIRSPACE COVER Aeronautical Surveying Aeronautical Documentation 20° Charting 18S 010W Flight Procedure design Madagascar Training

26SS AIM Madagascar Madagascar 30° 040E Other projects South Africa 30S 30S 040E 057E Billing Current SADC VSAT satellite communication 35S 35S direct speech interconnectivity 40° 075E 075E Current NAFISAT satellite communication direct speech interconnectivity ASECNA region and SADC region VSAT direct speech connectivity via Antananarivo 50° 0° 10° 20° 30° 40° 50° 60° Interconnectivity between SADC and ASECNA networks Future planned circuits SADC 2%2% NAFISAT 3% South Pole 3% AFISNET/ASECNA

Figure 5 depicts ATNS’s current and potential new markets in the AFI region. ATNS bases its selection of the markets on the following criteria: GRAPH 1: SPLIT OF ATNS REVENUE SOURCES

l En-Route and approach fees • Analysis of external market research and intelligence gained through customer engagements. l SADC VSAT 11 • Countries where ATNS already has established contracts and good working relationships. l Small Aerodrome Fees • ATNS’s current capabilities and what is required to build and extend these to new markets. l NAFISAT revenue • Current and potential revenue contributors. l Other • Strategic intent for the organisation’s long-term aspirations. 90%

20 21 ORGANISATIONAL PROFILE CONTINUED

Contextualising our operations Committee (RC) and aims to balance the interests FIGURE 7: PERMISSION MODULE OVERVIEW of the Company with those of our clients. This encourages timely investment and ensures that we Regulatory context are well placed to finance our obligations and have Future Operating Environment Module P.13 a reasonable prospect of earning a commercial Defines the activities of ATNS to The international aviation regulatory environment return. satisfy the requirements of the ATNS Traffic South African National Airspace was formed through the International Civil Aviation Forecast Module Masterplan (NANP) and Organisation (ICAO), a specialised body of the The RC is a statutory body formed and appointed implement the initiatives United Nations Organisation responsible for by the Shareholder, the DoT and RC is empowered Covers the demand for the core air contained within the traffic control services. The annual ATNS ATM Roadmap global civil aviation. ICAO was established through by the ATNS Company Act to issue the Permission traffic, together with tariffs, drives revenue. Peak traffic with in the context the Chicago Convention, signed by participating and the related design and The frontline staff component of the to ATNS, which regulates the increase in specified of the Permission Human Capital Plan Module flows states in 1944. South Africa is a signatory to configuration of airspace from the traffic module, as well as tariffs that ATNS can issue and prescribes sectors determine how the Application. from the equipment component CapitalATNS Module Human the Convention and has acceded to abide by the core (frontline)is organised. business of the Capex Module (i.e. the number and organisation of minimum service standard requirements for the frontline staff depend on the terms and conditions. In terms of Article 28 of the regulated business. sector configuration and the enabling technology Chicago Convention, the South African Government environment). The other staff components flow is required to provide air navigation services and ATNS As per the regulations, the Permission formulation Module largely from the infrastructure in compliance with the Convention process must commence in the third year of the frontline staff. Macro-Economic and as promulgated from time to time by ICAO. current permission. A new permission process commenced in 2017 after the RC issued an capital) for the company. Eight modules (inflation, interest and cost of ATNS’s regulated business is carried out in its also sets the pricing parameters Approach Document to industry in December Drives aggregate (annual) traffic, and capacity as a State-Owned Company (SOC), 2016. After extensive consultation between that assist in

therefore the operational expenditures. mandated under Act by its Shareholder, the ATNS and industry stakeholders throughout company, as Administrativewell as statutorylevel expenditures (governance, ofThe activity annual in are the traffic largely company, drives andthe total CAPEX Module building driven by the staff organisation thatof the needs to be maintained.Module, i.e. the capital providesexpenditure the capital Maintenanceover base time Plan Department of Transport (DoT). Given its monopoly Basis for the the permission 2017, a permission application was made to the componentsauditing, are etc.) aggregated requirements. into the These ATNS status, this business is regulated by the Regulating RC in November 2017. The RC has concluded application

Committee [RC], a statutory body established by its deliberation on the permission application ATNS the DoT to regulate ATNS’s economic activities. made, after considering all comments received. Opex Plan Module.

Ties the other It subsequently submitted its decision and final Finance Module modules together, Economic regulation report to the Honorable Minister of Transport. ATNS which in simple terms Operations is purelytraffic the aggregate divided by the

Maintenanceand (‘revenue requirement’). The economic regulation regime is articulated The current Permission (2018/19 – 2022/23) was AdministrationModule company’s expenditure base in Section 11 of the ATNS Company Act (45 of approved by the Minister of Transport in terms The annualModule traffic drives the total level of activity in Administrative 1993), which specifies that ATNS cannot levy air the company, and therefore of Section 11 of ATNS Act.1993 in September the operational expenditure. The expenditures are traffic service charges unless it is in possession Capex Module is at the same time largely driven by the 2018. This approval by the Minister has been the basis of the Maintenance Plan Module, i.e. the capital expenditure staff organisation of the of a valid written Permission that provides for a promulgated and gazetted, thus authorising ATNS over time provides the capital base that company, as well as statutory tariff regime to be charged to users for the use of to levy tariff charges for the 2018/19-20122/23 (governance,requirements. auditing, etc.) air navigation infrastructure and/or the provision period. needs to be maintained. of an air traffic service over a five-year period. The said Permission is issued by the Regulating Read more on ATNS’s Permission cycle on page 24.

22 23 ORGANISATIONAL PROFILE CONTINUED

FIGURE 8: PERMISSION MODULE INTERDEPENDENCIES Global business context networks in the last 10 years. Ethiopian Airlines, with its hub at Addis Bole Int Airport, is one of the Continent’s largest carriers with an extensive Aviation provides the only world-wide regional and intercontinental network, consisting transportation network2: of one of the youngest and most technologically- TRAFFIC MACRO- FINANCE advanced fleets globally. FORECAST ECONOMY PLAN • More than 3,3 billion passengers travel annually (7,3 billion world-wide by 2031). • 52 million tonnes of cargo is transported by air National context travel. Cost of Non-regulated Numerous private airlines have entered the Ann. Traffic Small Airport Capital Tariffs • 40% of international tourists now travel by air. (regulated) Traffic (non-reg) domestic market in recent years. Historically, Economic • Aviation generates 58 million jobs globally. South African Airways (SAA) had monopolised the Variables Regulated market since 1934 until the early 1990s, when the Peak Sector Borrowings • Economic impact is estimated at US$2,4 trillion. Traffic Configuration Tariffs industry was deregulated. SAA began the process • At least 1,570 Airlines/22,000 Aircraft. of transitioning to a commercial airline in a • Over 50,000 routes/100,000 flights per day. liberalised international market (Goldstein, 1999), making it difficult for new airlines to compete with • 1,670 Airports and 160 Air Navigation Service SAA. At the time, SAA held approximately 95% of Providers. the market share (Oosthuizen, 2013).

Regional context South Africa has seen many entrants since the industry’s deregulation in 1990. Flitestar was the first South African airline to enter the market after Air travel in Africa has grown strongly and much deregulation, followed by other entrants such as FUTURE HUMAN faster than the rest of the world. IATA projects OPEX OPERATING CAPITAL Comair, Nationwide and Sun Air. By 2006, Sun Air PLAN that the airline industry in Africa will continue to ENVIRONMENT and Comair had managed to erode SAA’s market PLAN grow in passenger numbers at an annual average share to 66% on the Cape Town-Johannesburg- rate of 4.7% by 2034, faster than regional markets Durban routes (Goldstein, 1999). Sun Air however in North America and Europe whose growth is went bankrupt in 1999 and ceased operations. forecast at 3.3% and 2.7%, respectively (IATA, AOM Phoenix Airlines, Nationwide, Velvet Sky, Intensive AO Administration ATS 2014). To meet this demand, there has been entry Air and 1Time all entered the market; however, DCB and expansion of numerous airlines. TS Other Staff after a few years in operation, they too encountered CM Operations ETS financial difficulties and closed operations. Other AUO National carriers, such as Kenya Airways and ATMSDM late entrants include Kulula, Mango, FlySafair, Ethiopian Airlines, have been the most successful CEM Air, Skywise and Blue Crane. Apart from the in terms of growth by scale and scope of their national carrier’s subsidiary, Mango, of the 11 route networks as mid-hemisphere full-service airlines that entered the market between 1991 hub-based carriers LCCs are also quickly entering Legend and 2012, only a few are still operational, such as markets throughout the region and gaining AO – Aerodrome Operations MAINTENANCE PLAN Comair’s Kulula. AOM – Airspace Organisation market share. In the South African domestic Management arena, they are the dominant carriers (ASM Traffic ATS – Air Traffic Services Development Plan – ACSA, 2015). Developmental context AUO – Airspace User Operation CM – Conflict Management CAPEX PLAN Africa’s air travel connectivity has improved in As a State-Owned Company, ATNS aims to support DCB – Demand Capacity Balancing ETS – Engineering Technical recent years. This is partly due to the increase governmental socio-economic outcomes – which Services in legacy carriers on the Continent – Ethiopian aim to eliminate poverty and reduce inequality by Airlines, Arik and Kenya Airways – that have added the year 2030 through the National Development significantly more routes and destinations to their Plan (NDP). Equipment

Facilities 2 Source: Industry Economic Performance 2017

24 25 ORGANISATIONAL PROFILE CONTINUED

guided by the Medium-Term Strategic Framework Statement of Strategic Intent and KPA BUSINESS OBJECTIVES OBJECTIVE MEASURES FOR 2017/18 (MTSF), implemented by the South African NO. Shareholder Compact Government to measure the NDP’s enabling milestones. 2.2 Operation of the satellite communication Optimise revenue and ensure network ATNS’s activities are informed by the Minister of networks: SADC VSAT 2. availability. Transport’s Statement of Strategic Intent as well as The DoT, and by extension ATNS, focuses on the our Shareholder Compact, concluded annually with implementation of four of the 14 outcomes for 2.3 Operation of the satellite communication Optimise revenue and ensure network the Shareholder Minister. The business is further Government to achieve related MTSF outputs. networks: NAFISAT. availability. 3. DoT Outcome 9: The fight against fraud and corruption SHAREHOLDER COMPACT: BUSINESS OBJECTIVES AND OBJECTIVE MEASURES 3.1 Comply with relevant legislation, regulation Full compliance KPA BUSINESS OBJECTIVES OBJECTIVE MEASURES FOR 2017/18 and standards. NO. 3.2 All whistle blowing matters reported are Fighting corruption and promoting good 1. DoT Outcome 3: Transport safety and security investigated governance.

1.1 Risk Safety Index (RSI). Reduce the risk associated with safety events. 4. DoT Outcome 10: Environmental protection

1.2 Safety service provision. Increase successful safe operation. 4.1 Implementation of environmental plan. Measure ATNS Carbon footprint. 1.3 Operational efficiency. Reduce overall traffic delays. Performance assessment. 1.4 Operational efficiency. Achievement of CNS Systems Availability. 5. DoT Outcome 5: Training to contribute to job creation 1.5 Ensure commercial sustainability. Ensure financial sustainability. 5.1 Address societal challenges, thereby building ATS bursaries and engineering learnerships. PBN Operational Enhancement. PBN Roadmap implementation. a meaningful legacy for ATNS and the 1.6 Independent Parallel Runway operations at communities in which we operate. FAOR. 5.2 Manage the training pipeline for ATS and Adoption and approval of HC plan as per budget. 2. DoT Outcome 6: Infrastructure development and high-level investment plan for Transport technical staff. ATS and TS training plan. 2.1 Development of optimised and efficient aviation Approved CAPEX infrastructure in a cost-effective manner. Commitment Plan for 2017/18. Operational or implementation plan.

5.3 Review and implement the HR plan to recruit, Development programmes for employees, with FIGURE 9: ATNS REGULATED BUSINESS MODEL develop, retain, and reward employees across emphasis on AIC and women. all disciplines.

6. DoT Outcome 4: Broad-Based Black Economic Empowerment (B-BBEE)

6.1 Achieve B-BBEE targets. Percentage of discretionary spend on B-BBEE.

Outcome Outcome Outcome Outcome Achieve preferential procurement targets as Total discretionary OPEX budgeted. 3 4 6 10 set by the Transport Charter. Total CAPEX budgeted.

7. DoT Outcome 4: Employment equity

7.1 ATS EE targets (AIMO, ATSO, ATCO 1-3). Achieve representation towards alignment of Decent employment An efficient, competitive Protect and enhance our A transport sector Company staff profile with the demographics of through inclusive economic and responsive economic environmental assets and that is safe growth infrastructure network natural resources the country.

7.2 ATNS EE targets. Increase representation of black (AIC) racial grouping - with a particular focus on African and female representation - towards creating alignment with the demographics of the country.

26 27 ORGANISATIONAL PROFILE CONTINUED

Commitments to external initiatives

• ICAO collaborates with member states, industry and international Mr Simphiwe Thobela Mr Thomas Kgokolo Mr Matome Moholola The ICAO Aviation organisations to develop the ASBU concept. Advocate Edwin M. Mphahlele Chairperson Interim CEO ChairmanChief Financial Officer (Acting) System Block • ASBU helps to ensure the following operational imperatives: Upgrades (ASBU) »» Maintaining and enhancing aviation safety. »» Harmonising air traffic management improvement programmes. »» Removing barriers to future aviation efficiency and environmental gains at a reasonable cost. Leadership review • ATNS fully endorses the ASBU initiative in setting the framework for globally harmonised air traffic management. This Integrated Report is a ‘transitionary report’ business in South Africa through reliable, cost- in several respects. Not only are we transitioning effective and efficient air traffic navigation services into a new dispensation of Shareholder oversight, on the one hand, and on the other, to ensure that • ATNS is a founding member of the Indian Ocean Strategic with the appointment of a new Shareholder we do our part to achieve Government’s greater The Indian Ocean Partnership to Reduce Emissions (INSPIRE). Minister, represented by Dr Bonginkosi Emmanuel development aspirations. These aspirations Strategic Partnership • INSPIRE is a partnership with airlines, ANSPs and airport Nzimande, we also transitioned from the previous are clearly articulated through the National to Reduce Emissions partners to address aviation’s impact on the Environment. King III governance framework to the new King Development Plan (NDP) and, more recently, by (INSPIRE) initiative • INSPIRE is a collaborative partner network across the Arabian Sea IV principles-based framework during the year, President Cyril Ramaphosa in his 2018 State of the and Indian Ocean region dedicated to improving aviation efficiency which in many respects has guided our integrated Nation address. This dual mandate is not always and sustainability. reporting. Further, strategy development and an easy balance as we consider the trade-offs Governance oversight are being transitioned to between commercial benefits and developmental new leadership with a new interim Board being priorities. appointed by the time of publishing this report. • ATNS is a founding member of the Civil Air Navigation On behalf of ATNS management, we wish to convey Air traffic navigation is a global business, which we Organisation (CANSO) in Africa. our earnest support to the new Minister and to the manage at a country level. When we consider our Civil Air Navigation • ATNS hosts the CANSO Regional Office in Africa. interim ATNS Board. strategy and planning for the provision of services Organisation (CANSO) for South Africa, we not only look at our domestic This integrated report is being published during needs, but also at what is happening globally and the celebration of the Nelson Mandela Centenary regionally on the rest of the continent. In addition, year. In the spirit of commemoration, we need we look at how aviation caters for peoples’ needs, to ask ourselves how we, as a company and as and the needs of businesses and indeed that of individuals, are ‘living his legacy’. Are we actively entire economies. Aviation is, the only true global • ATNS Carbon Emission Inventory and footprint is calculated using dismantling inequalities where we find them? Do transportation mode that is capable of reaching best practice methodology to account for all greenhouse gas (GHG) The GHG Protocol we aspire to excellence in all we do? As a State- land-locked cities and coastal areas alike. Air emissions released as a result of its operations. Corporate Standard Owned Company (SOC), do our strategy and plans Transport is not an end in itself but a means to • ATNS calculates its carbon inventory in accordance with the GHG contribute towards the vision of a sustainable an end. It serves as a conduit to opportunities, Protocol Corporate Standard. future, not only for the Company, but for the real or imagined. Different States and people with national aviation industry, the domestic economy, diverse cultures and interests are brought together the people of South Africa and the pursuit of safer through aviation. With the advent of technological African skies? Former president Nelson Mandela innovation, especially in the past five years, the • To ensure superior achievement of “Absorptive Capacity” and will be remembered for his many extraordinary world has become a smaller place. qualities, one such being his desire to act in the University of to promote strategic collaboration, ATNS has established a best interest of the ‘many’ to ensure a prosperous Africa is home to 12% of the world’s people, and yet Johannesburg strong coalition with the University of Pretoria’s Department of future for all South Africans. As an SOC, we have it accounts for less than 1% of the global air service (Leadership) Electrical Engineering and Computer Systems in the areas of telecommunication. the dual mandate of contributing to South Africa’s market.1 That said, we are observing increasing • This initiative builds capacity and learning opportunities for economic wellbeing by reducing the cost of doing commercial interest in Africa from foreign shores, undergraduate and postgraduate engineering students from historically-disadvantaged backgrounds. 1 http://www.worldbank.org/en/topic/transport/publication/open-skies-for-africa.

28 29 ORGANISATIONAL PROFILE CONTINUED

particularly from the Middle East and Asia. Many we want to build Africa’s global competitiveness. a prosperous, interconnected African continent, fairly involved and includes consultations with new airports are, for instance, being developed For decades, there have been efforts to get the based on inclusive growth and sustainable industry stakeholders and culminated in a Joint around the continent by Chinese consortiums. This African union to follow the example of the ‘single development. Consultation Report from ATNS and the Industry. growth is very positive for the region, with new sky’ initiative implemented by the European The Joint Consultation Report is a reflection of the on-the-ground infrastructure being built; however, Commission, to make the entire continent one ATNS’s Financial performance constructive and positive nature of the consultation the ratio of traffic movements in Africa is still very connected, free airspace for civilian aircraft. meetings. During the consultations consensus low (approximately 2%) relative to other first-world Under the Single European Sky initiative, the Total revenue for the year at R1,594 billion (2017: was reached on most issues, with remaining regions, where air traffic is constantly growing, design, management and regulation of airspace is R1,557 billion), reflects a 2% improvement on the issues being resolved through active engagement which means the cost of aviation – and hence the coordinated throughout the European Union (EU). prior year. The minor improvement in revenue is between ATNS, the RC and the Industry. cost of doing business using aviation on the African Air traffic management in the European Union is mainly due to a slight increase in tariff revenue continent – remains largely prohibitive. largely undertaken by member states, cooperating as a result of increased movements. Technical The newly-approved permission will replace through EUROCONTROL, an intergovernmental maintenance and training revenue also contributed the 2015/16-2019/20 permission. The current There are also politically-motivated reasons for organisation that includes both the EU member to increased revenue. Operating costs increased by permission dispensation, as approved, is in its first Africa’s historically under-served air-movement states and most other European states as well. 6% to R1,382 billion (2017: R1,300 billion) mainly year of a five-year permission period. status. Many African countries have restricted their The initiative organises airspace into functional due to increased staff costs, telecommunication air services markets to protect the share held by blocks, according to traffic flows rather than to expenses as well as the impact of the fluctuating Non-regulated business state-owned air carriers, a practice that originated national borders. Such a project was not possible foreign exchange rates on our administration in the early 1960s when many newly-independent without common rules and procedures at European and contract maintenance costs. Capital ATNS’s non-regulated business currently African states created national airlines, in part level. As Africa, we need to get to a similarly expenditure decreased by 0,7% to R305 million contributes approximately 10% of the Company’s to assert their status as nations.2 However, as coordinated arrangement to truly benefit from the (2017: R307 million). Our balance sheet remains revenue and encompasses a long-term strategy commercial interest in Africa trade rises, many AfCFTA agreement. During the reporting year we sound with a liquidity ratio of 4.6:1 (2017: 5.2:1), to facilitate regional and continental expansion. are recognising the detrimental impacts this saw some positive steps towards this outcome. with our gearing ratio at 0,5% (2017: 0%). As Revenue from this sector of the business protectionist attitude has had on air safety records, On May 18, ministers of justice and attorneys- such, ATNS is well positioned to raise funding for inflated air fares and negative air-traffic growth general from the Common Market for Eastern is, however, below budget by R22,9 million imminent capital expenditure. Cash generated on the continent. With this, and the fact that and Southern Africa (COMESA)4 region approved (21,5%) due to SADC VSAT II and NAFISAT Flight from operation decreased by 15% to R366 million African countries have continued to charge each an agreement for the creation of a single airspace Information Region (FIR’s) crossing movements (2017: R431 million), mainly due to financial other to trade long after the European Union had for its nineteen (19) member bloc. The open skies being lower than initially anticipated and currency difficulties faced by some of our major customers established a single market, Africa, as a collective, agreement guarantees a free market for the bloc’s fluctuations. as well as increased operational costs. has remained uncompetitive on the global airlines by abolishing restrictions on, among other platform. A gradual ‘loosening’ of restrictions in things, routes, frequencies, number of selected These multilateral regional agreements facilitate We have introduced numerous interventions to recent years, coupled with the new Agreement on airlines and type of aircraft, while market forces communication between ATSUs via satellite links accelerate capital expenditure delivery going the African Continental Free Trade Area (AfCFTA) determine pricing. Although the approval of the and are managed by ATNS and IATA under a seven- forward. A Portfolio Programme Management launched in March 2018, will see a quickening unified airspace does not lead to an immediate year contract. The current dispensation is running Office (PPMO) has been introduced to oversee the of air-traffic movements as trade flows between opening up of the skies, it creates a foundation to from 2015 to 2022. execution of projects and to ensure they adhere countries with no (or reduced) import tariffs. establish more legal, regulatory and institutional to stringent project management principles. We Some 44 countries out of 54 signed the free trade regional frameworks to enable unrestricted cross- Increased air traffic movement on the continent also established the CAPEX Delivery Framework to agreement, while 27 went even further, allowing border flights and boost trade across the region. will be the backbone of our long-term financial provide a structured approach to investment and the free movement of all persons within African Ultimately, the SADC states and North East Africa – sustainability as there is little room left in the countries. According to credit ratings agency in partnership with ATNS and the International Air to enhance oversight of CAPEX implementation local market to improve our bottom line. As the Moody’s, countries such as South Africa, Kenya Transport Association (IATA) – have demonstrated projects for both the Executive, Board and other new interim Board and executive leadership, and Egypt are most likely to benefit given their that harmonised regional service provision is stakeholders. Strengthened Supply-Chain we are eager for the business to explore the large manufacturing bases and relatively robust achievable and brings improved and sustainable Management will further improve our asset- international expansionary aspirations articulated infrastructure, particularly given their access to infrastructure. creation value chain. and set in motion by our predecessors. The electricity.3 business rationale is sound; however the timing We look forward to seeing tangible results Permission application for actualising this vision depends on our ability While the AfCFTA will benefit African trade as opportunities arise following the AfCFTA to stabilise and position our internal systems, relationships, which would no doubt boost air agreement; and as the continent unfolds the bold Revenue, based within the regulated business, processes and human resourcing capabilities for traffic on the continent, there is still more to do if vision of the African Union’s Agenda 2063 towards is guided by the outcome of tariff applications to this pioneering journey. set prices – through a Permission Application. ATNS’s permission application was submitted to A critical lever of our expansion strategy is our 2 http://www.worldbank.org/en/topic/transport/publication/open-skies-for-africa the Regulating Committee in November 2017. internationally-recognised and ICAO-accredited 3 https://www.businessinsider.co.za/sa-to-benefit-most-from-africa-free-trade-area-2018-3 4 Formed in December 1994 The process of compiling the Permission is aviation training academy (ATA), which is

30 31 ORGANISATIONAL PROFILE CONTINUED

growing in strength to provide new educational new Required Navigation Performance (RNP) locally-sourced infrastructure equipment going To conclude offerings. During the year the ATA enrolled 444 approaches, Required Area Navigation (RNAV)1/2 forward, without compromising on quality or safety. ATS trainees and 419 Engineering trainees. From Standard Instrument Departures (SID), and As the interim Board of Directors, we arrived to an the perspective of our international strategy, the Standard Terminal Arrival Routes (STAR). Our developmental mandate organisation with skilled and competent people, ATA’s new e-learning format offers exponentially- and we appreciate the foundational work done by increased opportunities for distance learning. We are disappointed that we fell short of our Employment equity and supplier localisation the preceding Board and the outgoing CEO. At the Communication, Navigation and Surveillance remain business imperatives for us to ensure time of publishing this report, the process of filling (CNS) Service Level Agreement (SLA) targets Continuous improvement that our workplace and supplier profiles align to various ‘acting’ positions within executive and pertaining to system availability during the year the national demographics and the Integrated management cadres of the organisation is ongoing and are exploring ways to improve SLAs with third ATNS, has done much to improve efficiencies Transport Sector’s Broad-Based Black Economic and we are confident that once finalised, the new parties. This method of equipment performance and to streamline our service offering through Empowerment (B-BBEE) charter. We are proud leadership structure will provide the much-needed reporting considers the availability of redundant automation, so as to reduce the cost of doing to report that we improved on our enterprise stability to pursue ATNS’s growth aspirations. systems. Reasons for not achieving our navigation business in South Africa. We are also working development targets at 13,47 points (2017: 12,24) targets include third-party interventions, such as to keep in step with global air traffic navigation and reached the 30-point mark for our preferential On behalf of the Board and its committees, we electrical or telecommunication failures, and also trends. Notwithstanding the need to maintain high procurement. However, we fell short of our overall wish to thank our new Shareholder Minister, some incidents of theft and vandalism. Accordingly, safety standards, international passengers want employment equity performance from the prior represented by Dr Bonginkosi Emmanuel we have performed country-wide security to experience the same levels of quality service year, from 14,02 points to 13,51 points in terms of Nzimande, for his confidence in our ability to when they come to South Africa and want to pay assessments on ATNS sites and are working on a deliver on our mandate, and for his confidence in strategy to address security at all sites. the dti’s B-BBEE Codes of Good Practice. Overall, proportionately for what they receive. During ATNS obtained 85,42 points, which translates to a our leadership team to take ATNS forward. the year, we commissioned the ‘Collaborative B-BBEE Level 2. We are committed to doing better ATNS Air Traffic System’ (CAATS). CAATS is Safety performance going forward. Thank you also to our customers, our suppliers modernising and replacing the existing ATNS Air and sector partners. We appreciate your trust Traffic Management (ATM) system and involves ATNS utilises a ‘safety ratio’ mechanism to ATNS’s CSI investment continued to support and continued support and look forward to the replacement of display systems used by air calculate the number of safety events per 100,000 underprivileged communities through various strengthening our partnerships both in South traffic controllers. The initiative represents a ramp movements. During the year, we investigated 55 projects, with our overall CSI spend amounting Africa and beyond local borders. up in technology as well as rationalising some of safety events, resulting in a safety ratio at year- to R2,521 million. Going forward, the Company our services, thereby increasing efficiencies and end of 5,19 safety events per 100,000 movements We further acknowledge our competent and intends to augment this financial support with reducing costs. This cost benefit will ultimately be against a target of 2. This performance is dedicated employees for their commitment and initiatives that will help to expose more rural transferred to our airline users, and further onto unsatisfactory given that safety remains the first professionalism during the year. Thank you for learners from outlying regions to the joys and their passengers. and overriding priority in air traffic management, uniting in delivering safe skies in the most efficient, boons of aviation, and air traffic control services in and we are investigating each incident and customer-focused manner possible. particular. We need to inspire young people early We continuously strive to reduce overall traffic will continue to mitigate safety risks. Our on to consider careers in aviation, so that our local delays at airports and in our airspace. During the organisational culture plays a critical role in human year, we registered an average delay per delayed performance and the management of human error. aviation sector - and its many sub-sectors - can (ADD) flight of 22 seconds against a set target of ATNS has launched a Safety Culture improvement become more representative of South Africa’s own 120 seconds. ATNS contributed to 7,4% of total project, which covers the full spectrum of ethnicity and gender profiles in future. delays of which, the highest contributors were elements in the Safety Management System. A Mr Simphiwe Thobela Approach Control (49,27%) and Area Control recent CANSO5 ‘safety seven (7)’ maturity survey Sound governance Chairperson (36,5%) respectively. compared ATNS to the CANSO Safety Standard of Excellence, and rated ATNS as a ‘Level C’, which During the year, it became apparent that the ATM system capacity and efficiencies are further reflects our compliance with all ICAO Annex Company’s governance structures require achieved through Performance-Based Navigation nineteen (19) provisions. While this is a substantial attention particularly as they pertain to supply- (PBN) – which also yields environmental and safety improvement from the previous Level A, which chain management processes. At the time of Mr Thomas Kgokolo benefits through reduced aviation congestion, is the lowest possible level, we are committed publishing this report, Investigations are underway Interim CEO fuel conservation, reduced emissions and aircraft to doing more to improve our safety ratio. Our to assess various incidents of irregular expenditure noise, improved flexibility, enhanced operating continued investment in global best-in-class amounting to R54,2 million. As the Board of returns and improved safety of regional and technology infrastructure will undoubtedly support Directors and executive leadership, we are national airspace systems. During the year, we the pursuit of safer skies. And with infrastructure committed to improving coordination, oversight and worked towards achieving targets stipulated in investment being a strategic imperative for ATNS, sustainability of the business by enhancing internal the National PBN Implementation Plan by adding we are determined to increase the percentage of governance oversight and supporting the Auditor- Mr Matome Moholola General to strengthen external audit processes. Chief Financial Officer (Acting)

5 Civil Air Navigation Services Organization (CANSO)

32 33 GOVERNANCE AND ASSURANCE

ATNS is committed to sound corporate governance • A detailed gap analysis; Board of Directors GRAPH 2: BOARD OF DIRECTORS practices, which are continuously reviewed to ensure REPRESENTATION – GENDER PROFILE • Training for the Board of Directors, executive that leading practice standards are maintained as P.1 management and key staff; and P.3 Appointment of directors recommended by the King Code of Governance P.7 for South Africa (2016) (KING IV); The Company’s • Detailed planning to address identified gaps, P.10 The appointment of directors to the Board of governance practices are underpinned by the which will include reviewing governance 2 values and principles that inform our day-to-day structures, processes, policies and relevant Directors is a formal and transparent process activities, including responsiveness, collaboration, company documentation. and a matter considered by the Shareholder and Cabinet as a whole. The appointment of directors transparency, integrity and accountability. l is facilitated by the Department of Transport Non-executive female In September 2017, four Board members resigned l Executive male Oversight Unit. As a State-Owned Company, ATNS’s governance from the Board followed by another resignation in l Non-executive male relationship with its sole Shareholder - the December 2017, leaving only two non-Executive 1 Government of South Africa, exercised through directors and one executive director—the Chief All appointments are subject to approval by the 5 the Minister of Transport - is managed through Executive Officer. While, in line with the company’s Shareholder Minister, as well as ‘fit and proper’ the Shareholder’s Compact. The Compact sets out Memorandum of Incorporation (MOI), the tests in terms of the Public Finance Management the Shareholder’s commercial and developmental Board remained properly constituted with three Act, the Companies Act, and any other applicable requirements and expectations. members, it was largely hampered in discharging legislation. its fiduciary duties as it could not constitute sub- The Board of Directors is the focal point for - and committees that do governance groundwork. The ATNS Board of Directors is governed by a GRAPH 3: BOARD OF DIRECTORS the custodian of - the Company’s governance In particular, the Board could not constitute Board of Directors Charter, which outlines the REPRESENTATION – ETHNICITY PROFILE framework through its committee structures, its two statutory committees, namely, the Audit principal provisions of the ATNS Act, the fiduciary Committee and the Social and Ethics Committee. responsibilities of directors, the relationship with relationship with management, its Shareholder 10% and other Company stakeholders. The primary This led to a compromised governance oversight by executive management, and matters of policy that purpose of the Board of Directors is to provide the Board which affected the general functioning of the Shareholder and the Board of Directors ought strategic direction to ensure the Company fulfils the organisation. to follow to ensure good corporate governance. its statutory, commercial and developmental The Board of Directors regards the Charter as a living document, updated periodically to align objectives, thereby promoting long-term financial Compliance and Internal Audit functions did not l with changes required by relevant legislation and African and organisational sustainability. effectively discharge their duties. l Indian regulation.

Application of KING IV Ethical leadership and Period of office of Board of Directors members P.5 corporate citizenship ATNS continues to review the Company’s P.1 P.8 P.13 P.2 corporate governance practices to ensure that The appointment of ATNS Directors is governed 90% The Board of Directors – as the focal point for P.3 by the Company’s Memorandum of Incorporation leading practice standards are maintained as and custodian of corporate governance - and P.6 recommended by the King Code of Governance P.7 (MOI). Non-Executive Directors have a three (3) senior management are committed to the highest GRAPH 4: EXECUTIVE COMMITTEE for South Africa [2016]. We are committed to the P.8 year fixed term of appointment. A third of the standards of corporate governance and strive to P.16 REPRESENTATION directors retire by rotation each year and are governance principles of KING IV and continue achieve the highest moral and ethical operational eligible for re-election by the Shareholder at the to develop governance policies, practices and and behavioural standards, as well as sound and Annual General Meeting (AGM) of the Company. procedures in line with an integrated governance, transparent business practices. risk and compliance framework. Directors appointed to fill a vacancy on the Board 4 of Directors during the year retire at the next The Board of Directors met seven times during the AGM, enabling the Shareholder the opportunity to We maintained our application of KING IV during year. Its paramount responsibility is to ensure that confirm their appointment. the year, and considered the impact that King IV the Company performs optimally in creating value l Executive male will have on processes and policies going forward. by setting direction through strategic objectives l Executive female The Board of Directors is satisfied that every effort and key policies. In doing so, the Board of Directors has been made in 2017/18 to apply all material appropriately considers the legitimate interests aspects of KING IV as far as appropriate. and expectations of all its stakeholders. In line with our integrated view of King IV, our 11 plans for 2018/19 include:

34 35 GOVERNANCE AND ASSURANCE CONTINUED

Composition of the Board of Directors In the 2018/19 financial year, the following • Reporting on the effectiveness of the Company’s Academy and thorough Corporate Governance appointments were made, effective 13 April 2018: system of internal controls. training, facilitated by the Institute of Directors SA P.7 The Company has a unitary Board of Directors Mr Thomas Kgokolo, Ms Esther Letlape, (IoDSA). P.8 • Taking responsibility for the governance Ms Kyansambo Vundla, Mr Zenzele Myeza, structure comprising one (1) Executive Director of risk through effective risk management Mr Suleman Badat, Major General Lucky Ngema and seven (7) Non-Executive Directors. Two practices, including regularly reviewing and Board of Directors and committee and Mr Khulile Boqwana were appointed as Non- Executive members serve as invitees on the Board. evaluating risks to the Company and ensuring Executive Directors on the ATNS Board for an evaluations the existence of an effective risk-based internal P.1 The Board of Directors drives and directs strategy interim period of six (6) months. Ms Nomathemba P.7 audit function, as well as appropriate internal The performance of the Board of Directors and its P.8 within the entity and has the ultimate responsibility Kubheka was appointed as a Non-Executive controls. Committees is evaluated on an annual basis and P.9 for directing and monitoring performance of Director on 22 August 2018 for a period of two P.10 includes: the organisation. The Board is composed of months. Mr Daniel Mwanza’s term on the Board • Ensuring that the Company is, and is seen to be, P.11 members with a wide range of skills, experience ended on 31 August 2018. a responsible corporate citizen. • An assessment of the performance and and knowledge required to meet organisational • Identifying, managing and monitoring any effectiveness of the Board and that of individual requirements. The appointment of ATNS Directors Ms Esther Letlape subsequently resigned on 10 May gaps between stakeholder perceptions and the directors inclusive of the CEO; is governed by the Company’s Memorandum of 2018 following a senior appointment which required performance of the Company to manage ATNS’s Incorporation (MOI) and guided by the prescripts of her full dedication. reputation. The Board of Directors is kept • A peer evaluation by all Directors ranking their the applicable legislation i.e. the PFMA 1 of 1999 appraised of ATNS’s going concern status and fellow directors on contribution to the Board; and and the Companies Act 71 of 2008. Roles and Responsibilities monitors the Company’s solvency and liquidity • An evaluation of each committee by members of on a regular basis. the committee, focusing on effectiveness of the The independence of the Chairman and the The Board of Directors conducts its business in P.7 Chairperson and the contribution of individual separation of the Chairman’s responsibilities accordance with the principles of KING IV, which P.8 Rotation of directors P.16 committee members. from those of the Chief Executive Officer (CEO) include exercising discipline, independence, ensures a balance of authority precluding any one responsibility, fairness, social responsibility and P.9 Ordinarily, Non-Executive Directors have a three The evaluation process takes place by way of director from exercising unencumbered powers transparency, and the accountability of directors to (3) year fixed term of appointment. In terms of evaluation and questionnaires based on the of decision-making. The Chairman of the Board all stakeholders. the Company’s MOI, a third of directors retire by observation and experiences of board members derives his or her power from the Company MOI, rotation each year and are eligible for re-election throughout the year. The results are discussed by and leads the Board in objective and effective The Board of Directors’ formal charter sets out its by shareholders at the annual general meeting the Board and one on one meetings are held with discharge of governance roles and responsibilities. roles and responsibilities: (AGM). The current dispensation of Non-Executive directors to discuss the results of the evaluations The Chairman is the link between management Directors was appointed for a 6-month fixed-term and to propose developmental actions, should they (CEO) and the Board of Directors. The roles of the • Providing effective leadership based on an period. CEO and Chairman are separate as per required ethical foundation. be required. standards to ensure a balance of power and • Ensuring that the Company has an effective and Induction of directors authority. The Chairman is responsible for leading independent Audit and Risk Committee. During the period under review a board evaluation P.9 was not done as there were vacancies on the Board the Board and the CEO is responsible for execution All new Directors participate in a formal induction • Contributing towards and approving the for a period of seven (7) months. An interim Board of the strategy. process. Upon appointment, directors are provided strategic direction of the Company. was appointed in April 2018, A process is underway with recent Board and committee documents, Changes to the Board of Directors • Satisfying itself that the strategy and business information on legal and governance obligations, to facilitate an evaluation of the Interim Board. plans proposed for the achievement of the the Company’s MOI and recent reports. Guidance P.9 During the period under review, the following ATNS’s objectives do not give rise to risks is provided on the requirements of the Public Director training and development that have not been thoroughly assessed by changes took place on the Board: Ms Phindile Riba Finance Management Act, No.1 of 1999 (PFMA); P.9 resigned as Chairman and Director of the Company management. King IV and the Companies Act, No. 71 of 2008, as All directors are expected to keep abreast of on 18 May 2017. Mr Isaac Nkama and Ms Shaila Hari • Ensuring that the strategy will result in amended from time to time. Directors are entitled changes in trends in the business and in the resigned as Directors on the 13 September 2017, sustainable outcomes, considering financial, to seek independent legal advice at the cost of the ATNS’s environment. Director training and and Ms Nwabisa Mtshali and Dr Bridget Ssamula environmental and social objectives as Company. Meetings are arranged between new development is arranged on an annual basis with resigned as Directors on 14 September 2017. approved by the Board of Directors. directors and members of Exco, to ensure that access to courses that would benefit and develop Advocate Edwin Mphahlele was appointed as Board the former develops a full grasp of their areas of the Directors from an air traffic management • Ensuring the integrity of the Company’s Chairman effective 13 September 2017 and was responsibility and of the complex businesses and perspective as well as general Director integrated annual report. removed on 8 August 2018. Mr Simphiwe Thobela operations that make up the ATNS. During the development. Site visits to the operations are was appointed as a non-executive director on 21 • Defining evelsl of authority and areas of period under review, the newly-appointed Board arranged at least once a year to familiarise the May 2018 and was confirmed as Board Chairman materiality, and approving a framework for had three (3) separate Induction sessions dealing directors with the operational and environmental on 14 August 2018. delegated authority. with the company overview, the operations at the aspects of the business.

36 37 GOVERNANCE AND ASSURANCE CONTINUED

Roles and responsibilities under similar circumstances, the Board of relationships, and any form of relationship that Audit and Risk Committee Directors and the Board committees may engage have the potential to create conflicts of interests P.8 Chairperson of the Board of Directors and the services of external experts at ATNS’s expense. while they serve as directors on the Board. The The Board of Directors – which carries ultimate P.8 P.9 Chief Executive Officer declarations received from the directors are responsibility for risk management within the P.11 Company Secretary closely scrutinised by both the chairman and the Organisation – is continuously kept appraised The roles of the Chairperson of the Board company secretary and are tabled at the beginning of risks facing the business. The Audit and Risk of Directors and the Chief Executive Officer The ATNS Company Secretary provides guidance to P.13 of each quarterly Board meeting. At every Board, Committee supports the Board of Directors in are separate, with clearly-defined individual the Chairman and directors, both individually and Board committee, Executive committee and other this task by ensuring an effective risk-based responsibilities. The Chairperson is responsible collectively, on their duties, responsibilities and Management committee meeting, every member internal audit function and enterprise-wide risk for leading the Board of Directors and ensuring powers. The ATNS company secretary also advises is required to declare or confirm absence of any governance. The committee provides the Board its effectiveness. The Chief Executive Officer is on corporate governance, and on compliance with potential conflict of interest before deliberations. of Directors with regular risk reporting as well as responsible for the execution of ATNS’s strategy legislation and other relevant regulations. Where a conflict arises, directors are required to feedback on the status of the Company’s control and the Company’s day-to-day operations. He is recuse themselves from the discussions. environment. supported by the Executive Committee, which he The Company Secretary at ATNS, Mr Solomon chairs. Mngomezulu is currently on extended leave. Materiality Governance of risk P.11 Independent non-executive directors Ms AZ Manqele was appointed as the Acting Levels of materiality regarding capital expenditure As a State-Owned Company operating within an P.13 P.15 Company Secretary on 11 October 2017. Ms and changes in the operation of the business international regulatory environment – as well as Directors’ skills Manqele is an Admitted Attorney of the high court have been determined, with all matters falling a globally volatile economic climate – ATNS needs of South Africa and has more than nine years post- outside these parameters requiring formal to ensure vigilant risk management. Further, the The independent non-executive directors possess qualification experience, of which six years have Board of Directors authorisation. These matters Company provides organisation-wide assurance varied skills and experience from diverse been within the Corporate governance field, both in are monitored and evaluated on a regular basis on priority issues such as regulatory compliance, industries. They are principally free from any the private and public sector. In Mr Mngomezulu’s through the Procurement Committee. ATNS has a safety management, environmental compliance, business relationships that could hamper their absence, the Board is satisfied that the Acting Materiality and Significance Framework to monitor reputation management, operational efficiency, objectivity or judgement in terms of the Company’s Company Secretary is suitably qualified and has and manage the risk of material losses through and project and financial risk management. The business and activities. demonstrated competency in discharging duties criminal conduct, irregular expenditure, and Board of Directors ultimately determines the of a company secretary. These duties include fruitless and wasteful expenditure. various levels of risk tolerance of the organisation, Access to information maintaining an arm’s length relationship with the and delegates the overall design, implementation executive team, Board of directors and individual It is the responsibility of the Minister of Transport and monitoring of risk to management. An annual All the independent non-executive directors have directors. The Acting Company secretary is not a (with whom rests the primary responsibility for enterprise risk assessment is performed, and unrestricted access to the Company’s information, appropriate ATNS oversight and accountability director of ATNS. mitigation controls are monitored through the documents, records and property in the interest to Parliament) to ensure that these risks are enterprise risk management framework. of fulfilling their responsibilities as non-executive identified, reduced and managed. The ATNS directors. The independent non-executive directors Succession planning Significance Framework is designed to assist the The governance of information contribute a multiplicity of skills, business Minister in discharging this responsibility. acumen, independent judgement and experience The Human Resources Committee and the Board technology (IT) on many varied issues, including strategy, of Directors review succession planning as a P.12 planning, risk management, corporate governance, regular item on their respective agendas. The Committees of the Board of The organisation runs a successful IT Steering operational performance and leadership. Directors’ HRC, in line with its terms of reference, and from Directors Committee, which meets every quarter to facilitate independence is determined according to the time to time, reviews the general composition of P.8 cooperation between user departments and the the Board of Directors and makes appropriate P.9 The Board of Directors has established various IT department to ensure that business objectives definition in the KING IV Code, which includes P.10 the number of years a director has served on the recommendations on the appointment of new P.11 standing committees that are ultimately are met. A sub-committee of the IT Steering Board of Directors. executive or non-executive directors. accountable to it. These committees assist the Committee – the ‘Enterprise Architecture and Board of Directors by focusing on specialist areas. Technology forum’ - was launched at the end of the Independent advice Conflict of interest The committees meet independently and provide 2017/18 financial year. The Enterprise Architecture feedback to the main Board of Directors through and Technology forum was formulated to: In allowing the Board of Directors to discharge its On a quarterly basis, the Company actively P.7 their respective Chairpersons. The roles of, and corporate responsibilities by exercising the care solicits from its directors details regarding representation on these sub-committees are listed • Oversee the formulation and implementation that an ordinary prudent person would exercise external shareholdings, directorships, contractual in figure 10 on page 48. of shared principles, standards, policies,

38 39 GOVERNANCE AND ASSURANCE CONTINUED

guidelines and technology-related reference Compliance with laws, codes, rules and Internal audit proactive stakeholder relationships and to manage models for IT and Operations Technology (OT) standards stakeholder expectations as well as potential environments; P.3 P.15 Internal audit is an independent, objective reputational risks by aligning the Company’s The Board of Directors recognises its P.13 assurance and consulting function. It reports objectives with stakeholder priorities. • Assure technology designs for IT/OT P.16 infrastructure and the Wide Area Network and accountability to all ATNS’s stakeholders under administratively to the CEO and functionally to the information security related infrastructure; the regulatory requirements applicable to its Audit and Risk Committee (ARC) as provided for in The Board of Directors further undertakes to use business and remains committed to high standards the PFMA. Internal audit’s main function is to give its best efforts to balance the diverse interests of • Guide and promote technology architecture of integrity and fair dealing in its conduct. Given assurance to Management and the Board on the ATNS’s stakeholders and to engage stakeholder implementations; and the importance of complying with the ever- adequacy and effectiveness of controls, governance groups on material issues that may impact the • Execute and implement decisions and tasks increasing domain of regulatory requirements, and risk management. Company’s long-term economic, social and delegated to it by the IT Steering Committee. and the increased national and international environmental sustainability. emphasis placed on regulatory supervision, the An external quality assessment review was conducted subsequent to year end to assess the A monthly IT EXCO structure was also formulated Board of Directors, Executive Committee and Integrated reporting and disclosure during the 2017/18 financial year, which serves as employees continue to monitor, align and adhere internal audit function’s conformity to The Institute a forum for IT senior management and business of Internal Auditor’s International Standards for to compliance requirements. Further, ATNS Through its integrated reporting, ATNS aspires P.5 leaders to discuss current priorities and to report the Professional Practice of Internal Auditing as remains vigilant in monitoring material risks and to provide a comprehensive and integrated P.15 IT performance to the business using a set of required in terms of the PFMA. The review raised P.16 developing an appropriate control environment to representation of the Company’s performance in established performance metrics. ensure company-wide compliance. significant findings relating to non-conformity with the Institute of Internal Auditors (IIA) standards, terms of both its finances and its sustainability. non-delivery of the internal audit plan for the year ATNS’s Integrated Report is published annually The Company also ran effective information The responsibility for effective implementation of under review and the capacity of the internal audit and presents an overview of the Company’s security campaigns during the year to inform users compliance throughout ATNS has been delegated function. An improvement plan to address findings activities, practices and financial performance for of potential risks and to promote safer online to the ATNS Compliance Officer. The compliance from the review will receive attention during the the year; and presents a balanced analysis of our behaviour. Disaster recovery simulations served to function enables the business to adhere to 2018/19 financial year. sustainability performance strategy in relation to test the effectiveness of the controls put in place applicable regulatory requirements by ensuring issues that are relevant and material to ATNS and to ensure continuity of business in the event of a that actions, processes and procedures are risk- Governing stakeholder relationships its stakeholders. disaster. appropriate and that the business can achieve its business goals without fear of penalties and loss of P.3 The Company is in the process of formulating a ATNS recognises that it does not operate in The Integrated Report is reviewed by the Audit reputation. P.16 new IT strategy that is aligned to organisational a vacuum and is therefore cognisant of the and Risk Committee and the Board of Directors to strategy, particularly with regards to organisational environment within which it operates. This includes satisfy themselves of the materiality, accuracy and Incidents of non-compliance are reported to the performance and sustainability goals. acknowledging the Company’s direct and indirect balance of disclosures. In addition, various aspects responsible executives or heads of business units, impact on its stakeholders, thereby informing how of the Integrated Report are independently assured divisions, departments or subsidiaries for prompt The plans for the current financial year and beyond it conducts its business. ATNS strives to maintain by multiple assurance providers. resolution. The office of the ATNS Compliance are to: Officer is also charged with the responsibility of assisting, guiding and advising the various • Mature processes for exploring leading-edge business units, divisions and departments within technology, global best practices and emerging ATNS on how to discharge their duties in managing good practices to exploit them in support of their compliance responsibilities and obligations. corporate sustainability goals;

• Refresh ageing technology for operational The ATNS Audit and Risk Committee oversees efficiency and business continuity; compliance matters within ATNS. The Committee • Enhance and implement IT policies, procedures requires that: and responsibilities for managing information security, information management and • the compliance officer reports non-compliance information privacy; with laws and regulations to the Audit and Risk Committee; and • Perform regular IT security risk and impact analysis; and The ATNS Compliance function has unrestricted • Formulate and ensure approval of the IT access to the Chairperson of the Audit and Risk security strategy by the ATNS Board of Directors Committee.

40 41 GOVERNANCE AND ASSURANCE CONTINUED

ATNS Board of Directors

P.7 P.8 DIRECTOR COMMITTEES AREAS OF CORE EXPERTISE ACADEMIC QUALIFICATION DATE OF 1ST ACTIVE MEMBERSHIPS ON [SKILLS & EXPERIENCE] APPOINTMENT OTHER BOARDS

• Governance • Leadership • B. Com Logistics – (University of South Africa) 21 May 2018 • Directorship/Shareholder/ Committee • Governance • Post Graduate Diploma in Public Management – Trusteeship: • Financial Management (Regenesys School of Public Administration) »» IlimaLethu Trust SIMPHIWE THOBELA • Supply Chain Management • Master of Town and Regional Planning – »» Magwa Tea Estate Board Chairperson (University of KwaZulu-Natal) • PhD Candidate (University of The Free State) Date of birth: 26 March 1972

• Governance • Governance • Bachelor of Accountancy (University of Kwa-Zulu 13 April 2018 • Directorship/Shareholder/ Committee • Risk Management Natal) Trusteeship: • Social and Ethics • Compliance • CA (SA) »» Howden Africa Holdings Limited Committee • Certificate of Risk Management & Assurance »» Marine Living Resources Fund SULEMAN BADAT • Audit and Risk (IIA) »» Project Assurance Solutions Date of birth: Committee (Pty) Ltd 20 November 1962 • Business Research, Operations and Development Committee

• Governance • Financial Management • Bcom Accounting (Rhodes University) 13 April 2018 • Workforce Limited - Non Executive Committee • Insurance • Higher Postgraduate diploma Accounting Director • Transformation, (Rhodes University) Investments and • Postgraduate diploma in Mechanics of Project KYANSAMBO VUNDLA Projects Committee Finance (Middlesex University) Date of birth: • Audit and Risk 10 October 1978 Committee • Social and Ethics Committee

• Human Resources • Talent management and skills • Bachelor of Arts in Education 22 August 2018 • SANCO Development Institute Committee development (University of the Witwatersrand) (SDI), • Social and Ethics • Corporate negotiations • MSc in Building • SANCO Investment Group (SIG), NOMATHEMBA Committee • Project management (University of the Witwatersrand) • The Mining Qualification Authority KUBHEKA • Transformation, • Research and development (MQA). Investment and planning Date of birth: Projects Committee • Logistics 1 January 1967 • Property development and facilities management

42 43 GOVERNANCE AND ASSURANCE CONTINUED

DIRECTOR COMMITTEES AREAS OF CORE EXPERTISE ACADEMIC QUALIFICATION DATE OF 1ST ACTIVE MEMBERSHIPS ON [SKILLS & EXPERIENCE] APPOINTMENT OTHER BOARDS

• Governance • Financial Management • Bcom Accounting (University of Zululand) 13 April 2018 • Directorship/Shareholder/ Committee • Investment Management • MBA (UKZN) Trusteeship: • Social and Ethics • Auditing • Certificate in Aviation Management (IAMTI, »» Chas Everitt International Committee • Risk Management Canada) Property Group • Human Resources • Information Technology • Certificate in Corporate Governance (University »» Rand Water Medical Scheme ZENZELE MYEZA Committee • Business development of Johannesburg) • Business Research, • Operations • Certificate in Retail Management (University of Date of birth: Operations and • Marketing Management Pretoria) 28 July 1960 Development • Property Management • Property Development Program (UCT Graduate Committee • Project Management School of Business) • Human Resources • Development facilities management

• Governance • Strategic Planning • Private Pilots Licence (CAA Nigeria) 13 April 2018 Committee • Policy Formulation • Commercial Pilots Licence(CAA UK) with the • Business Research, • Strategy Formulation following rating: Operations and • Resource Management Instrument rating, night rating, multi engine Development • Driving Transformation rating, flight instructor rating Committee • Aviation • Airline Transport Pilots Licence (FAA USA) • Social and Ethics • Aerospace rated on the following a/c: NLJ NGEMA Committee Boeing B767, BAE 146, Viscount 700 & 800, • Human Resources BE200, BE55, PA23, PC6, Cessnas 182, 172, 152 Date of birth: Committee & 150 (aerobatics) 25 September 1950 • Military Senior Command and Staff Diploma »» Senior Management Programme »» Defence Resource Management »» Defence Management (Wits) »» Advance Air Operations Law certificate »» AVIATION Leaders Programme in Public Policy

• Governance • Investment and Regulation • Senior Teachers Diploma 13 April 2018 Committee • Airport Infrastructure • B Compt • Audit and Risk Regulation • Masters in Business Leadership Committee • Broadcasting and KHULILE BOQWANA • Human Resources Telecommunications Date of birth: Committee • Energy Regulation 28 July 1972 • Transformation, • Corporate Strategy Investment and • Corporate Governance Projects Committee • Policy Regulation • Project Management

44 45 ATNS Board Members (From left to right): Kyansambo Vundla, Thomas Kgokolo, Simphiwe Thobela, Khulile Boqwana, Zenzele Myeza, Nomathemba Kubheka, Suleman Badat, Thabani Mthiyane (term ended on 30 September 2018), NLJ Ngema

46 47 GOVERNANCE AND ASSURANCE CONTINUED

Board of Directors committees COMPOSITION OF THE BOARD OF DIRECTORS AND BOARD OF DIRECTORS COMMITTEES

FIGURE 10: BOARD OF DIRECTORS COMMITTEES STRUCTURE AND CORE FUNCTIONS EXEC & % MALE % FEMALE COMMITTEE TOTAL NON-EXEC African Coloured Indian White African Coloured Indian White ATNS BOARD COMPOSITION CORE FUNCTIONS P.7 ATNS Executive 12 Exec 8 0 0 1 3 0 0 0 Committee ATNS Board of Exec 1 0 0 0 0 0 0 0 8 • Chair: Non-Executive Oversight: Directors Non-Exec 4 0 1 0 2 0 0 0 • 3 Non-Executive • Monitors financial controls and reporting Directors • Reviews audit plans and adherence by external and internal auditors Audit and Risk Exec 0 0 0 0 0 0 0 P.1 • Convenes: 4 p/a • Ascertains reliability of audits 3 Audit & Risk Committee Non-Exec 1 0 1 0 1 0 0 0 P.2 Committee • Ensures financial reporting complies with IFRS and Companies Act P.7 • Oversight of financial matters Human Exec 1 0 0 0 0 0 0 0 P.8 • Nominates auditors for appointment Resources 5 P.9 • Monitors risk appetite and controls Committee Non-Exec 3 0 0 0 1 0 0 0 P.13 • Governance of risk and IT P.14 Social and Ethics Exec 1 0 0 0 0 0 0 0 6 P.15 • Chair: Non-Executive Oversight: Committee P.16 • 1 Executive Director • Establishes overall principles of reward and remuneration Non-exec 2 0 1 0 2 0 0 • 4 Non-Executive • Determines remuneration of executive directors and executive Transformation, Exec 1 0 0 0 0 0 0 0 Human Directors heads in line with the market Investments 4 Resources • Convenes: 4 p/a • Ensures compliance with relevant laws and regulations and Projects Committee • Considers, reviews and approves Group policy on executive Non-Exec 1 0 0 0 2 0 0 0 remuneration Committee • Reports on remuneration to stakeholders in the Company’s Business integrated report Research, Exec 1 Operations and 5 • Chair: Non-Executive Oversight: Development Non-exec 3 1 • 1 Executive Director • Monitors and develops compliance with section 72(8) of the Committee • 5 Non-Executive Companies Act (read in conjunction with regulation 43) Social & Directors • Assists the Board with oversight of social and ethical matters Ethics • Convenes: 4 p/a related to the Company, incl.: BOARD OF DIRECTORS COMMITTEE RESPONSIBILITIES FOR INTEGRATED REPORTING ELEMENTS Committee »» good corporate citizenship; »» environment; »» health and public and safety; and INTEGRATED REQUIRED ACTIVITIES BOARD »» consumer relationships, labour and employment. REPORTING COMMITTEE • Chair: Non-Executive Oversight: ELEMENTS • 1 Executive Director • Oversees the ATNS Capital Expenditure programme in line with the Risks and • Review adequacy and effectiveness of ATNS’s Enterprise • Audit and Risk • 3 Non-Executive Economic Regulator permission document P.5 Transformation, Directors • Ensures that appropriate procurement and provisioning systems opportunities Risk Management (ERM) process and associated control Committee Investments P.8 • Convenes: 4 p/a are fair, equitable, transparent, competitive and cost-effective P.14 environment. • Business Research, & Projects P.15 • Identify and assess material risks. Operations and Committee • Ensure effective mitigation activities to prevent or Development minimise the adverse impacts of material risks. Committee • Identify opportunities for innovation and growth. • Chair: Non-Executive Oversight: • 1 Executive Directors • Assesses and evaluates the viability of ATNS International Strategy and • Ensure appropriate strategic responses to risks and • Audit and Risk Business • 4 Non-Executive • Formulates the ATNS International strategy resource opportunities. Committee Research, Directors • Established in accordance with applicable legislation allocation • Ensure appropriate and efficient processes, procedures • Human Resources Operations and • Convenes: 4 p/a • The implementation of ATNS’s African strategy is aligned with ATNS’s and policies to provide an enabling environment and Committee strategic objectives Development structural support to the Company’s business. • Transformation, Committee • Business opportunities are evaluated and recommended to the Board • Provides oversight on business operations • Ensure appropriate allocation of the various ‘capitals’, Investments • Monitors operational performance including: and Projects »» Financial capital (e.g., long-term borrowings) Committee • Chair: Non-Executive • Reviews the effectiveness and composition of the board and its »» Manufactured capital (e.g., property, plant and • IT Steering • 1 Executive Directors committees • 7 Non-Executive • Reviews the general governance structures, processes and policies equipment) Committee Directors »» Intellectual capital (e.g., brands, trade-marks and • Social and Ethics Governance • Convenes: 4 p/a Committee patents) Committee »» Human capital (e.g., permanent employees) • Safety Committee »» Social and relationship capital (e.g., industry alliances) »» Natural capital (e.g., air space, electricity and fuel)

48 49 GOVERNANCE AND ASSURANCE CONTINUED

MEETING DATES OF DIRECTORS AND ATTENDANCE: APRIL 2017 TO SEPTEMBER 2017 INTEGRATED REQUIRED ACTIVITIES BOARD REPORTING COMMITTEE Attended 3 Absent/Apology 7 Chairman C Member M Resigned R ELEMENTS P.6 P.7 Remuneration • Ensure appropriate, market-related remuneration, linked • Human Resources P.8 and incentives to performance. Committee MEETING DATE RIBA SSAMULA NKAMA MTSHALI HARI DLAMINI MWANZA MPHAHLELE • Ensure incentives and rewards are market-related and • Social and Ethics managed according to performance against targets, Committee 06/06/2017 R M3 M3 M3 M3 M3 M3 M3 as per ATNS’s Shareholder Compact and strategic Board Meeting 23/06/2017 - M3 M3 M3 M3 M3 M3 M3 objectives. Safety and • Ensure a safe working environment for ATNS employees. • Safety Committee 05/09/2017 - M3 M3 M3 M3 7 M3 M3 health • Ensure alignment with global safety standards. • Transformation, • Ensure ‘safe procurement’. Investments 12/04/2017 C3 M3 M3 7 M3 M3 M3 7 • Ensure ‘safety culture’, including safety training. and Projects 21/7/2017 - M3 M3 M3 M3 7 M3 M3 Committee Special • Social and Ethics Board Meeting 29/8/2017 - M3 M3 M3 7 M3 7 M3 Committee • Human Resources 22/9/2017 - M3 RRR M3 M3 C3 Committee

Organisational • Ensure ATNS B-BBEE Strategy align with Dti’s Codes of • Audit and Risk Human 23/05/2017 - M3 - M3 C3 M3 M3 - transformation Good Practice. Committee Resources • Maintain and ensure favourable black representation at • Human Resources Committee Board of Directors and Top Management levels. Committee (HRC) 21/08/2017 - M3 - M3 C3 M3 M3 - • Ensure on-going equal opportunity initiatives. • Transformation, • Ensure that procurement practices align with ATNS’s Investments Special HROC 02/06/2017 - - - M3 M3 M3 M3 - enterprise development (ED) and supplier development and Projects (SED) objectives. Committee Transformation, 01/06/2017 - M3 M3 --- M3 M3 • Social and Ethics Investments Committee and Projects 23/08/2017 - M3 M3 --- M3 M3

Environmental • Ensure environmental sustainability through the • Audit and Risk 26/05/2017 - M3 M3 ---- - management management of carbon emissions and energy efficiency. Committee Audit & Risk • Ensure responsible operational impacts on communities • Social and Ethics 24/08/2017 - M3 M3 ---- - and bio-spheres (e.g., noise reduction). Committee • Ensure environmental risk management and compliance. • Human Resources 24/05/2017 - - - M3 M3 M3 - - • Ensure organisational awareness for environmental Committee Social & Ethics sustainability issues. • Transformation, 04/09/2017 - - - M3 M3 M3 - - • Ensure environmentally-responsible procurement Investments 3 3 3 practices. and Projects Business 26/05/2017 - M M -- M - - Research, • Ensure ‘Green technology’ practices. Committee Operations and • IT Steering Development 24/08/2017 - M3 M3 -- M3 - - Committee Committee Stakeholder • Ensure positive stakeholder relationship engagement and • Social and Ethics engagement management. Committee AGM 13/09/2017 - M3 M3 7 M3 M3 M3 C3 and relationship • Ensure proactive support for suppliers and constructive • Transformation, management supplier management. Investments • Ensure positive employee relations and encourage and Projects adherence to ATNS’s Code of Conduct and embed the Committee Company’s Values throughout the organisation. • Human Resources • Ensure proactive SLA compliance management with Committee suppliers. • Audit and Risk • Ensure an enabling work environment for employees Committee to achieve their professional and personal goals, share • IT Steering ideas, communicate openly and report concerns. Committee

50 51 GOVERNANCE AND ASSURANCE CONTINUED

MEETING DATES OF DIRECTORS AND ATTENDANCE: SEPTEMBER 2017 TO MARCH 2018 DEPARTURES OF DIRECTORS

Attended 3 Absent/Apology 7 Chairman C Member M P.6 DIRECTORS CAPACITY DATE OF REASON FOR DEPARTURE P.7 DEPARTURE P.8 MEETINGS DATE RIBA SSAMULA NKAMA MTSHALI HARI MPHAHLELE DHLAMINI MWANZA Ms. Phindile Riba Chairman and Director 18 May 2017 Resignation 06/12/2017 - - - - - C3 - M3 of the Company Board Meeting Mr Isaac Nkama Directors on the Board 13 September 2017 Resignation 27/01/2017 ------C3 - M3 Ms Shaila Hari Directors on the Board 13 September 2017 Resignation 13/03/2018 - - - - - C3 - M3 Ms Nwabisa Mtshali Directors on the Board 14 September 2017 Resignation 12/10/2017 - - - - - C3 M3 M3 Dr Bridget Ssamula Directors on the Board 14 September 2017 Resignation Special 10/01/2018 - - - - - C3 - M3 Board Meeting Mr President Dlamini Directors on the Board 31 December 2017 Resignation 01/02/2018 - - - - - C3 - M3 Ms Esther Letlape Directors on the Board 10 May 2018 Resignation

HROC ------Advocate Edwin Mphahlele Chairperson on the 8 August 2018 Contract terminated Board Transformation, Investments and ------Mr Daniel Mwanza Directors on the Board 31 August 2018 End of contract term period Projects DEPARTURES OF SENIOR EXECUTIVES Audit & Risk ------

Social & Ethics ------EXECUTIVE CAPACITY DATE OF REASON FOR DEPARTURE DEPARTURE Business Research and ------Ms Thandi Thankge Executive Human Capital 6 February 2018 Resignation Development Mr Andile Swaartbooi Chief Information Officer 31 March 2018 Resignation 05/12/2018 - - - - - C3 - M3 Board Strategy Mr William Ndlovu Chief Financial Officer 24th May 2018 Contract terminated Session 06/12/2018 - - - - - C3 - M3

AGM 17/11/2017 - - - - - C3 - M3

52 53 GOVERNANCE AND ASSURANCE CONTINUED

ATNS Executive Committee

Areas of core expertise Academic qualification Areas of core expertise Academic qualification [skills and experience] [skills and experience]

• Aviation operations • BCom •e Financ • CA(SA) • Airspace Management • International Executive • Auditing • MBA (Gordon Institute of Business Development Program (WITS and Sciences) • Risk Management London Business School) • Investment Management • B Compt Honours (University of South Africa) • Business valuations • B Com Accounting Sciences (University of Pretoria)

JEOFFREY MATSHOBA THOMAS KGOKOLO Executive: Air Traffic Interim Chief Executive Officer Management/cns (Executive Director) Appointed: 1 July 2015 Appointed: 1 October 2018

• Legal compliance • LLB (University of UKZN) • Corporate Governance • Bachelor of Arts in Law • Advocacy • LLM- Mercantile Law (University of • Litigation • Bachelor of Laws-LLB (UKZN) • Contract negotiation and Pretoria) • Company Law • Admitted Attorney (2011) management • Business Leadership Programme • Labour Law • Professional Post-Graduate • Litigation (GIBS) Qualification: Company Secretarial • Corporate Reporting • Certificate in Contract Drafting and Governance Practice (CSSA) • Risk assessment (LSSA) Current • Admitted Attorney (2004)

AYANDA MANQELE THANDEKA MDEBUKA Acting Company Secretary Legal Counsel Appointed: 01 April 2018 Appointed: 11 October 2017

• Technical support and maintenance • Financial Management • CA (SA), • BSc Electrical Engineering • Telecommunications and • Retail • MBA (Georgetown University – • BEng Honors Computer technology – systems design, USA and ESADE Business School – Engineering • Manufacturing services planning, development, Spain) • Government Business implementation and maintenance • MBL • MCOM Tax (University of Pretoria) • Technology lifecycle management • Certificate in Advanced • B Com (University of Venda) and support services Executive Programme • BACC (University of Witwatersrand) • Electronic engineering • Ventures and business development • Project Management MOHOLOLA MATOME ZORRO BOSHIELO Acting Chief Financial Officer Chief Technology Officer Appointed: 1 December 2015 Appointed: 1 October 2017

54 55 GOVERNANCE AND ASSURANCE CONTINUED

Areas of core expertise Academic qualification Areas of core expertise Academic qualification [skills and experience] [skills and experience]

• Commercial services and business • BCom Accounting (University • Commerce and business analysis • BSc in Aviation Technology development of Zululand) • Strategy and Planning (Embry Riddle Aeronautical University, USA,1991) • New market strategies (locally and • MBA General Management • Aviation operations management internationally) (Texas Southern University) • Postgraduate diploma: Transport • Transport and airline logistics • Policy development and operational Economics (Rand Afrikaans policy alignment University, Johannesburg 1997) • Regional business expansion • Postgraduate diploma: Business Administration (PBL) (University of South Africa, 1999)

THABANI MYEZA DUMISANI H SANGWENI Executive: Commercial Services Executive: Strategy & Optimisation Appointed: 1 April 2015 Appointed: 1 May 2010

• Risk, audit and compliance • BCom (Hons) Cost • Aerospace technology & systems • PhD in Physics (Rhodes University) • Corporate Governance Management • Navigation, communication and • MBA (Business School, • Accounting, finance and • Accounting (University of surveillance management Netherlands) management Venda) • Research, Development & • CIA and Certificate in Control Innovation management Self-Assessment (CCSA) • High-value Project Implementation (Institute of Internal Auditors • Operations management (IIA) • Strategy and planning • Higher Education Diploma (UNISA) TENDANI NDOU • Global Executive MBA DR. SANDILE MALINGA Principal: Aviation (Gerogetown, USA and Esade Chief Operations Officer Training Academy Business School, Spain) Appointed: 1 September 2016 Appointed: 1 June 2011

• IT Governance • B.Sc. Engineering (Electrical) • Aviation operations management • Aerodrome, Approach an Area • IT Operations Management »» University of Witwatersrand • Training and mentoring Procedural and Radar validations (University of Stellenbosch) • Project Management • Master of IT – University of • Governance, compliance and Pretoria • IT Systems Lifecycle Management regulatory oversight • Solutions Architecture and • Safety management Software Development • Strategy and planning

GILMOUR M. RANKOE HENNIE MARAIS Acting Chief Information Officer Chief: Air Traffic Services

Appointed: 29 March 2018 Appointed: 1 March 2010

56 57 ATNS Exco Members (From left to right): Tendani Ndou, Thabani Mthiyane (term ended on 30 September 2018), Moholola Matome, Zorro Boshielo, Hennie Marais, Dumisani H Sangweni, Thabani Myeza, Dr. Sandile Malinga, Gilmour Rankoe, Jeoffrey Matshoba (Insert: Thandeka Mdebuka (top) and Ayanda Manqele (below)

58 59 GOVERNANCE AND ASSURANCE CONTINUED

How ATNS’s control framework creates value

P.1 COMPONENT HOW IT CREATES VALUE FOR THE ORGANISATION P.2 COMPONENT HOW IT CREATES VALUE FOR THE ORGANISATION P.8 Internal audit • Supports the Company by providing independent assurance over the adequacy IT governance P.11 • The Company is in the process of finalising the control self-assessment framework in P.12 and effectiveness of the governance, risk management and control environment, (continued) line with recommendations of the external auditors. The framework will assist the IT P.13 including other key controls as presented by management, and risks emanating from department to: P.15 the top 10 strategic risks of the Company. »» Conduct an assessment of risks and controls; • Helps the organisation to accomplish its objectives by bringing a systematic, »» Develop recommendations for improvement; disciplined approach to evaluate and improve the effectiveness of risk management, »» Enhance the department’s ability to achieve its objectives; control and governance processes to ensure that the following objectives are »» Improve communication within the team; and achieved: »» Improve the efficiency and effectiveness of IT operations. »» Risks are properly managed. Regulatory • ATNS established a Permission Planning Committee (PPC) as a permanent EXCO »» Policies, regulations and laws are complied with. compliance subcommittee, with the express purpose of facilitating the permission planning »» Data is accurate, timely, useful, reliable and relevant. process. »» Operations are effective and efficient and add value. • ATNS subscribes to a modular approach in compiling permissions and the PPC, Fraud prevention, • ATNS has a zero-tolerance approach to fraud and corruption. A fraud prevention plan through its Permission Module Managers project team, drives the preparation and detection and is annually approved by the board and monitored throughout the year. ATNS fraud and maintenance of information modules needed to compile permission applications as investigation corruption methodology enables the Company to identify and mitigate the occurrence mandated by the Regulating Committee in its Approach document. of fraud and corruption through risk assessment and compliance checks. These are • The PPC also ensures modules are kept ‘live’ and updated on an annual basis performed Companywide on an annual basis. These assessments help to identify to monitor progress in the implementation of the current permission, thereby potential high-risk areas of fraud and corruption. tracking ‘actual’ versus ‘budgeted’ permission Key Performance Indicators (KPIs) • Most reported incidences of fraud activities as per the whistle blowing hotline and and reporting on deviations. This provides input for the yearly budgeting process in from line management are in the following areas: Financial Control, Supply Chain addition to developing a repository of historic permission data needed to feed into and Management and Human Resources. (i.e. procurement misconduct and recruitment help guide subsequent permission application processes. process). Management have placed more controls to prevent, detect, and mitigate the fraud risk in these areas. Enterprise risk • Enterprise Risk Management (ERM)aims to achieve an appropriate balance between management (ERM) opportunities realised for gain, while minimising adverse impact. To achieve best- • The ATNS strategic imperatives represent the overarching themes of the Fraud practice levels, ATNS considers the requirements of the guidelines of the King Report Risk Management Plan in that they not only embrace the fraud risk management on Corporate Governance for South Africa, 2017 (King IV), and ISO 31000: 2009 initiatives undertaken in previous years, but also emphasise the related root causes Risk Management Standard. The strategic risk profile is based on the Six Strategic of fraud and corruption emanating from the areas of governance, people, methods Imperatives of ATNS and practices. Fraud and Corruption awareness education encompasses formal training annually with all employees, including both bargaining and non-bargaining • The strategic risks of ATNS are reassessed on an annual basis by considering the council employees. basic available information on changes, research in both internal and external environment of the entity. The risks are identified, evaluated and assessed on an • ATNS’s anonymous Whistle Blowing Hotline is in place for the reporting of suspected inherent risk basis, prior existing controls are considered. The control effectiveness fraudulent or unethical behaviour via an outsourced toll-free hotline. Reports of the risk is rated by the ATNS Executive team on a rating scale varying from weak are relayed to the Chief Audit Executive, Chief Executive Officer, as well as to to very good. This results in a calculated residual risk rating per risk identified. the Chairman of the Audit and Risk Committee. Staff awareness of this facility is Therefore, mitigation strategies are developed to mitigate the risks based on their promoted through posters, the intranet and the training programme undertaken to level of priority ranking. all staff. • To ensure continuous improvement in the risk management process, the risk • The hotline is available 24 hours a day, seven days a week and call centre agents can ownership has been enhanced by Senior Management team by formally appointing converse in all official languages. departmental and ATSU risk champions to embed risk management within their IT governance • The Company has developed a comprehensive list of IT risks that are linked to the area of operations. Formal risk management training was conducted for all the risk organisation’s objectives. The top five IT risks include: champions to build capacity within the risk department. This enhances risk advisory at an operational and departmental level. »» Cyber security threats. »» Inadequately managed information and business intelligence. »» Unauthorised access to operational and back-office systems. »» Lack of security on IT assets. »» Inappropriate IT assets disposal. • Each risk has a list of mitigation actions to improve the management of the risk, and these actions are monitored regularly and reviewed in joint sittings between the IT department and the Risk Management department.

60 61 GOVERNANCE AND ASSURANCE CONTINUED

Major risk movements – 2016/17 to 2017/18 Financial Capital

P.4 FIGURE 11: ATNS RESIDUAL RISK HEATMAP P.8 P.11 P.12 Residual Risk Profile 2017 M a l n 1 Inadequate business continuity plans and disaster recovery plans a u it fa p c t 2 IT systems/networks a u C r l e 3 Physical security of infrastructure a d r u C 4 Cyber security threat t a a 8 p N i t 5 Reliance on third party service providers a 9 l 6 6 Major safety event 1 1 7 7 Critical skills in global demand 2 3 2 3 4 8 Financial sustainability

9 Unavailability of deployed CNS technology 4 10 Political instability in certain African countries 5 7 5 6 I n t e l Residual Risk Profile 2018 l a l 8 t e i c p t 1 Business continuity plans and disaster recovery plans u a a C 2 l 10 n IT systems/networks C a a p m 3 Physical security of infrastructure i u ta H l 4 Inefficiency in supply-chain management 9 5 Major safety event

6 Financial sustainability Soc tal 7 Cyber security threat ial api and Relationship C 8 Non-compliance with regulatory requirements

9 Inability to access and capture the market

Residual risk exposure 2017 l Priority 1 – Extreme: Immediate action 2018 l Priority 2 – High: More controls required l Priority 3 – Moderate: Monitor risk exposure l Priority 4 – Low: Acceptable risk exposure l Priority 5 – Insignificant: Reduce controls

62 63 GOVERNANCE AND ASSURANCE CONTINUED

ATNS TOP RISKS ALIGNED TO STRATEGY

P.4 RISKS DESCRIPTION ROOT CAUSE OF THE RISK CURRENT CONTROL PROCESSES RESIDUAL ACTION PLANS P.11 P.12 IN PLACE TO MITIGATE THE RISK RISK P.13 EXPOSURE EXPOSURE

Inadequate business Lack of clearly defined business continuity plans and inconsistencies in Integrated Business Continuity Plans Integrated disaster recovery test. Priority continuity plans and disaster implementation of related processes. Development of disaster recovery plans where recovery plans 1 these are lacking Implementation of the plans.

Unreliable IT systems/ System obsolesce and misaligned processes. IT Systems and business processes. Implement key systems ERP and Enterprise Priority networks Architecture 1 Increase IT Capacity. Improve processes.

Physical Security of Inadequate security plans and measures in some places. Security governance instruments and Improve security strategies and plan; and Priority Infrastructure assessments. implement. 1

Inefficiency in Supply Chain Lack of SCM capacity and inefficient systems; inadequate governance and SCM governance instruments and Implement a new SCM module and increase Priority Management (SCM) control structures and environment. systems. training; increase SCM capacity. 1

Major safety event Inadequate safety strategies and plans in an environment that is becoming Safety Management system and related Implement a safety turn- around plan Priority complex and high traffic volumes. safety apparatus; safety delivery that addresses safety planning; safety initiatives. 1 implementation; safety assurance and human performance.

Financial sustainability Economic down turn and escalating costs; sub-optimal systems. Financial sustainability plans; Intensify marketing and further pursue robust Priority commercial and business development market expansion to the African continent under initiatives. 1 ATNS International.

Cyber Security Threats Sub-optimal IT security environment and readiness in a fast-changing Cyber Security governance framework; Develop a clear cyber security approach, Priority cyber security space. IT security software and firmware. strategies, plans, capacity, capability and focus. 2

Non-compliance to Lack of awareness and understanding of the implications and costs of non- Legal compliance framework and Increase awareness and education on compliance Priority regulatory requirements compliance. compliance initiatives. imperatives and initiatives. (Legislations, Regulations, 2 Policies, directives etc.)

Inability to access and Complexity of the African geo-politics and market environment. Leveraging on government-to- Re-evaluate the ATNS 10 year bank-able business capture the market due to government relations and other Priority plan and adapt it for the current continental political, economic dynamics continental economic block interfaces. economic and geo-political landscape. and internal constrains to 5 deliver.

64 65 GOVERNANCE AND ASSURANCE CONTINUED

Statement of adequacy of ATNS’s Monitoring and evaluation: QMS auditing is a operates. It is our aim, to align – at all times - disability and life insurance. Employees, including internal control environment crucial business management tool used within with the strategic direction and specific value the executive management, are afforded the ATNS to monitor and evaluate its documented P.8 drivers of the business within which ATNS opportunity to structure remuneration packages P.11 processes, procedures and responsibilities to operates, supporting the philosophy of Value according to individual needs within prescribed Based on the consideration and analysis of P.12 achieve ATNS’s quality policies and objectives, Based Management. As such, remuneration legal parameters. To encourage a high- information and explanations from management, and to ensure complete adherence to statutory plays a critical role in attracting and retaining performance culture, the determination of annual the assessment of internal controls by internal and regulatory requirements. Consequently, high performing individuals. Remuneration also salary adjustments is performance-based only. audit, including internal financial controls conforming to the monitoring and evaluation reinforces, encourages and promotes superior Employees are evaluated against annually set and external audit reviews; the Audit and Risk approach, ATNS provides its customers with performance. Remuneration is not considered to routine objectives, which encompass the scope and Committee is of the opinion that the internal the surety of cost-effective, value-add and safe be a stand-alone management process, but rather nature of the role and job content. controls of the Company were partially effective products and services. one that is fully integrated into other management throughout the year under review in ensuring that: processes. Retirement Fund In the year ahead, the Company intends to • Risks are properly managed fully complete the process of aligning policies, Benchmarking and position in the The fund is a defined contribution scheme and • The Company’s assets were safeguarded; procedures and processes to the updated ISO is governed by the Pension Funds Act of 1956, 9001:2015 standard in preparation for the January market • Proper accounting records were maintained; which requires an actuarial valuation to be 2019 audit, and to instill a holistic and integrated and carried out every three years. The retirement fund management approach and culture throughout the ATNS performs regular remuneration benchmarks contributions are deducted from the pensionable • Compliance with laws, regulations and organisation. to ensure that we remain market aligned and component of the employee’s guaranteed pay. All contracts was ensured. competitive. The Company’s defined market position is the midpoint of the market, however, the permanent employees are members of the ATNS retirement fund. The Company does not provide Where internal control weaknesses were identified, Remuneration pay progression for entrants to sustained superior any post-retirement benefits to employees and has these were discussed with management and performance will range from the minimum to no exposure to postretirement benefit obligations. corrective actions were taken to minimise the risk. The section on remuneration that follows includes P.3 the maximum of the pay scale. In line with the Consequence management linked to unresolved the Company’s remuneration performance for the P.14 business strategy, employees with key skills are audit findings is being driven at Board of Directors 2017/18 financial year. paid between the midpoint and the maximum of ATNS offers employees a flexible pensionable/ level to ensure management responds adequately pay scale. non-pensionable remuneration split, including: to repeat findings by both internal and external The Human Resources Committee recommends auditors. Management is undertaking an overhaul annual remuneration for both executive and The benchmarking of executive positions in • 60% pensionable 40% non-pensionable. of ATNS’s IT systems to improve internal controls. non-executive directors and considers associated the South African labour market faces many • 70% pensionable 30% non-pensionable. performance measures and benefits when challenges in making logical and fair comparisons • 80% pensionable 20% non-pensionable. The Committee and management have also assessing remuneration. State-Owned Companies between different jobs. Executive positions are • 85% pensionable 15% non-pensionable. addressed issues of non-compliance with policies require people with exceptional competencies and benchmarked annually, using a top executive • 100% pensionable 0% non-pensionable. and procedures received through the auditors experience to provide strategic leadership; as well survey. This benchmark informs the organisation and the whistleblowing hotline. The Committee as strengthen opportunities for direct and indirect of the market-related salaries of executive Healthcare benefit is driving an internal educational process to employment for thousands of people. They are management within the South African labour reemphasise the importance of regulatory also responsible for generating returns on investor market. Healthcare membership is a condition of service compliance within the Company. funding and have the added responsibility of for all permanent ATNS employees. The healthcare managing strategic national resources. Components of remuneration benefit is a fixed component of the employee’s Quality statement guaranteed pay. ATNS currently contracts to ATNS views remuneration as a business issue not Total remuneration consists of guaranteed pay, two healthcare providers, namely Discovery and ATNS has been an ISO 9001 certified organisation only a human resource issue. The organisation’s variable pay, plus short-term incentives. Bonitas, which ensures favourable underwriting since 1998. The ISO 9001:2015 standard replaced remuneration policy will have a direct impact on conditions for employees to join and remain the previous ISO 9001:2008 standard. As the operational expenditure and profitability, company Guaranteed pay members of the scheme. custodian of ATNS’s Quality Management System culture, employee behaviour and ultimately with (QMS), the Strategy and Optimisation department correct alignment on the ongoing sustainability of ATNS remunerates using the ‘cost to company’ Variable pay embarked on a process to embed the updated ISO the organisation. method of payment. The cost to company includes 9001:2015 standard throughout the organisation. the cash component plus employee benefits. The Variable pay includes all allowances ATNS may The aim for retaining ISO 9001:2015 certification Remuneration philosophy Company provides employees with contractually offer to employees from time to time. For the is to improve its business processes, reduce agreed basic benefits such as medical aid and executive management, it includes any acting company-wide waste, lower overall costs, and ATNS’s remuneration philosophy reflects the retirement fund benefits, which include the allowances for acting in another role as duly setting company-wide direction. dynamics of the market and context in which it pension fund and associated benefits, such as authorised and approved; and a principal officer

66 67 GOVERNANCE AND ASSURANCE CONTINUED

allowance for occupying the role of the principal Executive management are afforded the Non-executive directors’ remuneration officer on the pension fund. Variable pay for opportunity to structure their remuneration mission-critical positions includes variable packages according to individual needs within P.1 P.9 Non-executive directors receive fees for their service on the Company’s Board and Board Committees. allowances for the attraction and retention of key prescribed legal parameters. To encourage a Director’s fees are determined by the Department of Transport (DoT). skills and experience. high-performance culture, the determination of annual salary adjustments is performance-based GRAPH 6: CONSOLIDATED NON- EXECUTIVE REMUNERATION – 2015/16 TO 2017/18 Short-term performance incentive bonus only. Executives are evaluated against annually set routine objectives, which encompass the scope and Comparison of Consolidated Non-Executive Remuneration Performance incentive bonuses are based on: nature of the role and job content. 5 000 000.00

4 500 000.00 • The overall performance results of ATNS for the GRAPH 5: CONSOLIDATED EXECUTIVE financial year at the end of March, with a link REMUNERATION 2016/17 COMPARED TO 2017/18 4 000 000.00 to the key performance indicators set for the Executive Renumeration 2016/17 3 500 000.00 organisation at the beginning of the financial year. 3 000 000.00 17% 2 500 000.00 l Salaries

• The performance of the department. Rands • The employee’s performance against balanced 2 000 000.00 scorecard objectives. 1 500 000.00

1 000 000.00 The Company applies a five-point rating scale to l Salaries the measurement of the employee’s performance l Bonus 500 000.00 against balanced scorecard objectives. - Performance incentive bonuses are awarded to 2015/16 2016/17 2017/18 employees in the following categories: Year

• Meeting expectations. 83% • Exceeding expectations. Salaries and related costs GRAPH 7: TOTAL COST OF EMPLOYEES • Significantly exceeding expectations. Staff Costs Distribution 2017/18 Executive Renumeration 2017/18 Graph 8 provides a summary of the ATNS cost Executive remuneration of employment for the year. The salaries and wages increase is due mainly to average CPI as 1% 8% 15% P.1 Executive remuneration is aligned to the ATNS 9% P.9 published by STATS SA yearly. All remuneration remuneration policy to ensure fair and consistency policies and procedures are fully compliant with across the organisation. Benchmarking of current legislation and, where applicable, adhere executive positions in the South African labour to the collective substantive salary agreement market faces many challenges in making logical entered into between ATNS and the recognised l Salaries and fair comparisons between different jobs. trade union, Solidarity. This agreement is a four- l Bonus Executive positions are benchmarked annually, year agreement and will terminate on 31 March using a top executive survey administered by 2019. Payroll is audited annually by both internal external survey house. This benchmark informs and external auditors. If any findings result from projected salary movement in the external market. the audit, these are reported to the Audit and 85% Risk Committee of the ATNS Board of Directors. 82% In line with ATNS’s philosophy of continuous improvement, the current remuneration philosophy EXECUTIVE REMUNERATION 2017/18 is being reviewed and benchmarked against l Salaries & Wages l global best practice to ensure industry relevance. Bonus Incentives l Training & Development EXECUTIVE REMUNERATION 2016/17 EXECUTIVE REMUNERATION 2017/18 The completion of this project will result in an l improved, globally acceptable remuneration policy Pension Cost (Defined Contribution Scheme) Salaries 27,268,265.00 28,831,697.00 and practice. Salary negotiations will commence. Bonus 5,447,369.00 5,172,286.00

68 69 GOVERNANCE AND ASSURANCE CONTINUED

COMPARISON OF EMPLOYEE REMUNERATION – 2015/16 TO 2017/18

SALARIES & BONUS TRAINING & PENSION COST (DEFINED WAGES INCENTIVES DEVELOPMENT CONTRIBUTION SCHEME) 2015/16 R600,434,082 R68,833,745 R13,961,358 R59,983,454 2016/17 R656,652,451 R68,068,238 R13,406,144 R64,848,267 2017/18 R708,871,677 R73,382,720 R15,034,765 R71,175,100

Code of ethics

P.2 ATNS’s code of ethics enables a culture of P.3 entrenched values and norms that guide the behaviour of the Company’s employees. The Code aims to instil ATNS’s shared value system which includes the broad values of accountability; safety and customer service; continuous improvement and innovation; employee engagement and development; fairness and consistency; open and effective communication; and zero harm to self, others and the environment. The Code commits the Executive Directors and employees to the highest standards of ethical behaviour and all ATNS employment contracts reference the Code. The Company’s service providers, suppliers and trade partners are also subject to the Code in that they are required to sign the Procurement Code of Conduct, which is based on the Company’s Code of Ethics.

The Executive Human Capital is responsible for the development, review and implementation of the Code. The Code is reviewed annually. The Code informs fraud and corruption awareness training, and is accessible to all ATNS employees on the Company’s intranet.

70 71 MATERIAL ISSUES P.16

ATNS defines ‘materiality’ for its reporting in We have used a combination of internal and 1. Information and communication technology Our assessments of materiality also consider terms of ‘issues’ that substantively impact the external criteria to determine whether an issue 2. Procurement management the basic expectations expressed in the national organisation’s ability to create and sustain value is material, including factors such as the external 3. Infrastructure management and international standards and agreements with over the short, medium and long term. commercial environment, ATNS’s business which the organisation is expected to comply. 4. Human capital management context, its partnership landscape, regulatory and 5. License to operate For the 2017/18 Integrated Reporting process, policy environment, and stakeholder concerns The table on page 74 summarises the internal and ATNS reviewed the Company’s material disclosures and interests. Overall the Company identified 19 6. Services management external environmental factors that contextualise for the year and refined the process for identifying, material issues, clustered into eight overarching 7. Stakeholder engagement key disclosures and the material issues informing validating, prioritising and approving material clusters: 8. Financial management key disclosures. issues. The diagram below outlines the process followed.

FIGURE 12: ATNS INTEGRATED REPORTING PROCESS FOR DETERMINING MATERIAL ISSUES

STEP 1 STEP 2 STEP 3 STEP 4 Identification Validation Prioritisation Approval

Process Workshop to identify material issues for 2017 • A two-step electronic survey distributed to Management process to prioritise and cluster material • Approval of the material clusters and most material reporting period workshop attendees issues issues • Determine “importance” and “relevance” of • Submission of material issues profile to Board issues identified during the workshop Committees for approval • Management perspective applied

Facilitator Workshop coordinated by the office of the • Survey prepared by independent corporate The Office of the Company Secretary The Office of the Company Secretary ATNS Company Secretary and facilitated by reporting firm and circulated by the Office an independent corporate reporting firm of the Company Secretary • Survey finding collated by independent corporate reporting firm and approved by the Company Secretary

Participants Management, governance representative and Management, governance representative and Executive management • Executive management “process owners” “process owners” • Board of Directors (through Board Committees)

Criteria Identifying issues of material interest to ATNS Validate issues based on importance to ATNS Overall importance of top validated material issues to • Alignment of material clusters and associated material with a pre-determined boundary: in terms of: ATNS based on: issues with ATNS’s strategy and business context • Business context • Likelihood of materialisation • Area of impact • Alignment with ATNS’s top risks and opportunities and • External environment • Magnitude of impact • Time-frame of impact (short, medium or long term) emerging risks • Partnership landscape • Rating process aligned to ATNS’s ERM • Qualitative impacts • Alignment with Shareholder Compact reporting • Regulatory and policy environment process for validating material risks and • Quantitative impacts disclosures • Stakeholder engagement – Stakeholder opportunities • Where impact occurs (internal or external) identification Determine the relevance of material issues based on past, present or future impact on: • ATNS strategy • ATNS business model • The six capitals

Outcomes A set of 60 material issues (unclustered) Top 25 material issues (unclustered) Review material issues for the 2016/17 reporting year Approved Material issue clusters for the 2017/18 reporting year

72 73 MATERIAL ISSUES CONTINUED

CONTEXT FOR KEY DISCLOSURES AND MATERIAL ISSUES

REPORTING INTERNAL CRITERIA EXTERNAL CRITERIA CONSIDERATIONS P.16 Aviation industry ICAO Performance-Based ATM Global air traffic management (ATM) requirement by the Operational Framework and ASBU requirements, trends and standards; broader civil aviation Methodology; and global aviation as well as leading practice safety community. regulatory requirements. performance benchmarks. Basic expectations Statement of Strategic Intent and Changes in the socio-economic expressed in the national Shareholder Compact; 12 National developmental agenda and priorities and international Outcomes of Government and of National Government. standards and departmental outcomes of the agreements with which Department of Transport. the organisation is expected to comply. ATNS key performance ATNS Performance-Based Navigation Socio-economic changes and indicators as outlined Roadmap and Implementation Plan. challenges (e.g. barriers to market by the Shareholder’s entry) in ATNS’s key market compact. segments (local and regional). ATNS key performance ATNS’s mission, vision and values; Critical commercial opportunities as indicators as outlined Business Concept; strategic well as market and environmental by the Shareholder’s imperatives; critical issues; risks ATNS is geared to respond compact. programmes; and Key Performance to, locally, regionally and globally; Indicators (KPIs). as well as factors which may impact ATNS’s reputation, thereby influencing its ability to promote sustainable growth. ATNS top 10 high-level ATNS’s Enterprise Risk Management The provisions of various organisational risks. (ERM) Process, including the frameworks including: Public key operational risks impacting Finance Management Act (PFMA); ATNS’s strategic and operational KING IV/IV Code on Corporate objectives and the associated Governance (KING IV/IV); Discussion mitigating activities; as well as papers issued by the International ATNS’s governance and compliance Integrated Reporting Council (IIRC); frameworks; and the Company’s International Financial Reporting Sustainability Framework and Standards (IFRS); GRI Framework; associated policies and processes United Nations Global Compact; to manage financial, social and Carbon Disclosure Project; B-BBEE environmental sustainability Code. outcomes. List of key internal and Stakeholder expectations and Changes in the national, regional or external stakeholder feedback on material considerations global political environment and a issues as outlined by as captured and monitored through changing regulatory landscape. our stakeholder relation ATNS’s stakeholder engagement process and broader process – e.g. business community, social expectations. Airport customers, ACSA, Non- Governmental Organisations (NGOs), National and Provincial Governments, regional partners, designated targeted groups, academics, investors and the media.

74 75 MATERIAL ISSUES CONTINUED

, 1, 2 10 , 12 , 11 Clustering of ATNS’s material issues , 10 1, 6 2, 4 R Materiality universe ICONS ASSOCIATED WITH THE SIX CAPITALS 2 1 R 1, 1, 3 1 , 1 P.4 The Materiality universe clusters and 0, 0 Financial capital 1 , 1 , 1 3 Supply chain , management links material issues to the six capitals 2 R and ATNS’s strategic imperatives. compliance R Manufactured capital

Economic Regulatory Intellectual capital FIGURE 13: ATNS MATERIAL ISSUES 2 uncertainty 1 costs , impacting Plan Permission 1 not in line with the

UNIVERSE ALIGNED TO STRATEGY expenditure Capital 0 on ATNS’s Employment , 1 Permission Management of 6 , , Human capital AND THE SIX CAPITALS 7 6 , , 8 5 Financial Procurement , , 9 3 , unsustainability R Social and relationship capital 2 related Reliance on 3rd party service License to Natural capital operate providers High operational costs – inability to Financial 2 optimise costs Material issues cluster 1

, related issues 1 1 , 1 3 , ,

0 Material issue 1

1 Services R 2 Emerging risk- , Major safety

5

, event delayed service 2 payments from Capitals impacted regional airports

Inability to Capitals impacted Stakeholder create and retain Poor internal ICONS ASSOCIATED WITH STRATEGIC Engagement institutional 0

3 1 OBJECTIVES communication of , knowledge ,

1 Human Capital 6 ATNS’s long-term 0 , Ensure long-term financial , planning 5 1 1 , sustainability 2 Ethical 3 leadership Enhance operational efficiencies in 2 line with global ATM standards

related , Infrastructure 2 7 1 Physical security , Develop leadership capability in Africa Critical skills in , 6 3 1 of infrastructure , ATM space global demand 1 5 , , 0 4 , 1 2 , 4 , Maintaining positive 3 Create a transformative organisation 9 5 , employee morale 8 Physical safety of related ICT assets and people 5 Build a culture of safety

Build a skilled and capable employee Unavailability 6 of deployed resource base

CNS technology

and BCM and Manage the organisation’s recovery recovery 7

SUSTAINABLE

Disaster Disaster AVIATION AFRICA contribution to Climate Change

Cyber security operations event impacting network Manage and preserve scarce and Unstable IT Unstable 8 vulnerable resources 2 2 1 , 5 6, 5, 9 Develop enterprise-wide awareness for accountable environmental impact

10 Maintain an impeccable governance 2 framework , 5 10 , 10 2, 5, Ensure regulatory alignment and 11 2, 5, 10 compliance

12 Ensure constructive and collaborative stakeholder relationships Material issues cluster:

ICT related Procurement related Infrastructure related License to operate Human Capital Services Stakeholder Engagement Financial related issues

76 77 MATERIAL ISSUES CONTINUED STAKEHOLDER ENGAGEMENT

Figure 14 illustrates the ‘relevance’ of material issues in terms of the Company’s short, medium Key stakeholders • Economic Regulator and long-term strategic vision. • Continental ANSPs P.3 ATNS recognises the importance of securing • Media FIGURE 14: RELEVANCE OF MATERIAL ISSUES IN TERMS OF ATNS’S SHORT-, MEDIUM- AND LONG-TERM P.16 stakeholder support for our long-term success STRATEGIC VISION • CANSO by enhancing transparency, sharing knowledge, • Solidarity Trade Union and generating innovative solutions. The Company regularly engages key stakeholder groups that are • Schools, students and Educational institutions most relevant to the business. These dialogues and Universities) 12 13 inform our ‘Material Assessment’ and thereby, • Job seekers 3 2 1 informs our Sustainability Framework (Figure 18) • Regional aerodrome owners

Critical 5 6 and ultimately provides invaluable input into our 8 • CAASA 7 overall Strategic Model (Figure 16). 11 • Strategic partners, e.g., ANSPs outside the 10 9 ATNS’s Stakeholder Engagement Policy is available continent and selected supply chain entities 12 4 online at http://www.atns.co.za/ annual-reports. 14 18 Figure 15 provides an overview of stakeholder 17 20 ATNS’s key stakeholders include: priorities in terms of material issues whilst 15 16 19 prioritising these issues in terms of ATNS’s • ATNS employees strategic and operational imperatives. It is Significant important to state that ATNS views the business’s • International Civil Aviation Organisation (ICAO) Business Impact Business long-term commercial wellbeing and its • South African Air Force (SAAF) stakeholders’ interests as mutually inclusive. • South African Civil Aviation Authority (SACAA) • International Air Transport Association (IATA) Read more on ATNS’s stakeholder engagement in • Airlines Association of South Africa (AASA) our Sustainability Report available online http:// www.atns.co.za/ • Board of Directors of Airline Representatives of South Africa ATNS’s Stakeholder Engagement Policy is available Key • National Department of Transport (DoT) online at http://www.atns.co.za/annual-reports. Short term Medium term Long term • South African Weather Services (SAWS) Strategy Timeframe

1. Cyber security event impacting operations 12. Physical safety of assets and people

2. Unstable IT network 13. Poor Internal communication of ATNS’s long-term planning 3. Supply chain management compliance 14. Capital expenditure not in line with the Permission Plan 4. Physical security of infrastructure 15. Emerging risk – delayed service payments from 5. Low employee morale regional airports

6. Major Safety event 16. Critical skills in global demand 7. Ethical leadership 17. High operational costs - inability to optimise costs 8. Disaster recovery and BCM 18. Financial unsustainability 9. Economic Regulatory uncertainty impacting on ATNS’s Permission 19. Unavailability of deployed CNS technology

10. Inability to create and retain institutional knowledge 20. Management of Employment costs not commensurate with strategic objectives to remain financially 11. Reliance on 3rd party service providers sustainable

78 79 STAKEHOLDER ENGAGEMENT CONTINUED STRATEGY

FIGURE 15: STAKEHOLDER PRIORITISATION OF MATERIAL ISSUES FIGURE 16: ATNS STRATEGIC FUNDAMENTALS

Broad Strategic Inputs

12 ICAO Performance-Based ATM Operational Framework and ASBU Methodology 1 2 3 SA Government’s 12 National Outcomes Critical 8 5 6 13 4 7 DoT Departmental Outcomes 20 14 9 11 18 10 19 15 12 ATNS Performance-Based Navigation Roadmap and Implementation Plan

16 17 Economic Sustainability Social Sustainability Environmental Sustainability Sustainable development Commercial imperatives outcomes Significant

Ensure long-term financial sustainability Relevance to stakeholders to Relevance Provide efficient air traffic Become a transformative Manage the organisation’s

SUSTAINABLE management solutions organisation. AVIATION AFRICA contribution to Climate and associated services Change which meet the needs and Deliver continuous expectations of the ATM improvement of our Manage and preserve scarce community. safety performance and vulnerable resources Deploy and use leading Invest in our people to Develop enterprise-wide technologies to the benefit of build a skilled and capable awareness for accountable

Key the ATM community. employee resource base environmental impacts Strategic Imperatives Strategic Develop leadership capability Short term Medium term Long term in Africa ATM space Importance to ATNS Maintain an impeccable governance framework

1. Cyber security event impacting operations 13. Poor Internal communication of ATNS’s long-term planning Ensure regulatory alignment and compliance 2. Unstable IT network 14. Capital expenditure not in line with the Permission 3. Supply chain management compliance Plan Ensure constructive and collaborative stakeholder relationships

4. Physical security of infrastructure 15. Emerging risk - delayed service payments from regional airports Strategic Outcomes 5. Low employee morale 16. Critical skills in global demand 6. Major Safety event Strategic imperatives and key performance indicators (KPIs) 17. High operational costs - inability to optimise costs 7. Ethical leadership 18. Financial unsustainability 8. Disaster recovery and BCM Business concept 19. Unavailability of deployed CNS technology 9. Economic Regulatory uncertainty impacting on ATNS’s Permission 20. Management of Employment costs not commensurate ‘CriticalKey Issues’, business Core concepts Programmes and ‘Areas and implementation of Excellence’ plans with strategic objectives to remain financially 10. Inability to create and retain institutional knowledge sustainable Key business concepts and ‘Areas of Excellence’ 11. Reliance on 3rd party service providers

12. Physical safety of assets and people

80 81 STRATEGY CONTINUED

ATNS’s strategic fundamentals • Regulatory requirements with which ATNS 5. Become a transformative organisation. must comply, including safety regulation, 6. Deliver continuous improvement of our safety P.4 economic regulation, governance requirements Figure 16 demonstrates the Company’s holistic performance. approach to economic, social and environmental and shareholder needs. 7. Invest in our people to build a skilled and sustainability in that the three sustainability • Short- to medium-term business conditions capable employee resource base. pillars serve as drivers of our strategic intent to which ATNS must respond, as manifest in and operational momentum. The three strategic macro-economic developments and associated Sustainable outcomes pillars, in turn, require that the Company ensures traffic growth. impeccable governance oversight, regulatory compliance, and alignment with the needs of our • The requirements of stakeholder entities, 1. Manage the organisation’s contribution to wider stakeholder communities. including clients, ACSA and others, with whom Climate Change ATNS consults. 2. Manage and preserve scarce and vulnerable The model shows the strategic inputs into the resources business, including (but not limited to) the ICAO The ATNS strategy is reviewed annually to reflect Performance-based Air Traffic Management (ATM) the development of new critical issues and 3. Develop enterprise-wide awareness for Operational Framework at a global level; the strategic core projects, as well as to track strategic accountable environmental impacts South African Government’s national outcomes; implementation to achieve outcome-oriented the Department of Transport’s departmental goals. ATNS has adopted a Strategic Thinking Providing strategic value to South outcomes; and the ATNS Performance Based Process that provides a framework for formulating, Africa Navigation Roadmap and Implementation Plan. articulating, communicating and implementing a clear, concise and explicit strategy for the ATNS recognises the significant strategic value it organisation. The organisation is in the process Strategic drivers provides in the Republic of South Africa through of reviewing the current 2014 corporate strategy. the regulated provision of Air Traffic services This review includes the development of the future within the borders of the country. The Company The strategy is based on the understanding that strategic profile and industry models, as well as will continue to provide excellent and optimised the aviation industry plays a major role in driving strategic scenarios and stealth analysis. services in the regulated business. ATNS also sustainable economic and social development offers a range of related services that are throughout the world. In South Africa, the aviation strategically relevant throughout South Africa and sector comprises airlines, airports, air navigation Strategic imperatives other African countries. These additional, non- services and other essential ground services regulated international business deliverables are which make up the air transport infrastructure. ATNS’s strategic perspective is based on seven essential to the Company’s growth and positioning Globally, aviation has achieved high levels of strategic commercial imperatives and three in the African continent. macroeconomic performance by serving different sustainable development outcomes: regions through clear cycles of investment and opportunity. Our market-driven strategy is largely focused Commercial imperatives on driving ancillary services, such as air Within its legal mandate, ATNS positions itself to traffic management training, flight procedure 1. Ensure long-term financial sustainability. take advantage of opportunities - and to minimise design, consulting and sophisticated satellite threats - in response to four external drivers: 2. Provide efficient air traffic management communications technology through the non- solutions and associated services which regulated business model. The products and • Macro trends and industry developments meet the needs and expectations of the ATM services offered through the non-regulated that it cannot influence. These include the community. business have been carefully selected to enhance consolidation of the aviation industry, the ATNS’s current offerings and to provide innovative 3. Deploy and use leading technologies to the regionalisation of air traffic services and the packages for the future needs of both the business benefit of the ATM community. changing technology paradigm as air navigation and the ATM sector. These products and services services (ANS) become increasingly satellite- 4. Develop leadership capability in Africa ATM will position ATNS as a leading trans-national based. space. supplier of air traffic expertise and technology. Key

82 83 STRATEGY CONTINUED

products and services to be provided through the • Expedite ATNS’s expansion into the rest of FIGURE 17: STRATEGIC IMPERATIVES, ‘CRITICAL ISSUES’ AND ‘CORE PROGRAMMES’ non-regulated business across the continent will Africa and other selected global markets, include: while expanding our range of ATMS services in existing markets. Strategic Imperative Critical issue Core programme • Consultancy services for ASBU planning and • Attract, develop, retain and appropriately deployment reward a diverse and motivated professional Maintain long-term Deliver a high performing l CAPEX programme implementation • Air Traffic Management team that has the right skills, experience, financial sustainability Strategic Supply Chain in and alignment to the Permission commitment and drive to implement ATNS’s response to changing market • Aviation related training l ISO 9001:2008 – ISO 9001:2015 strategy. • AIS to AIM roadmap products and services. Standards Migration l Isando/Spartan • Flight Calibration. Implementing strategy within ATNS • ATFM/ ATM Consulting services. Our strategy is influenced by a number of planning Become a transformative Deliver a high performing l An operating/governance model to • CNS/ATM Systems maintenance/ installation/ initiatives such as the Industrial Policy Action Plan organisation which Strategic Supply Chain in align regulated and non-regulated consulting response to changing market business (IPAP), as well as the developmental prerogatives invests in its people • Space Based ADS-B of the South African Government. Strategic delivery l ISO 9001:2008 – ISO 9001:2015 aims to meet the increasing demands of longer- Standards Migration ATNS’s strategy focuses on the needs and term traffic growth and complexity. The strategy expectations of the ATM community, primarily seeks to adopt increasingly flexible practices, in South Africa, with a strong emphasis on the Deploy and use leading Deliver a high performing l CAPEX implementation and more efficient operations and more cost-sensitive Strategic Supply Chain in alignment to the Permission rest of Africa and other selected global markets. technologies to the business processes to counter unpredictable response to changing market The effective implementation of this strategy will benefit of the ATM l Remote Service Provision events. community ensure a well-equipped resource base, responsible l ISO 9001:2008 – ISO 9001:2015 governance, industry transformation, enhanced Our strategic imperatives and sustainable Standards Migration sustainability and support the global ATM system. development outcomes are further refined and directed into ‘critical issues’, ‘core programmes’ Our strategic vision can be encapsulated as Play a leading role in Deploy an enabling IT l ISO 9001:2008 – ISO 9001:2015 and Key Performance Indicators (KPIs) to set follows: the development of air infrastructure Standards Migration specific performance targets and guide their traffic management • Develop a thorough understanding of the practical achievement. in Africa and selected global ATM community with emphasis on international markets core products and services, technology ATNS Critical Issues and Core developments and client requirements, by Programmes providing innovative and relevant ATM solutions Deliver continuous Implement Safety l Cyber/site security Intervention to improve and associated services; improvement of our l Disaster recovery Critical issues bridge the Company’s current safety performance safety performance • Develop, market, distribute and support a strategic profile and the future strategic profile. l ISO 9001:2008 – ISO 9001:2015 complete range of ATM solutions and associated At an even more granular level, High priority Standards Migration services that meet the needs and expectations critical issues are set to be achievable within a of access, equity, safety, security, efficiency, single financial year. Critical Issues are reviewed Provide efficient air Deploy an enabling IT l Remote Service Provision predictability, environmental sustainability and annually and, when required, new critical issues traffic management infrastructure affordability. are developed in line with the Company’s profile, l ISO 9001:2008 – ISO 9001:2015 solutions and associated Standards Migration • Continue to enhance ATNS’s ATM solutions strategic objectives and risk appetite. Core services which meet the and associated service provision in South programmes drive the corporate strategy and are needs and expectations Africa to leverage strategic partnerships, the linked to the critical issues as well as the linked to of the ATM community Company’s global influence, and its harmonised Strategic Imperatives. technologies and methods, to become the leading ATM provider in Africa, thereby securing For the period 2017/18, ATNS developed the future growth, sustainable revenue sources, following High Priority Critical Issues to secure an long-term profitability and relevance as an ATM integrated action plan to reach the set strategic provider of choice. objectives in the strategic profile.

84 85 STRATEGY CONTINUED

Monitoring sustainable development outcomes

P.3 P.4 In pursuit of a culture of sustainability, ATNS has identified three key areas that must be addressed to Sustainability is a journey for ATNS and the aim is to achieve corporate citizenship as well as sustainable P.16 ensure that our business is viable and relevant for the future, namely: economic, social and environmental development which is crucial for our and society’s wellbeing. sustainability. ATNS will ensure that each of these areas is well-rooted, and that the business continues to thrive in a changing world. ATNS’s strategic economic, social and environmental performance outcomes are monitored through the Company’s Sustainability Framework, which reflects the full spectrum of ATNS’s key sustainability outcomes. FIGURE 18: ATNS SUSTAINABILITY FRAMEWORK

ATNS’s detailed Sustainability Report is available online at http://www.atns.co.za/annual-reports.

Key Sustainability Outcomes Key Sustainability Outcomes

• Manage climate change impacts • Core and critical skills/training and PRESERVE ENABLE development • Preserve scare resources • Manage Organisation’s • Build a culture of safety • Institutional knowledge • Invest in green energy technologies contribution to Climate Change & Environmental Protection. • Culture of safety • Sustainability (economic, social & • Build a skilled and capable environment) integration into business employee resource base • Employee satisfaction and collaborative operations as a key enabler • Develop organisational culture sustainability change • Create a transformative • Enhance awareness to drive behavioural management and • Create a representative workforce organisation change amongst employees communication. • Long-term job creation • Harvest & retain intellectual capital • Manage & preserve non- including knowledge • Creating a learning organisation renewable natural resources.

Key Sustainability Outcomes

Key Sustainability Outcomes • Ensure impeccable governance and ethics

• Enhance safety, reliability and availability • Ensure regulatory compliance GROW ENGAGE • Ensure operational efficiency • Develop local suppliers • Develop leadership capability • Maintain an impeccable • Innovation, ICT and R&D • Shareholder management in Africa ATM space governance framework • Ensure working capital • Strategic partnership development • Ensure long-term financial • Ensure regulatory • Leadership development sustainability alignment and • Positive community development • Sustainable regulated and non-regulated • Stakeholder management revenue • Enhance operational • Compliance efficiencies in line with • Creating a shared value perspective global ATM standards • Responding to South Africa’s socio- • Ensure constructive and economic objectives • Investing in communities and developing collaborative stakeholder local community capabilities (e.g. SMME’s) relationships

86 87 CREATING VALUE THROUGH THE CAPITALS

FIGURE 19: ATNS’S VALUE CREATION MODEL

P.4 Inputs Activities Outputs Outcomes

FINANCIAL CAPITAL FINANCIAL CAPITAL FINANCIAL CAPITAL FINANCIAL CAPITAL • Cash generated by operations • Sound financial management • Cash generated by operations: R366 million • Maintaining long-term financial sustainability by • Turnover • Capital investment strategy • Turnover: R1,594 billion optimising revenue in ATNS’s regulated and non- • 5-year Permission • Net profit: R191 million regulated businesses • Implementation of core programmes to increase • Protecting South Africa’s economic interests and revenue in the regulated and non-regulated trade, whilst creating employment opportunities business for South Africans • Creating economic value for the country

MANUFACTURED CAPITAL MANUFACTURED CAPITAL MANUFACTURED CAPITAL MANUFACTURED CAPITAL • Communication systems • Infrastructure acquisition and management • Number of traffic movements for the year: 1,060 183 • Deploying and using leading technologies • Navigation systems • Network performance monitoring and • % of global Airspace cover: 10% • Creating infrastructure value for the South • Surveillance systems management African ATM sector • Display (Air Traffic Management) systems • Management of infrastructure reliability • Exerting more influence and market confidence in • Simulator and systems (training & licencing) our abilities • Improving air traffic safety in Africa

INTELLECTUAL CAPITAL INTELLECTUAL CAPITAL INTELLECTUAL CAPITAL INTELLECTUAL CAPITAL • ATNS brand and reputation • ATNS brand and reputation • 68 ATS bursars trained • Enhancing skills and building competencies • Information knowledge management management activities • Engineering trainees = 22 • An organisational culture that entrenches safety • Patents, trademarks & copyrights • Information knowledge (12 Engineering learnerships and values • Licencing management 10 graduates) • Embedding a culture of sustainability • Aviation Training Academy (Air Traffic Services • Ensuring patents, and Engineering) training pipeline trademarks & copyrights are appropriately licenced

HUMAN CAPITAL HUMAN CAPITAL HUMAN CAPITAL HUMAN CAPITAL • 928 permanent headcount • Human capital ATS AIC: 72,27% • Maintaining a representative workforce • 42,43% female representation management • ATS Female: 46,55% strategy • ATNS AIC: 76,98% • Safety management • ATNS Female: 47,35% programmes • People with • Aviation Training disabilities: 3,22% Academy for ATS and Engineering pipeline

SOCIAL AND RELATIONSHIP CAPITAL SOCIAL AND RELATIONSHIP CAPITAL SOCIAL AND RELATIONSHIP CAPITAL SOCIAL AND RELATIONSHIP CAPITAL • Civil Air Navigation organisation (CANSO) • Stakeholder management strategy • 5,19 safety events per 100 000 movements • Deliver on our corporate social responsibility • INSPIRE Initiative • CANSO programmes and initiatives • Total CSI: R2,521,704.85 • Collaborative stakeholder relationships • Institutional alliances promoting training and • Supplier and enterprise development programmes • B-BBEE Level 2 education (e.g. WITS, University of Pretoria and University of Johannesburg)

NATURAL CAPITAL NATURAL CAPITAL NATURAL CAPITAL NATURAL CAPITAL • South African sovereign and delegated airspace • Sustainability and Environmental Strategy • Total carbon inventory for the year: • Reducing CO2 emissions • % of global Airspace cover: 10% • Water management activities and programmes 23,440,52 tons CO2e • Sound management of natural resources • Natural resources for consumption: water, fuel • Sustainability management framework • 20,358,981.44 kWh electricity and electricity • Environmental compliance practices • 81,612 litres of fuel

88 89 CREATING VALUE THROUGH THE CAPITALS CONTINUED

Defining “value creation” Financial capital Approach to creating financial capital value

P.3 P.8 ATNS defines “value” as the Company’s ability P.4 As a provider of Air Traffic Control and ATNS’S 10-YEAR BUSINESS PLAN AND ACCOMPANYING FINANCIAL MODEL P.16 to create and preserve relative economic, social Management (ATM) solutions for South Africa and natural worth in terms of the six capitals to • South African ATM industry strongly linked to growth in air traffic movements and overall economic growth. as well as 10% of the world’s airspace, ATNS • 10-year plan addresses key strategic and stakeholder concerns. meet – and exceed - stakeholder expectations. creates financial value for the Company • Ring-fences resources and ‘non-regulated’ business costs and revenues from the current regulated business This includes: financial capital and economic value, through its regulated and non-regulated in the short to medium term. manufactured capital and infrastructure value, business activities. The air traffic management • Identifies risks and opportunities in both the egulatedr and non-regulated businesses. intellectual capital value, human capital value, industry in South Africa is strongly linked to social and relationship capital value, and natural ATNS INTERNATIONAL PROGRAMME growth in air traffic movements and overall capital value. economic growth. The Company projects its • A long-term strategy to expand into the Africa region. • A division established known as “ATNS International”. revenue based on the expected air traffic The Company aims to create integrated and • Enables expansion in the non-regulated business market without undue risks to the regulated market and movement growth. The air traffic movement sustainable value by providing a single banner Shareholder. has a high correlation to Gross Domestic of service accountability to clients for air traffic • Facilitates joint ventures and partnerships with external suppliers to harness market opportunities. Product (GDP) at approximately 80%. There is management solutions and associated services, a time lag between a change on GDP and the ALIGNMENT OF TARIFFING AND SERVICE STANDARDS IN THE REGULATED BUSINESS and to expand this service offering across South impact on air traffic movements of between Africa’s borders into the rest of Africa. • Strong correlation between service standards reporting and the Permission application. 12 and 18 months. • The Regulating Committee (RC) - sanctioned by the ATNS Act No.45 of 1993 - prescribes service standards. • Service standards are prescribed in accordance with internationally-accepted practices. ATNS’s value proposition is supported by: • Reporting on quantitative and qualitative results - a necessary counterbalance to economic regulation. Every year some 390 000 airplanes take off and • RC determines if ATNS’s assets are sufficient, excessive or insufficient. • the creation of economic value for the country land from South Africa’s main airports. A study • RC deters Companies from implementing excessive charge increases through Consumer Price Index (CPI) – through its supply-chain practices; by International Air Transport Association (IATA) X price-cap regulation. confirms the vital role of air transport in facilitating • Monitoring of service standards ensure that the price cap translates into increased efficiency, and not a • improved infrastructural systems through over R129, 9 billion ($10 billion) in exports, some deterioration of service levels. leading-edge technology; R181,9 billion ($140 billion) in foreign direct ATNS’S B-BBEE STRATEGY • a commitment to safety compliance; investment and around R116,9 billion ($9,2-billion) • Important driver in achieving ATNS’s goals towards economic and social sustainability. • the provision of training and career in inbound leisure and business tourism for South • B-BBEE Strategy developed in accordance with the B-BBEE Codes of Good Practice. development for its people; and Africa. • Aligns with the South African Governments’ transformation initiatives. • the ability to attract and retain sector-specific The aviation industry has a significant economic • B-BBEE Strategy addresses all six elements of the generic B-BBEE scorecard. staff competencies and critical skills in global impact across some of the major African markets. • ATNS’s Enterprise and Supplier Development strategy supports and develops emerging black-owned demand; ATNS’s non-regulated business encompasses a suppliers in the aviation industry • the ability to foster reliable industry long-term strategy to facilitate regional expansion SOUND FINANCIAL MANAGEMENT partnerships; through a wholly-owned subsidiary vehicle • ATNS raises funds from the market to finance its capital expenditure programme. • a commitment to ethical business practices, ATNS also delivers considerable economic • The borrowing plan is driven by planned capital expenditure, cash flow, gearing and ATNS’s current ratio. • Gearing levels (% of debt capital) of 45% is acceptable without placing undue risk on the Company. environmental impact awareness and proactive outcomes to society. South Africa’s air traffic corporate social responsibility. • ATNS obtains approval from the Minister of Transport and the Minister of Finance to borrow funds. routes connect the country to cities of more than • Distributable profits are retained for re-investment and to maintain financial sustainability in the short term. 10 million inhabitants, with an average of 1,5 • Major share of revenue derived from monthly billings for air traffic control services rendered. outbound flights per day available to passengers. • Other revenue derived from less periodic income. It is estimated that a 10% improvement in air • CAPEX dependent on the requirements of specific projects. connectivity relative to GDP would see a • ATNS maintains a minimum cash balance of two months’ operating expenditure plus capital loan payables. R1,5 billion per annum increase in long-run • ATNS’s 20-year capital expenditure plan, considers legislation, capacity requirements, efficiency, technological changes and end-of-life replacements of infrastructure. GDP for South Africa’s economy. South Africa’s • The capital expenditure plan is reviewed annually and approved by the Board of Directors. integration into the global air transport network • Approximately 60% of VSAT and NAFISAT revenue is generated by IATA members. therefore is important for the continued growth of • Where required, ATNS hedges against foreign currency fluctuation by taking forward cover. the country’s economy. • Cash flow is monitored daily to ensure sufficient funds to cover operational expenses and loan obligations. • All purchases are approved in accordance with the ATNS mandate matrix and prescripts of the PFMA.

90 91 CREATING VALUE THROUGH THE CAPITALS CONTINUED

We report on: MATERIAL ISSUES WHY THEY MATTER HOW WE MANAGE THEM

• Financial performance Financial • Economic regulation by the South • The ATNS 10-Year Business Plan. • The Permission Planning process unsustainability African Regulating Committee • Africa expansion strategy, including • Performance in the non-regulated business restricts monopoly abuse within the ATNS International programme the South African market by strictly and Ring- Fencing Project. applying tariff adjustments. • The ATNS ATM Roadmap. 2017/18 Material issues impacting our ability to create financial capital value • The maturity of ATNS’s domestic • The Africa Indian Ocean (AFI) operations will create challenges Strategy Project. MATERIAL ISSUES WHY THEY MATTER HOW WE MANAGE THEM for the business to generate new • Capital Investment Strategy. customers in South Africa. It is • Sound financial management. therefore, imperative for ATNS to • ATA Strategy and associated Capital expenditure • An inability to successfully plan, • Integration of policies, processes secure future growth and revenue by expansion objectives geared towards not in line with the implement and expense ATNS’s and procedures to ensure coherence broadening its service offerings to becoming a profit-centre. Permission Plan CAPEX programme in line with the in planning capital. other markets, including the wider Permission Plan could result in a • On-time hand-over of projects to Africa market. penalty in the form of an imposed procurement department (6 – 12 “clawback”. months prior to commitment date) • Acquisitions of appropriate training enables a streamlined tendering and Management of • ATNS needs to balance employee • ATNS remuneration philosophy and systems, equipment and simulators contract awarding process. Employment costs not costs with the need to attract highly Human resourcing plan. may impact training delivery should • A “master view” of project status commensurate with skilled and experienced staff – many • Human Resource Plan implemented we not be able to keep up with best through real-time information flow strategic objectives of whom have skills in critical global in accordance with the Human practice technologies. across the phases of ‘commitment’, to remain financially demand. Capital plan in line with the approved ‘cash flow’ and ‘capitalisation sustainable Permission plan enable’s effective monitoring, reporting and control of projects. Economic regulatory • Economic regulation by the South • Apply for a 5-year Permission to levy • ATA participation on various forums uncertainty impacting on African Regulating Committee charges. to ensure ATA requirements are ATNS’s Permission (RC) restricts monopoly abuse • Comply with the conditions of the addressed at concept/business case within the South African market by Permission as set out by the RC. stages of projects. strictly applying tariff adjustments. • ATNS playing a role in amendments • CAPEX Delivery Framework with ATNS’s business and operational to current regulations and legislation aims to improve delivery of CAPEX strategies hinge on RC approvals for and monitoring developments on project by ensuring efficiencies and its planning process – e.g. human STER. effectiveness of the CAPEX value capital and infrastructure planning. chain including processes and policies. Increased cost and • Additional revenue is influenced by • Dedicate personnel resources to regional airport reliance regional or privately-owned airports. recover regional airport funds and Emerging risk - delayed • On-time payments from regional • Dedicate personnel resources to ATNS’s revenue recovery can be ongoing consultation as well as service payments from airports ensure on-time payments recover regional airport funds and challenged if there are delays in maintain set agreements. regional airports to key suppliers and ED suppliers. ongoing consultation as well as payments from these airports. ATNS agreement need to be maintained. continues to provide services to these airports as part of the national High operational costs • Cost-optimisation forms part of • Standard cost-saving initiatives objective and the mandate set out in - inability to optimise operational efficiency objectives and • Continuous organisational the Act. costs helps to drive value for stakeholders awareness promoted for cost- in line with the Permission process. savings and operational efficiency. • Training delivery is viewed as an • An operations efficiency analysis investment in the future of ATNS and will be conducted in 2018/19 with its people. ATA expansion objectives the intention of addressing existing may be compromised should costs bottlenecks and areas for cost not be optimised and if adequate optimisation. funding is not allocated. Ultimately the journey towards becoming a profit-centre may be compromised.

92 93 CREATING VALUE THROUGH THE CAPITALS CONTINUED

Key financial capital outputs for 2017/18 • A transport sector that is safe. • An increased contribution to job creation. Total revenue R1,594 billion • An efficient and integrated transport infrastructure network for social and economic development. Operating costs R1,382 billion • An increased contribution of transport to environmental sustainability. Capital expenditure R305 million Approach to creating infrastructural value SADC VSAT II Revenue R46,4 million

NAFISAT Revenue R35,8 million PERFORMANCE-BASED NAVIGATION IMPLEMENTATION

Total assets R3,084 billion • Defines performance requirements for aircraft navigating on an ATS route, within a terminal procedure or a Total equity R2,617 billion designated airspace. • Supports increase in ATM system capacity and efficiency. Cash generated from operations R366 million • Brings about environmental and safety benefits by reducing aviation congestion, conserving fuel and reducing impact of aircraft noise. Total investment in CNS technology R36,6 million • National PBN Roadmap and National PBN Implementation Plan developed with the ATM Community. Employee wages and benefits R885 million • South African PBN Implementation Task Team established to deliver on the implementation plan. Total borrowings as at 31 March 2018 0 ATNS INFORMATION TECHNOLOGY STRATEGY

Payments to Government as income tax (including deferred tax) R75,5 million • Manages end-to-end internal and external client experiences to ensure catalogued IT services. • Spearheaded by fast-maturing business process management and knowledge management. • Online presence management and mobile applications. • Ensures adequate support for various units within ATNS, especially for highly-skilled resources and change- Material financial and economic Manufactured capital management initiatives. outcomes CONTINUOUS SAFETY IMPROVEMENT AND IMPLEMENTATION OF ATNS’s SAFETY MANAGEMENT PLAN ATNS provides and maintains reliable • Maintaining long-term financial sustainability airspace infrastructure in South Africa, • Safety action plans are created annually and consider the findings of operational analyses. by optimising revenue in ATNS’s regulated and enabling the delivery of air traffic services in • Operational analyses identify hazards and gaps, as well as factors contributing to previous safety events and non-regulated businesses. a safe and efficient manner. In line with the new applicable operational safety concepts. • Protecting South Africa’s economic interests Shareholder Mandate to deliver safe skies and • Continuous adjustments and additions are made to safety plans in response to periodic operational demands to reduce event recurrence. and trade, whilst creating employment customer-centric services, our leading-edge • Both national and unit-specific safety plans are in place to address human- and system- related failures. opportunities for South Africans. communications, navigation and surveillance • A Regional Airport Safety Programme helps to streamline contractual terms, resource allocation and service technology creates advanced infrastructural • Creating economic value for the country. provision between various service providers. value for the Company and the country’s air • Safety performance assurance enables ATNS to verify that it is meeting its safety performance targets. traffic navigation sector. Accordingly, ATNS • A monitoring programme increases the probability of detecting weaknesses in the safety system’s defences Monitoring the trade-offs in the invests in new and pioneering air traffic before an active failure leads to a serious safety occurrence or accident. business management technology to manage and • Investigation of occurrence reports go together with safety performance assurance. control the national airspace system. • Safety metrics include: »» Safety Ratio ATNS operates in an environment where it is »» Separation standards based on IFR hours required to pre-empt the future demand for ATNS’s advanced Technology Investment »» Risk Safety Index (RSI). air traffic capacity, services and technology as Initiative is one of the largest single CAPEX »» Safe operation and application of separation standards are based on Instrument Flight Rule (IFR) flight expected and articulated by its ATM stakeholders investments that the Company has embarked hours. » The IFR metric is comparable to the same metric obtained from the Civil Air Navigation Services and users in the South African regulated and upon in the last decade and is steered under » Organisation (CANSO) and serves to support the benchmarking of safety performance. continental non-regulated environments; as well the programme ‘Collaborative ATNS Air Traffic System’ (CAATS). documented in the ATNS Permission framework CAPITAL INVESTMENT STRATEGY approved by the Economic Regulating Committee. As capital expenditure in infrastructure increases Through its manufactured capital and • Key enabler for creating infrastructural value. (2017/18: 28% increase), the value of manufactured infrastructural value creation ATNS supports the • Continually enhances operational efficiencies and service reliability. • Informed by regulatory requirements at a global level. capital rises while financial capital value National Developmental Plan (NDP) by facilitating • Develops business cases for Capital Expenditure projects. decreases. the achievement the following DoT outcomes:

94 95 CREATING VALUE THROUGH THE CAPITALS CONTINUED

INTEGRATED PLANNING THROUGH THE ATNS ATM ROADMAP MATERIAL ISSUES WHY THEY MATTER HOW WE MANAGE THEM

• Support ATNS’s strategic plan to implement ATM/ CNS systems. Unstable IT network ATNS’s IT network enable users to • Change management process to • Roadmap provides more detailed guidance for the content of implementation plans. share files, access applications, and assess all proposed changes and • Provides motivation for permission requests and a foundation for budgets. communicate and interact via various related performance impacts. • Serves as input into the ATNS Integrated Technology Plan. social and electronic platforms. • Action plans to enhance network An unstable network may: requirements in place following REMOTE SERVICE PROVISION • Result in severe operational recent ‘network health’ check. disruptions • IT infrastructure at the ATA to be • Consolidated approach control services for various airports terminal areas. • Impact ATNS’s financial sustainability addressed in the new financial year • Provides ATS services in remote airports even though traffic volumes are low. • Lead to loss of customers (local and to ensure optimal functioning. • Leading-edge remote tower technology establishes aerodrome control services without being stationed at an international) airport. • Devaluation of ATNS’s trade name • Reduced capital expenditure requirements on new towers. • Greater staffing flexibility. Cyber security event In the ever-increasing likelihood of • IT Cyber Initiative to address and impacting operations cyber-breaches, ATNS needs to adopt mitigate cyber vulnerabilities and COMMUNICATION, NAVIGATION AND SURVEILLANCE INFRASTRUCTURE PROVISION AND MAINTENANCE a more secure, vigilant, and resilient risks. approach to cybersecurity. The impact of • Holistic Cyber Security Strategy, • Air traffic services (ATS) provided at nine statutory ACSA airports and contractual air traffic control services a cyber-event may result in: Framework and Implementation at 12 regional airports. • Compromised and leaked data and Plan in partnership with CSIR. • Extensive Very High Frequency (VHF) radio network. information (sensitive) • Included in ATA Risk Register and • Voice communication and control system (VCCS) relays communications between air traffic controllers, • Legal actions associated mitigation controls. pilots and air traffic service units. • Financial instability • 9 ATS sectors; 10 approach radar sectors; and 30 aerodrome control sectors. • Operational disruptions • 22 Local VHF Sites; 42 Remote VHF sites; and 2 HF Sites. • Loss customers (local and • Navigation infrastructure includes: 35 VOR sites; 10VDF sites; 20 DME sites; and 12 NDB sites. international) • Surveillance infrastructure includes: 2 Surface Movement Radar Systems; 8 Primary Radar Systems; • Devaluation of ATNS’s trade name and 17 Secondary Radar Systems (9 stand-alone). • Loss of intellectual property (IP) • Training delivery, administration and We report on: document integrity may be severely compromised should the ATA suffer a cyber-attack. • Infrastructure performance • Infrastructure investment Unavailability of • ATNS Air Traffic Management • Current infrastructure availability deployed CNS technology service provision relies heavily levels are high and every effort is 2017/18 Material issues impacting our ability to create manufactured capital value on Infrastructure and software made to maintain existing standards. deployment. Current ATNS CNS • Adequate redundancy to ensure technology provides for effective and service continuity. MATERIAL ISSUES WHY THEY MATTER HOW WE MANAGE THEM safe aircraft operations as required • Service Level Agreement by International Civil Aviation • Preventative maintenance Disaster recovery and ATNS could suffer severe operational ATNS’s recently enhanced disaster Organisation. • ATA participation on various forums BCM disruptions, loss in revenue, and recovery strategy and process address • All Engineering and ATS-related to ensure ATA requirements are damage to the organisation’s reputation potential shortfalls in operational training make use of CNS addressed at concept/business case should a large-scale disaster procedures (particularly in terms of technology. stages of projects. materialise. ATNS’s disaster recovery information technology) to manage strategy and process during or after disaster recovery and consider: Physical security of • ATNS physical infrastructure is • A new Security Policy has been a disaster are critical in maintaining • ATNS’s holistic risk profile infrastructure experiencing theft and vandalism. developed and approved. operational security, safety and • A regularly tested DR plan This is also one of ATNS’s top 10 • The security team has finalised efficiencies as well as protecting • Major stakeholder concerns risks on its ERM profile. the required technical security intellectual capital and institutional • Aligning actions and processes specifications for all remote sites. knowledge. with appropriate IT regulations • The process of installing new and best-practices. security systems for various remote sites has started.

96 97 CREATING VALUE THROUGH THE CAPITALS CONTINUED

MATERIAL ISSUES WHY THEY MATTER HOW WE MANAGE THEM Material infrastructural outcomes Monitoring the trade-offs in the business Operational efficiency, • Ensuring operational efficiency and • Monitoring Arrival and Departure • Enhancing operational efficiencies and service service reliability and reliability not only maintains and Delays in accordance with reliability. ATNS’s project and infrastructure sites are located network performance improves safety standards but also performance target keeps operating costs down, which • Implementation of the operational • Deploying and use of leading-edge across the country and some of the sites are in turn ensures that air transport efficiency core programme. technologies. located in conservation areas. An example includes the Blesberg Radar facility, situated in the Cape stays affordable and that the number • Enhancing operational safety performance. of flights increases. Nature Reserve in the Swartberg Mountains of the Western Cape. The surveillance service from Disaster Recovery • A Disaster Recovery Enhancement • Disaster Recovery Enhancement Enhancement Plan Plan was developed and approved by Plan this facility tracks aircraft within a 250 nautical EXCO mile radius from the facility. In establishing and • The Disaster Recovery Project is maintaining this site extraordinary caution is taken broken down into four (4) phases: to comply with all environmental recommendations »» Phase 1: FAOR Centre (SSS & and considerations to ensure harmonisation Emergency Tower) between technology and the environment. This » Phase 2: FACT Centre (SSS & » approach to the environment is not only considered Emergency Tower) »» Phase 3: FAJA FIR (FABL, FALA & in biodiversity sensitive areas, such as parks, but is FALE) and FACA FIR (FAGG, FAPE applied to all infrastructure deployments. & PAEL) »» Phase 4: Regional Airports • FAOR (Phase 1) is being prioritised and is included in the 2019/2020 CAPEX plan for excursion • A business case is being developed for Phase 1 currently.

Key infrastructure value outputs for 2017/18

C: 99,78% Achievement of CNS Systems Availability N: 96,30% S: 99,97% Operation of the satellite communication networks SLA: 99,89% SADC VSAT 2 Operation of the satellite communication networks SLA: 99,97% NAFISAT Reduce overall traffic delays (Average delay per flight) 22 seconds 1 RNAV (GNSS) Baro VNAV: 4 Instrument Flight Procedures Design reports Completed Implement ICAO PBN concept in South Africa. 3 RNAV 1 Design report: Near-term implementation targets in line with South African 12 Instrument Flight Procedures PBN Roadmap. Design reports Completed 1 ILS design report: 4 ILS Design Reports for submission to SACCA Completed

98 99 CREATING VALUE THROUGH THE CAPITALS CONTINUED

Intellectual capital • A full member of ICAO Trainair Plus Programme (TPP), which supports the global improvement of safety and efficiency of air transport. • Certified as an approved Aviation Training Organisation by several Civil Aviation Authorities across Africa and ATNS’s intellectual capital plays a critical role ATNS aims to expand its service offerings to become a registered, sector-specific training the Indian Ocean Islands. in the Company’s future earning potential • Has delivered ATS and ATSEP training to delegates from at least 30 Countries in the past year. institution. ATNS’s training capacity and expertise and encompasses a range of ‘intangibles’ • Moving towards model of ‘profit-centrism’. that interrelate with the other capitals to are key enablers of industry leadership, innovation • Awarded ‘Regional Training Centre of Excellence’ status by ICAO, enabling the ATA to develop and deliver create sustained value for the business and and the Company’s future earning potential. ICAO training courses in authorized subject areas. its stakeholders. ATNS considers three main • Embarked on a multi-year project to register with the Department of Higher Education and Training as an categories of intellectual capital: In addition to reporting on the Company’s Institution of Higher Learning and to accredit an academic air traffic service qualification with the Council for performance in applied research and innovation, Higher Education this section includes performance reporting • Intellectual property: Research and AVIATION INNOVATION LABORATORY development (including service and product on the ATM sector-specific skills training and development) as well as ATM training development provided to staff and third parties by • Develops and validates future technology solutions with the potential to be commercialised or knowledge and capability. ATNS as an Aviation Training Academy; whereas operationalised in the ATM environment. • Future emerging technologies are visualised, simulated and tested. • Organisational capital: ATNS’s business organisational training intended to develop ATNS staff competencies (skills enhancement, • AR outcomes include product development, process development and process improvement. concept, operational model and strategy; • Will drive and position ATNS as an African leader in the 21st-century innovation economy. core programmes responding to industry leadership training and the development of dynamics; and business and governance functional competencies) is covered in the Human processes, policies and procedures. Capital section that follows. We report on: • Implicit and embedded knowledge: Market and sector knowledge, areas of excellence • Performance in applied research and innovation (including critical sector skills and • Training and development in sector-specific skills capabilities). 2017/18 Material issues impacting our ability to create intellectual capital value

Approach to creating intellectual capital value MATERIAL ISSUES WHY THEY MATTER HOW WE MANAGE THEM

Inability to create • Globally regarded as a beacon • ATNS has a retiree programme which is THE AVI AFRIQUE AVIATION INNOVATION SUMMIT and sustain of safety in airspace navigation, aligned to transferring and retaining talent institutional ATNS is regarded as a centre of • ATNS’s Aviation Training Academy. • Founded by ATNS in November 2012, the annual event aims to lead in the areas of ATM innovation. knowledge excellence and an institute of • Management training to enhance employee • Integrates an applied research (AR) and innovation framework to align ATM solutions to the African market. reference. This standing can only engagement and motivation. • Addresses needs that may not be met by research programmes in the USA and Europe. be maintained if ATNS continues • Continuation training to maintain the skills • Widely supported by - and represents - key stakeholders: to attract, retain and develop of air traffic controllers. »» Technology Innovation Agency. competent people who are aligned • Succession planning. »» Department of Science and Technology and Department of Transport. with the Company’s desired culture • Innovation around operational concepts and »» Council for Scientific and Industrial Research (CSIR). of safety, professional excellence safety performance. »» Aviation organisations such as IATA, Board of Directors of Airline Representatives of South Africa and sustainability awareness. • The AVI AFRIQUE Aviation Innovation (BARSA), Boeing and Airlines Association of Southern Africa (AASA), among others. • If the ATA is unable to attract and Summit. retain instructional resources to • Applied research unit within ATNS. APPLIED RESEARCH UNIT WITHIN ATNS continue delivering on the ATNS • Aviation Innovation Laboratory. training demands, the ATA’s • ATNS’s remuneration philosophy and • An Applied Research (AR) strategy and plan established by the ATNS Operations Technology Department. expansion objectives may be willingness to pay a premium to both attract • Shifts ATNS from being a user of acquired technologies to contributing to the local technology value chain. impacted. and retain scarce ATM skills. • Established in 2011, the AR unit aligns with the Government’s vision, to move South Africa towards a knowledge-based economy. • Focus to date has been to capacitate the unit with appropriate skills and expertise. Key intellectual capital outputs for 2017/18 ATNS’S AVIATION TRAINING ACADEMY ATCO 3: 221 • Provides a full range of air traffic services training, technical support and related training to delegates in ATCO 2: 37 South Africa and the broader African continent. • ISO 9001:2015 certified accredited institution. Training pipeline for ATS and technical staff ATCO 1: 134 • International cooperation agreements with partners such as the Embry Riddle Aeronautical University, Eng. Techs: 78 ENAC and WITS. Eng. Satellite Techs: 5

100 101 CREATING VALUE THROUGH THE CAPITALS CONTINUED

Material intellectual capital Human capital • A five-year EE Plan came into effect on 1 April 2015 to 31 March 2020 – reviewed annually. outcomes • EE Plan championed by ATNS’s CEO through various line department and executive management. P.3 • Aims to: P.16 ATNS builds human capital value through »» Create a balanced profile of employees within the Company. • Exerting more influence and market confidence the individual and collective competencies, »» Eliminate any discriminatory practices in terms of race, gender or disability. in our abilities. knowledge, skills and experience of the »» Provide for ATNS’s present and future skills requirements. • Improving air traffic safety in Africa. Company’s employees and managers. The • Enhancing sector competencies. Company drives organisational effectiveness CONTINUATION TRAINING TO MAINTAIN THE SKILLS OF AIR TRAFFIC CONTROLLERS • Contributing to ATS pool of engineering skills. through its leadership capability and by • Training spans various training programmes to maintain air traffic controllers’ skills. creating an enabling environment for • Provide refresher courses and emergency training. Monitoring the trade-offs in the employees to contribute to organisational • Theoretical and practical courses, together with simulation training. goals, while being fairly remunerated for their • Recurrent training maintains current competency levels. business contribution and initiative. • Build skills by cross-training selected controllers from quieter stations to gain experience in busier stations.

ATNS’s Aviation Training Academy (ATA) is a ATNS’S SAFETY CULTURE MATURITY MODEL AND SAFETY MANAGEMENT PRACTICES training institution and division within the Company Our ability to create human capital value in the long term is underpinned by our philosophy of fair • A Safety Culture Maturity Survey is performed every three years. through which we offer sector-specific skills remuneration and reward; and our commitment to • Routine safety monitoring and reporting practices. training and development to staff and third parties. organisational transformation through equitable • Safety performance indicators are measured against the number of Instrument Flight Rule (IFR) flight hours. Our sector-specific training is a key enabler of • Indicators measure the number of ‘losses of separation’ related to aircraft being provided with a service. employment practices. Accordingly, we strive to new revenue opportunities both locally and in • ATNS’s Safety Management System (SMS) Policy and System and Safety Management Plan form part of the create an organisation that reflects the diversity of the rest of Africa. Historically, the ATA has been Company’s risk management and compliance. our society and that maximises the potential of our • Safety imperatives include: viewed as a cost-centre. However, in growing employees. »» Embedding a safety culture and implementing safety assurance initiatives. ATNS’s intellectual capital through the ATA through »» Excellence in safety, as a guiding principle across all ATM system activities. a combination of financial capital investment, Safety is a primary driver of reliable, efficient air »» Ensuring externally-supplied systems and services meet appropriate safety standards. intellectual capital innovation and human traffic services to customers and the broader »» Appropriately skilled staff develop and implement safety strategies and policies. »» Defining unique operational accountabilities for all personnel. capital capacitation, new revenue-generating industry. A robust safety culture amongst opportunities are being explored that will not only employees is essential to maintaining consistently SERVICE DELIVERY SUPERVISION add financial capital value to the Company, but high safety performance, particularly where also deliver the social capital value of producing controllers are directly involved in the separation of • Pool Managers and Officers in Charge (OiCs) are responsible for planning and directing air traffic service technically-competent ATM professionals. aircraft. delivery: »» First-line supervision to air traffic controllers. »» Evaluating the in- and out-flows of sector traffic. Approach to creating human capital value »» Ensuring acceptable levels of traffic by implementing restrictive practices (as required). »» Mitigating delays. »» Providing leadership and direction while employing collaborative decision-making. DEVELOPING SKILLS AND REWARDING PERFORMANCE • Senior members from the Air Traffic Control Officer (ATCO) pools are appointed on a shift-by-shift basis to fulfil supervisory functions. • Learning programmes are provided for all employees in line with organisational needs. • Learning Management System maintains records of training interventions implemented for all employees. LEADERSHIP COMPETENCY MODEL • Key performance areas (KPAs) and targets – as mandated by the Shareholder Compact – direct activities and deliverables. • Helps to improve leadership skills and capacitates management to lead highly technical teams. • Recognition and reward system designed to cultivate a culture of trust, confidence, shared innovation in the • Entire ATS management team attend “ship training” to improve employee relations and safety performance. Aviation sector. • A four-year substantive salary agreement (commenced on 1 April 2015) exists between ATNS and the recognised trade union, Solidarity. We report on: • A performance management system designed for all employees in the administrative bargaining unit. • Aligns performance to strategic objectives, professional competencies and industry expectations. • Employment equity • Skills development ATNS EMPLOYMENT EQUITY PLAN • Employee wellness • Workforce representation is guided by ATNS’s internal Employment Equity (EE) Plan. • ATNS’s strategic objectives and prevailing organisational culture support on-going equal opportunity initiatives, with specific emphasis on designated groups. • EE Plan aligned to the Employment Equity Act, 1998 (Act No. 55 of 1998).

102 103 CREATING VALUE THROUGH THE CAPITALS CONTINUED

2017/18 Material issues Key human capital outputs for technological functions, thereby rendering them 2017/18 redundant, or requiring them to be adapted to match as yet unknown competency requirements. MATERIAL ISSUES WHY THEY MATTER HOW WE MANAGE THEM We acknowledge the need to balance a human- Rand value of training capital intensive business with an increased Maintaining • Employee wellness forms an • Defined Employee Engagement 6,52% Cost to Company emphasis on technology in the ATM sector. positive employee integral part of ATNS’s staff Programme. morale development focus and overall • Staff wellness programme. Human Capital Strategy. For ATNS, • A Leadership Competency Model. Material human capital value Social and relationship capital low employee morale and an outcomes operational environment that is not • Continuation training to maintain the performance-oriented could impact skills of air traffic controllers. ATNS considers the value represented by • Maintaining a representative workforce. the Company’s overall efficiency and • Enhanced supervision of service and through our stakeholder relationships as performance; lead to incurred costs delivery. • Embedding a culture of sustainability. critical to the long-term economic and social as a result of absenteeism; and pose • ATNS’s Safety Culture Maturity Model. • Promoting an organisational culture that sustainability of the business. a safety risk. • Safety management practices. entrenches safety values. These relationships are exemplified by the P.3 • Performance and reward. P.16 • Enhancing skills and building competencies. strength of our supply chain relationships, • Implementation of employee value community partnerships, government and proposition programme. Monitoring the trade-offs in the regulatory relations and our relationships with Ethical leadership • The Board of Directors and senior • ATNS’s governance and compliance business our customers and sector partners. management are committed to frameworks. the highest standards of corporate P.1 • Board of Directors Mandate. With ATNS competing globally to attract and For ATNS, authentic and accountable stakeholder governance and strives to achieve • Board of Directors selection process. retain critical ATM skills, it often pays a premium relations extend to ensuring the highest standards the highest moral and ethical for employees due to the scarcity of their skills of safety management, for employees, partners • Board of Directors committee operational and behavioural (intellectual capital value) in the market and their and citizens. We are committed to implementing, responsibilities and accountabilities. standards, as well as sound and value to the business. International demand for developing and improving appropriate strategies, transparent business practices. • Board of Directors evaluation process. highly-skilled technical staff (human capital) management systems, processes and procedures • Board of Directors induction process. impacts on our staff costs (financial capital), but to ensure that all our activities uphold the highest this cost must be weighed against the value of level of safety performance and meet national Critical skills in • ATNS competes globally in terms of • ATNS’s remuneration philosophy and technically-competent employees in ensuring safe and international standards and expectations. global demand attracting and retaining critical ATM willingness to pay a premium to both skies for all ATM users (social and relationship ATNS’s Safety Management System (SMS) ensures skills. These skills often demand attract and retain scarce ATM skills. capital value). global-standard safe operations through the a premium due to their scarcity in • Creating an enabling and dynamic effective management of safety risks. The SMS the market and their value to the operational environment and culture Additionally, ATNS’s long-term planning has is designed to continuously improve safety by business. Accordingly, ATNS may to ensure ATNS is perceived as an identified future challenges around the skills identifying hazards, collecting and analysing need to pay a premium to both employer of choice. that we will need to evolve within a globally- data and continuously assessing safety risks. attract and retain these skills. competitive, technologically-driven aviation The SMS seeks to proactively contain or mitigate Increasing • A skilled, representative and • Woman empowerment programme. environment. In this future context, many of the risks before they result in aviation accidents and employee motivated workforce contributes • People with disability action plan. sector’s present skills will either be replaced by incidents. development, not only to ATNS’s strategic and • Maintain a representative structure wellness and operational objectives, but also adds in line with the approved permission Employment to the Company’s competitiveness application. Equity and stability. • Reduction of staff resignation and roll out of Employee Value Proposition (EVP). • Employment Equity plan (initiatives and programmes). • Ongoing investment in core training for employees.

104 105 CREATING VALUE THROUGH THE CAPITALS CONTINUED

Approach to creating human capital value 2017/18 Material issues

ATNS CORPORATE SOCIAL INVESTMENT (CSI) STRATEGY MATERIAL ISSUES WHY THEY MATTER HOW WE MANAGE THEM

• ATNS’s CSI strategy is driven by the Company’s requirement to its align strategy to national socio-economic Major Safety event • Defined as an vente where there was • ‘Safety culture’ is the set of developmental imperatives, national Government outcomes and the DoT’s departmental outcomes. deviation from the desired system enduring values, behaviours and • ATNS’s community development programmes aims to drive expanded social transformation. state, leading to the potential loss of attitudes regarding safety, shared • ATNS’s flagship CSI projects relate to the promotion of mathematics and physical science for Grades 10-12. or damage to equipment, persons by every member at every level of an • Future CSI initiatives will encourage research and technology development initiatives driven through the or property if intervention was not organisation. R&D forum developed in 2012 known as Avi Afrique. applied. • ATNS measures safety performance • A Major safety event could be a mid-air using three metrics namely the safety SOUND SUPPLY-CHAIN PRACTICES collision or a collision of aircraft on ratio, the safety risk index and the • ATNS’s procurement systems are focused on holistic and integrated Supply Chain Management (SCM). the ground as a result of ATC action / CANSO safe operations metric. • Enterprise Development (ED) stimulates growth for small, medium and micro enterprises (SMMEs) through inaction. • The Risk Safety Index (RSI) matrix the up-stream supply chain. • A major safety event can give an measures the various levels of • ATNS’s equipment requirements and infrastructure development, are informed by: impression that safety management risk in terms of probability and • Regulatory requirements at a global level; systems are inadequate, which could severity categories. This mechanism • Enabling new technologies; and lead to stakeholder mistrust, loss of increases visibility of risks and assists • The need to address the specific requirements of the air traffic management (ATM) community. service contract and loss of income. management decision-making. • ATNS approaches technology sourcing by engaging the expertise of both local and global suppliers. • The CANSO safe operations metric • Procurement policies are geared towards localisation. calculates the safe operations • Specific argetst are set to transform the provision of aviation-related services. using the number IFR/IFR losses of • The Procurement Committee oversees the ATNS capital expenditure. separation over 12 months against IFR flight hours. PROACTIVE STAKEHOLDER MANAGEMENT Supply chain • The process of procuring of goods and • ATNS’s SCM Model aims to facilitate • Focuses the business on issues that are material to both ATNS and stakeholder groups. management services is vital for the organisation’s the acquisition of goods and services at • Proactive engagement with Stakeholder groups through stakeholder-specific engagement channels, compliance operations. Long lead-times to address the right price, time and quantity in line including (but not limited to): urgent acquisitions may result in with approved procurement processes. »» Quarterly EXCO to EXCO meetings. interruptions to operational delivery. • ATNS suppliers can compete »» Road-shows. for business in an open, fair and »» Industry safety workshops. transparent manner. »» ‘Thought Leadership’ programmes, such as the annual ATNS Avi Afrique Innovation Summit. • On-site financial administration and »» ATNS shares plans, collaborations and information on material issues of safety, training and Air Traffic centralised management of ATA Management (ATM); as well as Engineering and Technical Services (ETS). acquisitions. LEARNERSHIP PROGRAMMES Poor Internal • Poor internal communication of ATNS’s • Quarterly staff meetings to discuss communication of long-term planning could result the Company’s objectives, address • ATNS runs an ATS Bursar programme and an Engineering Learnership programme at the ATA. ATNS’s long-term in misunderstanding and mistrust employee queries as well as questions • Successful students from the learnership pipeline typically feed into the pool of qualified engineering planning between employees and leadership and face-to-face. technicians and junior systems engineers. can lead to low employee morale, job • Email correspondence utilised to insecurity, misalignment of priorities communicate on a more regular basis. and ultimately lower operational We report on: performance.

• Safety service provision • Supplier development and economic empowerment • CSI projects

106 107 CREATING VALUE THROUGH THE CAPITALS CONTINUED

As an air navigation service provider, ATNS exerts MATERIAL ISSUES WHY THEY MATTER HOW WE MANAGE THEM Natural capital influence on carbon emissions from aircraft, Reliance on third- • A reliance on third-party service • Where feasible ATNS uses at least P.3 mainly in terms of the efficiency of the ATM party service providers would suggest that two different third-party service The aviation industry’s impacts on the network. As air traffic movements are expected to providers ATNS lacks the requisite skills and providers to introduce redundancy environment are evident globally and increase, flexible optimisation of the airspace is competencies within the organisation in the provision of data and voice required to ensure that safety and an operationally- to effect the same services. Unless communication links for remote Radio appropriate legislative frameworks are being skills transfer is ensured, these skills and Surveillance systems. adopted by the ATM sector world-wide. ATNS efficient environment are achieved. ATNS aims do not become part of the Company’s • Satellite links are used as a backup supports the activities of ICAO’s technical to promote environmental sustainability through institutional knowledge. for terrestrial, communication links in Committee on Aviation Environmental continuously improving air traffic management • Third party’s poor-quality service some instances. Protection (CAEP) in establishing global practices. In aligning with the ASBU concept, ATNS could have adverse operational • Service level agreements are in place standards and recommendations for can promote various operational efficiencies, and reputational impacts, e.g. data with all third-party service providers. minimising the impact of aviation on the including fuel efficient routing, optimal traffic flow breaches, poor security practices, or • Where required, SLAs are accompanied management, Performance-Based Navigation supply chain issues stemming from by disaster recovery plans and environment, and specifically the reduction of a third party’s poor disaster recovery mitigation strategies. airspace noise and improvement of airspace air (PBN) and attention to fuel optimal speed control. procedures. quality. A reduction of aviation CO2 emissions By continuously improving these processes, can contribute towards keeping global mean ATNS has an opportunity to provide added value Training and skills • Leading sector-specific training is key • Ongoing stakeholder relations with key surface temperatures below a 2-degree to airspace users through a decrease in fuel development in the to enabling industry leadership within institutions. usage, a reduction in fuel costs, and reduced CO2 sector the African continent and beyond our • Learnership programmes. increase. ATA academy. • ATA (Aviation Training Academy) emissions. • The ATA has won awards including IAIA training pipeline and programmes. recognition. • ATA strategy roll-out. • Sector-specific skills training provided by the ATA strengthens the Company’s Approach to creating natural capital value ATM intellectual capital and aligns to industry trends. IMPLEMENTATION OF AVIATION SYSTEM BLOCK UPGRADES (ASBU)

• Operational efficiency is enhanced through the implementation of the ASBU concept: Material social and relationship capital value outcomes »» Maintaining and enhancing aviation safety. »» Harmonising air traffic management improvement programmes. Building positive stakeholder relationships to support economic, social and environmental sustainability. »» Removing barriers to future aviation efficiency and environmental gains at reasonable cost. Promoting socio-economic value: Community development. »» Improving airspace efficiencies. »» Procedure design. »» Oceanic random routing areas. Key social and relationship capital outputs for 2017/18 »» Reduced vertical separation minima (RVSM). »» Air Traffic Flow Management (ATFM) tool: balancing demand and capacity. »» Collaborative decision-making (CDM). RSI of 40 against a target of 44-46. »» The INSPIRE initiative. Safety ratio of 5,19 safety events per 100 000 Safety service provision »» Sustainable energy management. movements (target: 2 safety events per 100 000 »» Sustainability and Climate Change Strategic Plan movements). IMPLEMENTATION OF PERFORMANCE-BASED NAVIGATION (PBN) B-BBEE level 2 Supplier development and economic empowerment • Utilises the improved navigation capability of aircraft to enable more accurate operations in the departure, B-BBEE score: 85,42 en-route and arrival phases of flight. Total investment in corporate social investment • Enhanced navigation capability allows for reduced separation between aircraft and facilitates optimum R2,521,704 projects trajectories, resulting in reduced fuel burn and less CO2 and noise emissions. • ATNS developed a National PBN Roadmap and National PBN Implementation Plan in cooperation with the ATM Community. Monitoring the trade-offs in the business • PBN procedures are in place at most of the international airports ATNS services. SUSTAINABLE ENERGY MANAGEMENT ATNS’s social license to operate is based on the Company’s ultimate impact on society. Accordingly, our enterprise development initiatives contribute meaningfully towards the creation of a more equitable society. • Aims to reduce ATNS’s ecological footprint. However, many of the emerging technologies and innovations that will form part of ATNS’s future operational • Aims to provide sustainable use of energy and environmentally aware operations. landscape may only initially be accessible through foreign suppliers. ATNS will have to balance its need for • Applied in designing procedures and selecting sites for ground-based equipment. • Aligns with the National Environmental Management Act (NEMA) and Civil Aviation regulation. leading-edge technologies and its developmental mandate to promote local supplier development.

108 109 CREATING VALUE THROUGH THE CAPITALS CONTINUED

THE INSPIRE INITIATIVE 2017/18 Material issues

• ATNS is one of the founding members of the Indian Ocean Strategic Partnership to Reduce Emissions (INSPIRE). WHY THEY MATTER HOW WE MANAGE THEM • Partnership with airlines, ANSPs and airport partners to identify ways to reduce aviation’s impact on the Responding to climate change impacts environment. As an ANSP, ATNS recognises that it has influence • Implementation of Aviation System Block Upgrades PROCEDURE DESIGN on the emissions released as a result of aviation (ASBU). • ATNS applies a design philosophy of ‘clean speed arrivals and departures’ and shortened routings, whenever activities. Managing the carbon emissions resulting • Implementation of Performance-Based Navigation flight procedures are being developed.3 from our operations helps to reduce the amount (PBN). • The ASBU initiatives of Continuous Climb Operations (CCO) and Continuous Descent Operations (CDO) are of fossil fuels burnt that contribute to greenhouse • Improve airspace efficiencies. applied to all new designs. gases and ultimately climate change. As an ICAO • Procedure design. • CDO reduces aircraft noise and gaseous emissions at airports and saves fuel consumption without member state, ATNS supports and complies with • Oceanic random routing areas. compromising flight safety. standards and regulations set out to reduce the • Reduced vertical separation minima (RVSM). • CCO (aircraft operating technique) can reduce noise, while increasing flight stability and the predictability of aviation sector’s harmful impacts on the natural • ATFM tool: balancing demand and capacity. flight paths for both controllers and pilots. environment. Reducing CO2 emissions is aligned to • Collaborative decision-making (CDM). one of the four ‘relevant national outcomes’ identified • The INSPIRE initiative. OCEANIC RANDOM ROUTING AREAS by the DoT – “an increased contribution of transport to • Promoting employee awareness of environmental environmental sustainability”. management. • Random routing implemented within the Atlantic and Indian Ocean areas. • Initiative allows aircraft to make optimum use of upper winds in route planning and execution, enabling Improved natural resource efficiency to reduce our impacts higher efficiencies and reduced fuel burn, with less CO2 emissions. • User Preferred Routes (UPR) implemented in Indian and Atlantic Oceanic regions under ATNS’s jurisdiction. Energy efficiency: ATNS’s is committed to sound • Energy efficiency implementation considered in environmental stewardship and the responsible use infrastructure projects. REDUCED VERTICAL SEPARATION MINIMA (RVSM) of natural resources. The Company requires energy • The Operational Efficiency Programme and fuel to provide communication, navigation and (OEP) identifies airspace design and tactical • The RVSM initiative allows for aircraft to operate at optimised cruising levels with reduced vertical separation surveillance services to airlines to facilitate the safe improvements. standards, depending on the aircraft and flight crew certification. movement of aircrafts in the controlled airspace. The • Promoting employee awareness of environmental • RVSM contributes significantly to reduced fuel burn and the reduction of emissions. failure to manage electricity consumption within the management. SUSTAINABILITY AND CLIMATE CHANGE STRATEGIC PLAN Company’s daily operations can lead to inefficient operations and operational cost-increases. • Strategic plan to manage long-term environmental sustainability in the organisation. • Supports the setting of appropriate environmental KPIs. Water efficiency: While water usage relates mainly to • Considering ‘green building’ principles for ATNS’s consumption purposes, we acknowledge that South refurbishment projects. AIR TRAFFIC FLOW MANAGEMENT (ATFM) TOOL Africa remains a water-stressed country and aim to • Water efficiency initiatives include flow-regulating manage our own water consumption with due care. taps and toilets as well as rainwater harvesting. • Balances demand and capacity to minimise potential delays in the national airspace system. • Water meters. • Two techniques reduce delays from operational and weather events: • Alternative water sources, such as water tanks. »» Allocation of arrival and departure slots at slot-coordinated airports; and • Promoting employee awareness of environmental »» Dynamic allocation of calculated take-off and arrival times on the day of operations. management. • Reduces the need for aircraft to hold on the manoeuvring area with engines running, which reduces GHG emissions in the airport environment. Waste management: Further, as a more circular- • ATNS’s waste management policy enforces holistic economic ethos is embraced globally, ATNS intends waste-management practices. to move towards more environmentally accountable • A ‘cradle to cradle’ approach to waste We report on: waste management practices. management. • Assessing waste for alternative usage viability • Managing carbon emissions. prior to disposal. • Hazardous waste generated in operations • Managing natural and non-renewable resources: is disposed in accordance with formalised »» Electricity and fuel. procedures. »» Airspace quality. • ATNS maintains a detailed waste-management »» Biodiversity and protected habitats. register. »» Water and waste • Promoting employee awareness of environmental management.

3 The term ‘clean speed’ indicates that the aircraft flies at a speed and power setting that does not require the use of additional control surface (i.e., flaps, slats, and so forth). The ASBU initiatives of Continuous Climb Operations (CCO) and Continuous Descent Operations (CDO) are applied to all new designs as a matter of course.

110 111 CREATING VALUE THROUGH THE CAPITALS CONTINUED

WHY THEY MATTER HOW WE MANAGE THEM Material natural capital value Improved natural resource efficiency to reduce our impacts (continued) outcomes Biodiversity management: ATNS’s project and • ATNS’s Environmental Policy and related policies infrastructure sites are located across South Africa, and procedures. • Reducing CO2 emissions. with some sites located in conservation areas. These • Compliance with the National Environmental • Promoting sound management of natural sites require a more focused approach to biodiversity Management Act (NEMA) for all projects. resources management. The Radar Replacement Project in • Promoting employee awareness of environmental Blesberg4 is one such site, situated in the Cape Nature management. • Embedding environmental aspects in our Reserve in the Swartberg Mountains of the Western business Cape.

Airspace quality – noise reduction: Aircraft produce • Flight procedure designs support compliance with Monitoring the trade-offs in the noise during various phases of flight - on the ground noise abatement requirements as per NEMPA business while parked (such as auxiliary power units), while • Noise profiling and noise contours are being taxiing, on run-up from propeller and jet exhaust, considered ATNS manages both modern and older aircraft during take-off, underneath and lateral to departure • Application of power setting and climb gradient and arrival paths, over-flying while en route, or during restriction to support noise abatement. – particularly on the African continent. The older landing. Air traffic management operations have • Compliance with ICAO’s Guideline Manuals aircraft serve a direct purpose on the continent, an opportunity to minimise environmental impacts concerning noise and environmental assessment whether supporting global food programmes or such as noise and emissions through efficient ATM of ATM operational changes. peace endeavours. We need to ensure that our operations. airspace can accommodate these aircraft even Enabling integration of environmental aspects in our business while being cognisant of the fact that they may be inefficient in terms of fuel burn. The CO2 emission ATNS recognises that, as a state-owned company, • Sustainable procurement practices and supply contribution by the older aircrafts is weighed employer and service provider it has the potential to chain management compliance. against the much-need contribution they are lead in the establishment of a sustainability-oriented • Integration of sustainability integration into making on the continent. business ethos. For this ethos to become part of the infrastructure project planning. Company’s cultural roadmap, it needs to be embedded • Sustainability integration guideline and checklist. as a mindset and filter through into all aspect of the • Environmental performance forming part of score- business. Environmental sustainability is becoming an card performance monitoring (where applicable). important feature of ATNS’s business landscape as it • Dedicated resource for managing CAPEX and the applies to the responsible management of biodiversity Procurement value chain. areas during projects, water and energy usage and waste management.

Key natural capital outputs for 2017/18

* Results based on ICAO Doc 9988 Guidance revision 2016, Table C-2. Rules of thumb for estimating expected results by measure

8,843 tonnes of fuel saved Continuous Descent Operations (CDO) *27,944 tonnes of CO2e 40,749 tonnes of fuel saved Continuous Climb Operations (CCO) *128,767 tonnes of CO2e 14,237 tonnes of fuel saved Airport – Collaborative Decision Making (A-CDM) *44,989 tonnes of CO2e 544,53 tonnes fuel saved Wake – RECAT (arrivals) *1,721 tonnes C02e

4 The project has an approved Record of Decision (ROD) of 2002, where the EMP is being monitored as the radar is being replaced.

112 113 PERFORMANCE

Ensure long-term financial sustainability to the Regulating Committee in November are informed by the current operating environment, 2017 after the RC had instructed ATNS in as well as the forecasted operating conditions, P.8 5 December 2016 to commence with the planning macro-economic factors and drivers, and the ATNS Air traffic movements and industry consultation process towards a ATM Roadmap. Permission Application for the financial year Our regulated business relies on revenue generated from service-based tariffs with revenue being linked to 2018/19 to 2022/23. The process of compiling Increasing revenue in the non- air traffic movements. Given a set tariff, as air traffic movements increase, revenue increases. the Permission included consultations with the industry stakeholders and culminated in a Joint regulated business Air traffic movements for the 2017/18 financial year saw a decrease of 2,69%, compared to the prior year. The Consultation Report from ATNS and the Industry, • As part of its initiatives to ensure long-term total movements for this financial year is 1,087,694 (2017: 1,089,471). The decrease in air traffic movements which reflected the constructive and positive financial sustainability ATNS launched a is attributable to the reduction of flights by South African Airways , in an attempt to reduce operating costs, nature of the consultation meetings. While division – ATNS International – through which it in line with their turn-around strategy. The grounding of SA Express flights due to safety concerns further consensus was reached on most issues, remaining conducts non-regulated business. ATNS’s non- contributed to the decrease in air traffic movements issues have been resolved through ongoing active regulated business currently contributes 12% engagement between ATNS, the RC and the of the Company’s revenue and encompasses ALL AIR TRAFFIC MOVEMENTS INCLUDING ARRIVAL, DEPARTURES AND TRAINING FOR 2017/18 Industry. a long-term strategy to facilitate regional expansion. APRIL MAY JUNE JULY AUGUST SEPTEMBER The modular approach adopted by ATNS for 2017 2017 2017 2017 2017 2017 the 2018/19 – 2022/23 Permission has provided • Non-regulated revenue is below budget by a structured and justified framework for the R22 million (21,5%) due to SADC VSAT II and Movements 2017/18 92,158 99,832 94,311 101,783 94,983 91,173 Company’s investment plans over a five-year NAFISAT Flight Information Region (FIR’s) Cumulative movements 92,158 191,990 286,301 388,084 483,067 574,240 planning horizon and form the core pillars of the crossing movements being lower than initially Permission Application process. These modules anticipated.

OCTOBER NOVEMBER DECEMBER JANUARY FEBRUARY MARCH NON-REGULATED REVENUE 2017 2017 2017 2018 2018 2018

Movements 2017/18 91,721 93,350 78,907 82,777 79,503 87,196 REVENUE 2016/17 2017/18 2018/19 TARGET Cumulative movements 665,961 759,311 838,218 920,995 1,000,498 1 087,694 VSAT R48,739 million R46,5 million R51,1 million Nafisat R42,260 million R35,8 million R39,2 million Financial performance • Our balance sheet remains sound with a AIS services R2,539 million R12,2 million R6,5 million liquidity ratio of 4:5:1 (2017: 5.2:1). Our gearing Training R16,108 million R20,9 million R14,9 million • Total revenue for the year at R 1,594 ratio is at 0,5% (2017: 0%), as such ATNS is well Small aerodrome fees R47,651 million R50,4 million R53,3 million billion (2017: R1,557 billion), showed a 2% positioned to raise funding for imminent capital improvement on the prior year results. The expenditure. Technical fees R5,891 million R9,2 million R8,1 million increase in revenue is mainly attributable to a • For the year ended 31 March 2018, the Company Sundry R12,429 million R10,464 million R7,9 million slight increase in tariff revenue as a result of had no interest-bearing loans and borrowings. Rental of id Site/Beacons R474 thousand R267 thousand - increased tariff rates. Technical maintenance and training revenue also contributed to • Cash generated from operation decreased by increased revenue. 15% to R366 million (2017: R431 million), mainly GRAPH 8: NON-REGULATED REVENUE SPLIT • Operating costs increased by 6% to due to financial difficulties faced by some of R1,382 billion (2017: R1,300 billion) mainly due our major customers as well as increased 11% to increased staff costs, telecommunication operational costs. expenses as well as the impact of the 27% 7% fluctuating foreign exchange rates on our Permission Process administration and contract maintenance costs. 6% l Small Aerodrome • Capital expenditure decreased by 0.7% to ATNS’s Permission application for the 2018/19 l Training Services R305 million (2017: R307 million). – 2022/23 Permission cycle was submitted l Technical Maintenance l Aeronautical Information Services

25% l VSAT 19% 5 Air traffic movement refers to aircraft take-off and landing at an airport. The aircraft movements include all arrivals, departures and training operating at l Nafisat all airports within the ATNS mandate.

114 115 PERFORMANCE CONTINUED

Capital investment • Introducing the Portfolio Programme ABRIDGED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2018 Management Office (PPMO) to oversee the execution of projects and to ensure adherence The 2017/18 financial year marks the third year of 2018 2017 RESTATED to project management principles. the 2014/15 -2019/20 permission. ATNS contracted Assets an amount of R36.56 million during the 2017/18 • Establishing the CAPEX Delivery Framework financial year and the annual target was to provide a structured approach to Non-current assets 1,445,262,954 1,276,589,748 investment and to enhance oversight of CAPEX R131.48 million. Cumulative capital expenditure Current assets 1,639,380,840 1,542,292,765 contracted for at the reporting date but not yet implementation projects for both the Executive, incurred amounted to R432 million. The CAPEX Board and other stakeholders. Total assets 3,084,643,794 2,818,882,513 plan, as approved by the Regulatory Committee, • Strengthening Supply-Chain Management to Equity and liabilities has been identified as a key priority in the improve the asset-creation value chain within Total equity 2,617,321,904 2,427,167,780 organisation. To this end, numerous interventions the organisation to ensure execution of the have been introduced to accelerate CAPEX delivery: CAPEX plan. Non-current liabilities 99,910,667 94,349,540 Current liabilities 367,411,223 297,365,193 CAPITAL EXPENDITURE PERFORMANCE Total equity and liabilities 3,084,643,794 2,818,882,513

OBJECTIVE MEASURES 2016/17 2017/18 ACTUALS 2017/18 TARGET ABRIDGED STATEMENT OF CASH FLOW AS AT 31 MARCH 2018 Adoption and approval of CAPEX R307 million R305 million R432 million Implementation plan of 2017/18 2018 2017 RESTATED

HISTORICAL CAPITAL EXPENDITURE – COMPARATIVE VIEW Net cash flow from operating activities 351,760,969 420,154,723 Net cash flow from investing activities (304,855,460) (306,594,777) DESCRIPTION 2015/16 2016/17 2017/18 Net cash flow from financing activities (1,098,815) (1,122,312) Communications 113,376,794 130,084,642 46,565,398 Net increase in cash and cash equivalents 45,806,694 112,437,634 Navigation 13,372,558 38,642,176 12,917,127 Surveillance 21,228,055 22,987,072 137,355,334 Enhance operational as average delay per delayed (ADD) flight. ATNS Display Systems 27,105,892 49,867,072 30,785,299 routinely measures Instrument Flight Rules (IFR) efficiencies in line with global departure delays arising from any operational Simulator Systems 2,492,209 509,839 4,224,171 ATM standards disruption attributable to among others, airport Software 25,960,905 9,729,658 32,321,786 operators, airline operators, weather, and other air General 26,248,842 65,820,664 39,810,740 ATNS has two operational efficiency objectives that navigation service providers. measure the capability of the organisation’s service TOTAL 229,785,255 317,641,123 303,979,855 delivery to the ATM Community in a cost-effective • ATNS registered an ADD flight of 22 seconds manner while still ensuring a high-quality service against a set target of 120 seconds. ATNS Abridged Financial Statements and support: contributed to 7,4% of total delays of which, the highest contributors were Approach Control ABRIDGED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME AS AT 1. Measuring overall traffic delays; and (49,27%) and Area Control (36,5%) respectively. 31 MARCH 2018 2. Measuring the system availability performance • Most of the ATNS delays in March 2018 were of our technologies, namely Communication, technical delays due to Aeronautical Automated 2018 2017 RESTATED Navigation and Surveillance (CNS) systems. Information System (ANAIS) unserviceability’s at the Pietermaritzburg airport. Turnover 1,593,535,348 1,556,447,125 Operating profit 181,457,922 243,214,448 Measuring traffic delays

Profit before tax 265,652,554 326,375,744 As part of continuous improvement, ATNS strives Income tax expense 75,498,433 141,871,171 to measure the operational efficiency of its services such as reducing the overall traffic delays at Net profit 190,154,124 184,504,572 airports and airspace. Delay is typically expressed

116 117 PERFORMANCE CONTINUED

GRAPH 9: TRAFFIC DELAYS FOR 2017/18 The Company will continue to monitor these initiatives to ensure alignment to the South African State Action Plan. Further, these initiatives inherently address the global ICAO goals to achieve carbon-neutral growth 12:01:00 AM by 2020.

12:00:52 AM OPERATIONAL PERFORMANCE FOR 2017/18 12:00:43 AM

12:00:35 AM KPI 2017/18 RNP APCH (APV Baro-VNAV or Augmented GNSS • 27 Instrument Runways at 15 airports 2017/18 12:00:26 AM • 16 RNP APCH at 8 airports 12:00:17 AM • 10 RNP APCH at 5 Air Force Bases Delays for Quarters 1-4 Quarters Delays for 12:00:09 AM • Total: 53 RNP APCH Continuous Descent Operations (CDO) • 8,843 tonnes of fuel saved 12:00:00 AM Q1 Q2 Q3 Q4 • *27,944 tonnes of CO2e l Delays 12:00:53 AM 12:00:29 AM 12:00:25 AM 12:00:22 AM Continuous Climb Operations (CCO) • 40,749 tonnes of fuel saved • *128,767 tonnes of CO2e

Performance-based navigation stipulated in the National PBN Implementation Airport – Collaborative Decision Making (A-CDM) • 14,237 tonnes of fuel saved Plan by adding new RNP approaches, RNAV1/2 • *44,989 tonnes of CO2e Performance-Based Navigation (PBN) defines Standard Instrument Departures (SID), and performance requirements for aircraft navigating Standard Terminal Arrival Routes (STAR). The Wake – RECAT (arrivals) • 544,53 tonnes fuel saved on an ATS route, in a terminal procedure or Company’s activities extended to evolving and • *1,721 tonnes C02e maintaining flight procedures at airports where within a designated airspace. PBN supports an Gauteng Area PBN Plan (GAPP) RNP FAOR • Approved 4 design report for submission to these procedures already exist. increase in ATM system capacity and efficiency, as SACAA well as bringing about environmental and safety benefits through reduced aviation congestion, fuel • Procedures designed during 2017/18 included: Gauteng Area PBN Plan (GAPP) SID/STAR FAOR • Approved 12 design report for submission to conservation, reduction in emissions, reduced 9 x RNAV 1 SID/STAR (RWY03/21) SACAA (RNAV 1 SID/STAR aircraft noise, improved flexibility, enhanced • The total number of design reports completed Independent Parallel Runway operations (GAPP) • Approved 4 ILS design report for submission to operating returns and improved safety of regional from 01 April 2017 to 31 March 2018 is indicated FAOR SACAA and national airspace systems. During the year, in the table below. ATNS worked towards achieving the targets * Targets aligned to the airports where PBN is implemented * Calculations based on track miles DESIGN REPORTS COMPLETED DURING 2017/18 REGIONAL PERFORMANCE FOR 2017/18 RNAV (GNSS) BaroVNAV ILS CAT RNAV 1 SID/STAR KPI 2017/18 RWY03R RWY03L RWY03 (x3) SID RWY21L RWY21R RWY03 (x3) STAR Development of Instrument Approach Procedures • 1 X ILS for RWY 12 RWY21R RWY03R RWY21 (x3) SID and SID/STAR for Victoria Falls Airport (FVFA) • 2 X VOR Approach for RWY 12/30 RWY03L RWY 21L RWY21 (x3) STAR • 2 X RNP APCH for RWY 12/30 • 1 X NDB Approach for RWY 12 Performance assessment • 2 X SID for RWY 12/30 • 2 X STAR for RWY 12/30 ATNS compiles an annual performance assessment report to identify environmental benefits from air traffic management initiatives aligned to the PBN roadmap in response to the ASBU roadmap. During 2017/18, the Company continued with the initiatives identified in the previous financial year:

• PBN procedure to support continuous climb and descend operations; • Airport Collaborative Decision Making (A-CDM); and • Operational Efficiency Programme.

118 119 PERFORMANCE CONTINUED

Develop leadership capability in the Africa ATM space Create a transformative organisation

System availability as per SLA - CNS Economic empowerment

The Communication, Navigation and Surveillance (CNS) Service Level Agreement (SLA) describes ATNS’s ATNS recognises the importance of an integrated approach to Broad-Based Black Economic Empowerment commitment for uptime and connectivity of its technologies that is Communication, Navigation and (B-BBEE) in the transformation of the sector, as well as for the long-term sustainability of South Africa. Surveillance (CNS). The SLA is based on System Availability. This refers to the availability of the system The Company has, therefore, implemented key structures to assist in growing the economic strength of the used to support the provision of services. This method of equipment performance reporting considers the country. availability of redundant systems. During the period under review, ATNS obtained a B-BBEE score of 85,42 against the Old Public Sector Codes SYSTEMS AVAILABILITY which translates to a B-BBEE Level 2.

BUSINESS OBJECTIVE QUARTER QUARTER QUARTER QUARTER 2017/18 2017/18 B-BBEE CONTRIBUTION OBJECTIVES MEASURES 1 2 3 4 ACTUAL TARGET Operational Achievement C: 99,92% C: 99,77% C: 99,62% C: 99,67% C: 99,78% C: 99,67% B-BBEE ELEMENT ACTUAL 2016/17 ACTUAL 2017/18 efficiency of CNS N: 97,25% N: 95,90% N: 95,64% N: 98,65% N: 96,30% N: 98,65% System Management control 7,64 7,36 S: 100% S: 99,96% S: 99,98% S: 99,77% S: 99,97% S: 99,77% Availability Employment Equity 14,02 13,51 The primary reason for non-achievement of Navigation targets are due to third-party intervention (electrical Skills Development 22,81 16,09 and or telecommunication failures). There were several power outages throughout the year, affecting some Preferential procurement 20,69 30,00 Navigation sites. There have also been incidents of theft and vandalism. ATNS is looking at ways of improving SLA’s with third parties. ATNS has done countrywide security assessments on ATNS sites. ATNS is working Enterprise Development and Supplier Development 12,24 13,47 on a strategy (in conjunction with other stakeholders) which will address security at all sites. Socio-Economic Development 5 5,00 Operation of the Satellite Communication Networks - SADC VSATII & NAFISAT Total points 82,40 85,42

The SADC II and NAFISAT Very Small Aperture Terminal (VSAT) networks fulfil the region’s communication Measurement results as at 31 March 2018 requirements in terms of the ICAO Africa Indian Ocean (AFI) plan. The networks have succeeded in integrating a regional communications network, contributing to increased communication, allowing for greater safety on air traffic movements, and are financially sustainable. The SLA performances for both Satellite Communication Systems remain above the target level as indicated in the table below.

SLA PERFORMANCES VSAT II AND NAFISAT

BUSINESS OBJECTIVE QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4 2017/18 2017/18 OBJECTIVES MEASURES ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL TARGET Operation of Optimise SLA: 99,93% SLA: 99,96% SLA: 99,97% SLA: 99,70% SLA: 99,89% SLA: 98,5% the satellite revenue communication and ensure networks network SADC VSAT 2 availability Operation of Optimise SLA: 100,00% SLA: 100,00% SLA: 99,95% SLA: 99,93% SLA: 99,97% SLA: 98,5% the satellite revenue communication and ensure networks network NAFISAT availability

120 121 PERFORMANCE CONTINUED

Employment equity (EE)

ATNS EMPLOYEE DEMOGRAPHICS

EMPLOYEE DEMOGRAPHICS

MALE FEMALE

Occupational Levels African Indian Coloured White Foreign African Indian Coloured White Foreign Total AIC % Female % Nationals Nationals

Top Management 2 0 0 0 0 0 0 0 0 0 2 100 0

Senior Management 7 0 0 1 0 2 0 0 0 0 10 90 20

Professionally Qualified and Experienced Specialist 16 2 0 6 0 13 0 2 3 0 42 78,57 42,86

Skilled Technical Workers Junior Managers 308 44 47 194 10 351 35 37 80 5 1,111 73,99 45,27

Semi-skilled and Discretionary Decision 18 0 4 1 0 3 0 0 0 0 26 96,15 11,54

Unskilled and Defined Decision Making 6 0 0 0 0 23 0 0 0 0 29 100 79,31

Sub-total 357 46 51 202 10 392 35 39 83 5 1,220 75,41 45

% 29,26 3,77 4,18 16,56 0,82 32,13 2,87 3,2 6,8 0,41

ATS and ATNS EE Targets Build a culture of safety Risk safety index (RSI)

• Employment equity remains a business »» Creating a balanced profile of employees Safety is a critical concern for ATNS and receives ATNS utilises the Risk Safety Index (RSI) matrix imperative to ensure that our workplace profile within the Company through all occupational the most attention for continuous monitoring to measure various levels of risk in terms of is aligned to the national demographics and the categories and levels in the workforce. and improvement. To this effect, a safety culture probability and severity categories. This is a Integrated Transport Sector’s B-BEE charter. »» Eliminating any discriminatory practices in improvement program has been initiated which is mechanism to increase the visibility of risks terms of race, gender or disability. • In line with the Employment Equity Act, the aimed at improving the safety culture and is based and assist management decision making. ATNS »» Providing for the Company’s present and current ATNS five-year EE plan encompasses on the CANSO standard of excellence (SOE). performance target is set between 44-56, which future requirements for skilled staff, in line the following: will place it in the “mid-tolerable” range. The with our business plans. Company achieved an RSI of 40 during the year.

COMPARATIVE VIEW OF ATS EE PERFORMANCE AS AT 31 MARCH 2018 RSI HISTORICAL COMPARATIVE VIEW

ATNS EE TARGETS 2016/17 ACTUAL 2017/18 ACTUAL 2017/18 TARGET 48 ATS AIC 70,01% 72,27% 68% 46 ATS Female 42,43% 46,55% 45% 44 People with disabilities 3,3% 3,22% 3,5% 42 40

38

36 2015/16 2016/17 2017/18

122 123 PERFORMANCE CONTINUED

GRAPH 10: ATNS SAFETY PERFORMANCE – SAFETY RATIO VERSUS SAFETY RISK INDEX Out of the total number of safety events recorded Rules (IFR). IFR flight hours are also used as a during the reporting year, two events were basis for global benchmarking and safety metrics. ATNS safety events per 100 000 movements classified to be above the set target of a range The CANSO safe operations metric calculates between 44 and 56 (ranging from 64-76) which puts the safe operations using the number IFR/IFR 10 them in the Manageable and Acceptable region of losses of separation over 12 months against IFR 9 the RSI matrix respectively. flight hours. For the year under review ATNS’ safe Operations benchmark versus CANSO benchmark 8 Safety ratio was 99,990% against a target of 99,995 indicating 7 an error rate of 0,010%. 6 ATNS also utilises a ‘safety ratio’ mechanism,

5,19 which calculates the number of safety events The safety performance for the 2017/18 year 5 4,85 4,93 per 100,000 movements. In the financial year 4,5 declined overall, with the organisation not meeting

4 3,84 3,93 under review, a total of 55 safety events were its targets. To address this ATNS has embarked on 3,35 3,36 3,16 3,33 reported and investigated. The resultant safety two main projects, the Safety Turn-Around Plan 3 2,78 2,50 ratio achieved at the end of the financial year and the Safety Culture Improvement Programme. CURRENT BOARD Number of ATNS Safety Events Safety Number of ATNS 2 TARGET was calculated at 5,19 safety events per 100,000 These two have specific action items that address movements against a target of 2, as indicated in 1 safety inadequacies within the business. More graph 10. specifically, the programmes seek to strengthen 0 management within the business; improve the Apr 17 May 17 Jun 17 Jul 17 Aug 17 Sept 17 Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 Separation standards based on IFR workplace environment; increase the capacity Month hours and capability of our people; optimise our safety Number of Safety Events Safety ratio Safety Events per 100 000 movements defences including the Safety Management System, In air traffic control, separation is the concept of training, technology, procedures, Just Culutre, keeping aircraft a minimum distance from each etc. Further, a safety tool has been developed, and other to reduce the risk of colliding as well as provides a dashboard to complement the current prevent accidents. ATNS controls flights that are ATNS safety metrics. Various other initiatives are in GRAPH 11: ATNS SAFETY PERFORMANCE – SAFETY RISK INDEX predominantly operated under Instrument Flight progress.

ATNS safety events per 100 000 movements GRAPH 12: ATNS SAFE OPERATIONS VERSUS CANSO BENCHMARK (2012 AVERAGE) 8 60 ATNS Safe Operations vs CANSO Benchmark (2012 average) 7 100 50 50 50 48 48 47 48 46 45 99,999 6 44

40 99,998 39 39 40 5 99,997

4 30 99,996

Risk Index 99,995 3 20 99,994

Number of ATNS Safety Events Safety Number of ATNS 2 99,993 10 1 99,992 99,991 0 0 Apr 17 May 17 Jun 17 Jul 17 Aug 17 Sept 17 Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 99,990

Month 99,989

Number of Safety Events Rsk Index 99,988 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 CANSO ATNS

124 125 PERFORMANCE CONTINUED

Build a skilled and capable The graph below illustrates the annual carbon footprint in relation to the baseline year of 2015/16 financial year when the Company first started reporting on all the scopes i.e. Scope 1, 2 and 3. The total emissions for employee resource base Scope 1 amounted to 251,62 CO2e, for Scope 2 the amount was 20 092,17 CO2e and Scope 3 was 3 097,73 CO2e.

Training and development Manage the training pipeline for ATS GRAPH 14: ATNS’S CARBON FOOTPRINT INVENTORY FOR 2017/18 and Technical staff • ATNS is committed to structuring development programmes for employees in the organisation ATNS manages the training pipeline for ATS and to increase representation of black (AIC) racial technical staff at its Aviation Training Academy,

groupings, with a focus on African and female the ATA. The table below reflects overall staffing CO2e Tonnes representation. During the year, the Company’s numbers achieved during the year. A total of 444 2015/16 2016/17 2017/18 overall training investment amounted to 6,52% ATS trainees and 419 Engineering trainees were of the annual budget against a target of 6%. enrolled at the ATA during the year. Annual Emissions 2012 - 2017 l Scope 1 (Fuel) l Scope 2 (Electricity) l Scope 3 (Business Travel)

ATS AND TECHNICAL STAFF TRAINING NUMBERS Carbon emission intensity performance:

TECHNICAL STAFF ON TRAINING 2017/18 ACTUAL 2017/18 TARGET VARIANCE KPI 2017/18 ATCO1 134 121 13 Total Emissions from Scope 1 251,62 CO2e ATCO2 37 37 0 Total Emissions from Scope 2 20 092,17 CO2e ATCO3 221 226 -5 Total Emissions from Scope 3 3 096,73 CO2e Engineering Technicians 83 79 4 Overall emissions, including Scope 3 23440,52 CO2e (Incl. satellite technicians).

EMISSION INTENSITY UNIT MEASURE 2015/16 2016/17 2017/18 The main reason for the negative variance in the GRAPH 13: ATNS ANNUAL CARBON FOOTPRINT Per Air Traffic Movement (ATM) CO2e/ATM 0,02 0,03 0,02 ATCO3 stream is due to staff attritions resulting 2018/19 from individuals being enticed to work abroad given Per Revenue CO2e/Revenue 16,9 13,15 14,7 the global shortages within this stream. Per Employee CO2e/Employee 20,9 16,46 19,2 13% 1% Manage the organisation’s GRAPH 15: EMISSION INTENSITY GRAPH 16: EMISSION INTENSITY PER EMPLOYEE PER AIR TRAFFIC MOVEMENT (ATM)

SUSTAINABLE AVIATION AFRICA contribution to Climate Change l Scope 1 Emission intensity per Per Air Traffic Movement l Scope 2 employee & revenue (ATM) CO2e/ATM For 2017/18 financial year, 23 440.52 CO2e resulted l Scope 3 from ATNS operations. The emission distribution 25,0 0,035 resulted in 86% tonnes CO2e from scope 2, 13% 20,0 0,03 from scope 3 and 1% from scope 1 (graph 13). 86% Therefore, scope 2, electricity emissions, account 0,025 15,0 for majority of the carbon footprint. 0,02

10,0 0,015

0,01 5,0 Emission intensity per ATM intensity Emission 0,005 Emission intensity per parameter intensity Emission 0 0 2015/16 2016/17 2017/18 2015/16 2016/17 2017/18 Year Year l Per revenue CO2e/revenue l Per Air Traffic Movement (ATM) CO2e/ATM

126 127 PERFORMANCE CONTINUED

Manage and preserve scarce GRAPH 18: TOTAL ELECTRICITY CONSUMPTION AT GRAPH 20: FUEL EFFICIENCY PER AIR TRAFFIC ACSA AIRPORTS MOVEMENT (ATM/L) and vulnerable resources 13,02

6% 1% The first phase of the project involved the 13 Energy Management 5% deployment of smart meters at selected ATNS 3% 12,98 In the reporting period, ATNS initiated a smart business units and sites, while the second phase metering project in response to the electricity audit will include the rest of ATNS’s locations. Data 12,96 conducted in 2015. The objective of the metering from the selected centres and equipment sites system is as follows: will enable the Company to report monthly power 41% 12,94 26% consumption, thereby ensuring that electricity 12,92 • Measure and analyse the current electricity usage is monitored. The project is at 95% Per Parameter Per consumption trends. completion, with meters installed at nine ACSA 12,9 sites and six equipment sites. The next phase of • Determine a baseline for the major electricity 1% the project includes the final integration of the 4% 12,88 users to assist in implementing interventions to 13% system, as well as the confirmation of municipal lower the Company’s energy footprint. 12,86 tariffs. ACSA will be responsible for ensuring l OR Tambo Airport l ATA • Monitor and track electricity consumption for an information is accurate and that the reporting 12,84 efficient electricity saving plan. system is finalised. l Kimberly Airport l Port Elizabeth Airport 2016/17 2017/18 l East London Airport l Durban Airport Annual Performance l Bloemfontein Airport l Cape Town Airport Energy efficiency performance l George Airport Upington Airport 0% l Per Air Traffic Movement (ATM/L)

KPI 2017/18 GRAPH 19: ELECTRICITY CONSUMPTION GRAPH 21: ATNS ANNUAL FUEL CONSUMPTION Total Electricity Consumption 20 358 981,44 kWh PER EMPLOYEE AND REVENUE

Total Fuel Consumption 81 612 L 0,09 300

0,08 250 KPI 2016/17 2017/18 0,07

Per employee (Employee/MWh) 0,06 0,06 0,06 200

Per revenue (Revenue/MWh) 0,08 0,08 0,05 150 Per Air Traffic Movement (ATM/MWh) 52,1 52,1 0,04 Per Parameter Per Per Air Traffic Movement (ATM/L) 13 12,9 Parameter Per 0,03 100

0,02 GRAPH 17: ELECTRICITY CONSUMPTION FOR 2017/18 50 0,01

0 0 3% 5% 2016/17 2017/18 2013/14 2014/15 2015/16 2016/17 2017/18 3% Annual Performance Year

l Per employee (Employee/MWh) l Fuel (Litres) l Per revenue (Revenue/MWh)

l ACSA l Municipalities l UMFA GTS l Eskom 89% Denel 0%

128 129 PERFORMANCE CONTINUED

sites to ascertain the compliance level of the integrated into the Company in a manner that Water management KPI 2016/17 2017/18 various sites in accordance with the National will enhance ATNS’s overall Sustainability and As a state-owned entity, ATNS recognises the Recycled Waste 2 399 Kgs 1 519,37 Kgs Environmental Management Act and associated Environmental (S&E) Strategy. national drive to conserve water in the midst of the legislation and regulations. For the Company to national water crisis, and in particular the Western Biodiversity management ensure the adherence to legislation, it is necessary Enabling integration of Cape province. Even though the Company’s to measure and monitor the impacts of various environmental aspects to our water consumption is mainly for domestic use, environmental aspects. For the period under review, environmental business water conservation is prioritised in the overall assessments were conducted for the ATNS management of water at all our sites and aims to ISANDO Property Development project and the To fully address ATNS’s environmental impacts, Sustainable procurement practices empower implement various interventions to manage water Decommissioning of the masts located at the an ISO 14001:2015 Environmental Management the organisation to ensure that its products and accordingly. ATNS integrates water efficiency in ISANDO site. The ISANDO Property Development System (EMS) readiness exercise was performed services have minimal environmental impacts. projects that require building refurbishments and project forms part of the Company’s strategic to prepare for the implementation of an EMS. Existing practices relating to the assessment of promotes green building principles such as flow- projects in that, no only will the development The system will enable ATNS to manage its ATNS’s suppliers during the procurement phase regulating taps and toilets as well as rainwater enhance the current office facilities, it will also be environmental risks, achieve and control the harvesting. During the year, the Company of projects is being investigated to enhance a Green Star-rated building with certification from expected level of environmental performance investigated the benefits of installing water meters the Company’s environmental performance. the Green Building Council of South Africa. and provide a structured process for continual Assessments of suppliers, manufacturing in its operations as well as the installation of water improvement. ATNS has ISO 9001:2015 tanks as alternative water sources. processes, transportation, operational phases The key environmental aspects that will be certification. as well as end-of-life considerations need to be included in the development include: Waste management environmentally sustainable. Accordingly, the integration of environmental sustainability into the • Office management in line with the Green Star Develop enterprise-wide overall supply chain model is critical to enhance ATNS’s waste management approach is aligned SA accreditation to the Waste Hierarchy principles. The Integrated awareness for environmental environmental performance. Waste and the Integrated Waste Management • Building management system impacts Policy aims to enforce proper waste management • Implementation in accordance with the Environmental consideration in the practices at our building and project sites. General approved environmental authorisation Embedding environmental CAPEX value chain waste and hazardous waste are addressed to ensure compliance with the business’ sustainability • Water management sustainability awareness During the year, ATNS intensified the integration objectives. • Waste management During the year, the Company started a process of environmental sustainability into infrastructure projects planning to ensure that all projects ATNS waste management is yet to be fully • Emissions management of transitioning sustainability and environmental have minimal environmental impacts. Currently, implemented. The data collected currently is for • Materials management training within ATNS from a class-room training projects are assessed from the planning phase to the inception phase. model to an e-learning model. Going forward, the • Land use management new e-learning model will accelerate the practical ensure minimal associated impacts. The actual implementation and maintenance are monitored GRAPH 22: 2017/18 ATNS RECYCLED WASTE • Energy management assessments of participants’ understanding of training material and simplify learner feedback. through environmental management plans. The decommissioning phase is also aligned to 3 000 A service provider will be appointed to develop The e-learning mode of training is being phased environmental objectives. and implement the Environmental Management in over time to refine and enhance training 2 500 Plan (EMP) and Waste Management Plan (WMP) programmes. to monitor site activity and construction. Protected Ensure constructive and 2 000 flora species will be identified and a search and A total of 316 (25%) of 1 258 ATNS employees and rescue project will be implemented to relocate 24 bursars received environmental sustainability collaborative stakeholder 1 500 at-risk species as part of the Environmental training during the year. relationships Kilograms Authorisation requirements stipulated by the 1 000 Department of Environmental Affairs during the ATNS is investigating an Environmental Address societal challenges Environmental Impact Assessment process. Management System (EMS), which will enable 500 ATNS to integrate environmental sustainability ATNS’s CSI investment continues to support Environmental compliance into various business operations to enhance the 0 underprivileged communities through various 2016/17 2017/18 Company’s overall environmental performance. projects. Annual Performance In the period under review, ATNS conducted a The EMS will ensure that all the necessary l Recycled waste compliance assessment for CNS equipment structures, processes and procedures are

130 131 PERFORMANCE CONTINUED

The table below outlines the CSI programme investment for the 2017/18 financial year. ATS bursars enrolled in learnership programmes

ATNS CSI PROGRAMMES FOR 2017/18 One of ATNS’s business objectives is to implement interventions to address key societal challenges thereby building a meaningful legacy for ATNS in the Communities in which we operate. In this context, ATNS runs PROJECT NAME DESCRIPTION COSTS(R) an ATS Bursar and Engineering Learnership programme at the Aviation Training Academy. The overall ATS trainee number at the ATA for the year is 444. There were 68 bursars, 12 engineering learnerships, and Free State Winter School Project Winter school camp provided for earmarked high schools in 307 583.63 the Lejwe Leputswa District in the Free State 10 graduates. Oliver & Adelaide Tambo Foundation Donation to the Tambo Foundation 100,000.00 The table below indicates the demographic representation of the ATS Bursars currently enrolled at ATA. Partnership with ACSA – Teacher Partnered with ACSA in the Teacher and Learner 500,000. 00 and Learner Development Development Programme in the Eastern Cape at Dondashe DESCRIPTION OF ATS BURSARS ENROLLED IN LEARNERSHIP PROGRAMMES Programme Secondary school Khalushi Secondary School Winter Sponsorship of the winter school project at Kgalushi 45,000.00 PROVINCE FEMALE FEMALE MALE MALE GRAND School Secondary school in Limpopo TOTAL TOTAL TOTAL Computer Desks Installation of computer desks in Limpopo 106,025.00 African Coloured Indian White African Coloured Indian White Eastern Cape 1 0 0 0 1 3 0 1 0 4 5 Donation of groceries Donation of groceries to Orphanage homes 126,727.55 Free State 2 0 0 0 2 1 0 0 0 1 3 Artwork for computer lab and Artwork displayed at the computer and science lab at Bray 60,450.00 Physical Science lab in the North West Gauteng 34 1 0 0 35 9 0 0 1 10 45 Oliver Tambo Centenary Launch of the O.R Tambo bust and signage by the President 254,795.19 Kwa-Zulu Natal 4 0 1 0 5 1 0 0 0 1 6 at ORTIA Tower Limpopo 4 0 0 0 4 1 0 0 0 1 5 Branding and collateral Branding and collateral for CSI projects 261,400.00 Mpumalanga 1 0 0 0 1 0 0 0 0 0 1 Mfundo Development Foundation Teacher and Learner Development programme in Limpopo 240,000.00 Western Cape 2 0 0 0 2 0 0 0 0 0 2 Nyetsi Holdings Transportation for community projects 442,323.48 Northern Cape 0 0 0 0 0 0 0 0 0 0 0 Olwande Communications O.R. Tambo signage for the tower 77,400.00 North West 1 0 0 0 1 0 0 0 0 0 1 TOTAL 2,521,704.85 Grand Total 49 1 1 0 51 15 0 1 1 17 68

Read more about ATNS’s CSI commitments in our Sustainability Report, available online at http://www.atns.co.za/annual-reports.

132 133 PERFORMANCE CONTINUED

ATNS continues to facilitate the development Contracts for six engineering learners who had stringent Fraud Prevention Plan. ATNS has a fraud Ensure regulatory alignment of engineers by offering experiential learning registered in January 2017, were terminated on and whistle blowing policy and fraud prevention opportunities in the form of learnerships and the 31 March 2018. In January 2018 six engineering plan to support the fight against fraud and and compliance P.13 Graduate Engineering Development Programme learners were enrolled and their contracts will corruption and to promote good governance. (GEDP). The Graduate programme runs for run for a period of one year. Further, seven ATNS continues to comply with relevant legislation, 24 months while the Learnership programme unemployed graduates that are enrolled in a During the reporting year, ATNS obtained a regulations and standards. The organisation has identified and assessed the top five legislative runs for one year. development programme in different disciplines qualified audit opinion due to irregular expenditure. requirements applicable to business. Controls have across the business will have their contracts been implemented, with continuous monitoring. During 2017/18, ATNS enrolled 10 engineering extended by six months. A material matter was reported during the graduates. Contracts for five of the graduates first quarter of the year; however, it could Emerging risks relating to other legislation that had joined the GEDP in January 2016, were not be investigated further due to insufficient are monitored through the Compliance Risk terminated on 31 March 2018. They have since Maintain an impeccable information. A matter was also reported in the Management Plan (CRMPs). been absorbed into the business. The remaining third quarter, and was resolved in the fourth five graduates were enrolled in January 2017, governance framework P.2 Quarter, albeit not within the required 90 days and their contracts will run for 24 months. Their P.13 stipulated in the Fraud and Whistle blowing policy subsequent absorption into the business depends As part of ATNS’s plan to comply with Treasury given the lack of staff capacity in the Internal on attrition rate. Regulation and the PFMA, it has developed a Audit Department.

TRAINING DEMOGRAPHICS FOR 2017/18

SKILLS DEVELOPMENT BENEFICIARY STATISTICS

MALE FEMALE

Foreign Foreign Total Occupational Levels African Indian Coloured White National African Indian Coloured White National Female AIC % Female % & Male

Eng. Learner/Graduates 7 2 0 0 12 0 1 0 22 100 59

Graduate Support 1 0 0 0 6 0 0 0 7 100 85.71

ATCO Bursars/Trainee 0 0 0 0 2 0 1 0 3 100 100

ATSO Bursars/Trainee 2 0 0 0 41 0 0 0 43 100 95.35

PWD Internship 3 0 0 0 5 0 0 0 8 100 62.5

AIMO Bursars/Trainee 0 0 0 0 0 0 0 0 0

Sub-total 13 2 0 0 66 0 2 0 83 100 81.93

% of total skills development beneficiaries 15.66 2.41 0 0 79.52 0 2.41 0

ATNS DEMOGRAPHICS STATISTICS

MALE FEMALE

Foreign Foreign Total Occupational Levels African Indian Coloured White National African Indian Coloured White National Female AIC % Female % & Male

Number of employees 370 48 51 202 10 458 35 41 83 5 1 303 76.98 47.35

% of total employees 28.4 3.68 3.01 15.5 0.77 35.15 2.69 3.15 6.37 0.38

134 135 PERFORMANCE CONTINUED

Performance against our Shareholder Compact

Performance against targets as set in the Corporate Plan 2017/18

l l l The following table presents a summary of performance against targets for the 4th quarter and is prepared Not achieved Achieved Partially achieved in line with National Treasury Guidelines for quarterly performance reporting. (Partially achieved = A KPI that has not been fully achieved but significant progress has been made in financial year.

ITEM BUSINESS OBJECTIVE ANNUAL ANNUAL ACTUALS QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4 QUARTER 4 ANNUAL ANNUAL NO. OBJECTIVES MEASURES PERFORMANCE 2016/17 ACTUALS AS AT ACTUALS AS AT ACTUALS AS AT ACTUALS AS AT TARGET ACTUALS 2017/18 TARGETS 2017/18 INDICATORS (FULL YEAR) 30 JUNE 2017 30 SEPTEMBER 31 DECEMBER 31 MARCH 2018 (FULL YEAR) (FULL YEAR) 2017 2017

1. TRANSPORT SAFETY AND SECURITY

1.1 Risk Safety Index Reduce the risk Risk associated with RSI:47 RSI: 49 RSI: 49 RSI: 45 RSI:40 RSI: 44-56 RSI: 40 RSI: 44-56 (RSI) associated with safety events at a safety events level of 40 or higher in accordance with the Risk Assessment Tool

1.2 Safety service Increase successful Providing successful 99,995% 99,994% successful 99,993% 99,990% 99,990% 99,995% 99,990% 99,995% provision safe operations safe operation and successful safe safe operation and successful safe successful safe successful safe successful safe successful safe successful safe application operation and an an error margin of operation and an operation and an operation and an operation and an operation and an operation and an of separation error margin of 0,006% error margin of error margin of error margin of error margin of error margin of error margin of standards based on 0,007% 0,007% 0,010% 0,010% 0,005% 0,010% 0,005% IFR flight hours to equate to 99,995% and an error margin of 0,005%

1.3 Operational Reduce overall Average delay per 33 seconds 53 seconds 29 seconds 25 seconds 22 seconds 120 seconds 22 seconds 120 seconds Efficiency traffic delays delayed flight (off block time)

1.4 Operational Achievement of CNS Average CNS C: 99,80% C: 99,92% C: 99,77% C: 99,62% C: 99,80% C: 99,67% C: 99,78% C: 99,67% efficiency Systems Availability Systems Availability N: 97,98% N: 97,25% N: 95,90% N: 95,64% N: 96,40% N: 98,65% N: 96,30% N: 98,65%

S: 99,99% S: 100,00% S: 99,96% S: 99,98% S: 99,94% S: 99,77% S: 99,97% S: 99,77%

1.5 Ensure commercial Ensure financial Meeting financial D/E =0% D/E: 0% D/E: 0% D/E: 0,5% 0,3% D/E =10-45% 0,5% D/E =10-45% sustainability sustainability target as per Budget C/A =7.4:1 C/A: 6.01:1 C/A: 7.43:1 C/A: 5.99:1 5.3:1 C/A =2.5:1 4.6:1 C/A =2.5:1 ROCE =20,1% ROCE: 4,2% ROCE: 8,6% ROCE: 21,41% 13,4% ROCE =12,60% 5,26% ROCE =12,60%

Meeting financial Revenue: Revenue: Revenue: Revenue: R10,3 million SADC VSAT 2: R46,5 million SADC VSAT 2: target as per R49,0 million R11,5 million R 23,7 million R36,1 million Revenue Revenue: Budget – VSAT 2 R13,7 million R55,1 million

Meeting financial Revenue: Revenue: Revenue: Revenue: R9,0 million NAFISAT: R35,8 million NAFISAT: target as per R44,0 million R9,2 million R17,8 million R28,0 million Revenue Revenue: Budget – NAFISAT R12,0 million R48,3 million

136 137 PERFORMANCE CONTINUED

ITEM BUSINESS OBJECTIVE ANNUAL ANNUAL ACTUALS QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4 QUARTER 4 ANNUAL ANNUAL NO. OBJECTIVES MEASURES PERFORMANCE 2016/17 ACTUALS AS AT ACTUALS AS AT ACTUALS AS AT ACTUALS AS AT TARGET ACTUALS 2017/18 TARGETS 2017/18 INDICATORS (FULL YEAR) 30 JUNE 2017 30 SEPTEMBER 31 DECEMBER 31 MARCH 2018 (FULL YEAR) (FULL YEAR) 2017 2017

1.6 Performance- Gauteng Area PBN 4 Design Reports 3 Design Reports 1 x RNAV (GNSS) 3 x RNAV (GNSS) The report Completed in 1 RNAV (GNSS) 4 Instrument 4 Instrument based navigation Plan (GAPP) for submission to for submission to BaroVNAV RWY03L BaroVNAV designs for RNP Quarter 2 Baro VNAV Flight Procedures Flight Procedures (PBN) SACAA (RNP APCH SACAA (RNP APCH) for FAOR designed RWY03R, APCH were 4 Instrument Design reports Design reports Operational - FAOR) RWY21L, completed in Q1 Flight Procedures Completed Enhancement RNP APCH in RWY21R for &Q2 respectively Design reports 100% of instrument FAOR designed runways located at ACSA airports

12 Design Reports 10 Design Reports 0 RNAV 1 SID/STAR 0 RNAV 1 SID/ 3 RNAV 1 9 RNAV 1 3 RNAV 1 12 Instrument 12 Instrument for submission to for submission to designed STAR designed Design reports Design reports Design report Flight Procedures Flight Procedures SACAA (RNAV 1 SACAA (RNAV 1 completed completed Design reports Design reports SID/STAR) SID/STAR Completed

4 ILS Design 8 Design Reports There was no ILS 3 x ILS CAT 1 x ILS CAT I Completed in 1 ILS design 4 ILS Design 4 ILS Design Reports for for submission to reports design I RWY03L, RWY 21L was Quarter 3 report Reports for Reports for Submission to SACAA (RNAV 1 RWY21R, designed. 4 Instrument submission to submission to SACAA SID/STAR) RWY03R for Flight Procedures SACCA SACCA FAOR designed Design reports completed

2. INFRASTRUCTURE DEVELOPMENT AND HIGH-LEVEL INVESTMENT PLAN FOR TRANSPORT

2.1 Development of Approved CAPEX Compliance with R127,86 million R6,44 million R9,85 million R2.92 million R17,34 million R 25,43 million R36,56 million R131,48 million optimised and Commitment Plan the commitment efficient aviation for 2017/18 plan milestones for infrastructure in a 2017/18 CAPEX cost-effective (R131, 480,500) manner

2.2 Operation of Optimise revenue Achievement of SLA – 99,94% SLA: 99,93% SLA: 99,97% SLA: 99,97% SLA: 99,70% SLA – 98,5% SLA: 99,89% SLA: 98,5% the satellite and ensure network the revenue and communication availability network availability networks as per SLA targets SADC VSAT 2

2.3 Operation of Optimise revenue Achievement of SLA – 99,94% SLA: 100,00% SLA: 99,99% SLA: 99,95% SLA: 99,93% SLA – 98,5% SLA: 99,97% SLA: 98,5% the satellite and ensure network the revenue and communication availability network availability networks NAFISAT as per SLA targets

3. THE FIGHT AGAINST FRAUD AND CORRUPTION

3.1 Comply with Full (one is either Sound internal Qualified audit Report will be Annual target Annual target Top 5 legislations Unqualified ATNS obtained Unqualified relevant legislation, compliant or not & control systems for report was achieved available at the end have been audit report to a qualified audit audit report to regulation and therefore percentile identified for 2015/2016 of the financial year. identified and be achieved for due to irregular be achieved for standards measurement not /rated critical assessed. 2017/2018 (this is expenditure 2017/2018 (this is accurate) (top 10) non- Maintaining Controls have an annual target) an annual target). compliances on the legislative been put in place The annual audit universe. Regulatory Universe and continuous is expected to for ATNS by monitoring has be concluded by facilitating the risk been conducted June 2018. prioritisation of all and the process pieces of legislation is ongoing in the regulatory Emerging risk of universe. Escalate other legislation compliance matters are monitored to management. through CRMPs

138 139 PERFORMANCE CONTINUED

ITEM BUSINESS OBJECTIVE ANNUAL ANNUAL ACTUALS QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4 QUARTER 4 ANNUAL ANNUAL NO. OBJECTIVES MEASURES PERFORMANCE 2016/17 ACTUALS AS AT ACTUALS AS AT ACTUALS AS AT ACTUALS AS AT TARGET ACTUALS 2017/18 TARGETS 2017/18 INDICATORS (FULL YEAR) 30 JUNE 2017 30 SEPTEMBER 31 DECEMBER 31 MARCH 2018 (FULL YEAR) (FULL YEAR) 2017 2017

3.2 All whistle blowing Fighting corruption Matters investigated Eight whistle One matter was One matter One matter Investigation of There were no Four Whistle Investigation of matters reported and promoting good as per policy blowing issues reported in the was reported in reported in matters reported matters reported blowing issues all matters raised are investigated governance were reported for fourth Quarter Quarter 2. No Quarter 1 was to be completed in Quarter 4. One were reported for to be completed the year. Four were and is still under work could be completed in within 90 days matter received the year. Two (2) within 90 days completed within investigation performed due Quarter 3 within in Quarter 3 was were completed 90 days and the to inadequate 90 days completed in 148 within 90 days, other four are still information days one matter under investigation provided Two matters could not be as it was reported in were reported investigated due the last quarter of in Quarter 3. to insufficient the year One matter was information completed provided and within 90 days, one matter was one matter completed after is still under 90 days investigation

4. ENVIRONMENTAL PROTECTION

4.1 Implementation of Measure ATNS ATNS 2017/18 ATNS carbon Quarter 1 Carbon Quarter 2 Carbon Quarter 3 Carbon Quarter 4 Quarter 4 Carbon Carbon Footprint Carbon Footprint environmental plan Carbon footprint Carbon footprint footprint quarterly Footprint Report Footprint Report Footprint Report Carbon Footprint Footprint Report Report completed Report inventory report results Q1 – Q4 completed completed completed Report 2016/17

Performance Environmental Annual ATM Annual report Annual report Annual report Environmental Environmental Environmental Environmental assessment performance environmental Assessment Assessment Assessment Assessment assessments performance Environmental Environmental Environmental report completed report (At year- report completed report (At year- report compiled for Assessment report Assessment Assessment end) end) 2016/17 report report

5. TRAINING TO CONTRIBUTE TO JOB CREATION

5.1 Address societal ATS bursaries Trained ATS and ATS: 81 ATS: 25 ATS: 25 ATS: 25 ATS: 20 ATS: 20 ATS: 68 ATS: 20 challenges, and engineering engineering thereby building a learnerships learnerships Engineering Engineering Engineering Engineering Engineering Engineering Engineering Engineering meaningful legacy Learnership: 6 Learnership: 6 Learnership: 6 Learnership: 6 Learnership 6 Learnership 6 Learnership 12 Learnership :6 for ATNS and the ETS – GEDP: 10 ETS GEDP: 10 ETS GEDP: 10 ETS GEDP: 10 ETS GEDP:10 ETS – GEDP - 5 ETS GEDP:10 ETS – GEDP: 5 Communities in which we operate Unemployed Unemployed Unemployed Unemployed Unemployed Unemployed Unemployed Unemployed Graduates: 12 Graduates: 7 Graduates: 7 Graduates: 7 Graduates 0 Graduates 16 Graduates 7 Graduates: 16

5.2 Manage the training Adoption and Achievement of the ATCO 3: 210 ATCO 3: 209 ATCO 3: 205 ATCO 3: 215 ATCO 3: 221 ATCO 3 - 226 ATCO 3: 221 ATCO 3 - 226 pipeline for ATS and approval of HC plan numbers as per technical staff as per budget. budget ATCO 2: 30 ATCO 2: 33 ATCO 2: 34 ATCO 2: 38 ATCO 2: 37 ATCO 2: 37 ATCO 2: 37 ATCO 2: 37 ATS and TS training ATCO 1: 136 ATCO 1: 134 ATCO 1: 139 ATCO: 135 ATCO 1: 134 ATCO 1: 121 ATCO 1: 134 ATCO 1: 121 plan. Operational Adoption and or implementation approval of training Eng. Techs: 78 Eng. Techs: 78 Eng. Techs: 78 Eng. Techs: 78 Eng. Techs: 78 Eng. Techs: 74 Eng. Techs: 78 Eng. Techs: 74 plan plan. Compliance with the milestones Eng. Satellite Eng. Satellite Eng. Satellite Eng. Satellite Eng. Satellite Eng. Satellite Eng. Satellite Eng. Satellite of the plans Technicians: 5 Technicians: 5 Technicians: 5 Technicians: 5 Technicians: 5 Technicians: 5 Techs: 5 Technicians: 5

5.3 Review and Development Training investment 8,13% Rand value of 8,15% Rand value of 6,37% Rand 4,12% Rand 9,90% Rand 6% Rand value of 6,52% Rand 6% Rand value of implement the programmes for as percentage of a salary bill Cost to Company value of Cost to value of Cost to value of Cost to Cost to Company value of Cost to Cost to Company HR plan to recruit, employees, with salary bill Company Company Company Company develop, retain, emphasis on AIC and reward and women employees across all disciplines

140 141 PERFORMANCE CONTINUED

ITEM BUSINESS OBJECTIVE ANNUAL ANNUAL ACTUALS QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4 QUARTER 4 ANNUAL ANNUAL NO. OBJECTIVES MEASURES PERFORMANCE 2016/17 ACTUALS AS AT ACTUALS AS AT ACTUALS AS AT ACTUALS AS AT TARGET ACTUALS 2017/18 TARGETS 2017/18 INDICATORS (FULL YEAR) 30 JUNE 2017 30 SEPTEMBER 31 DECEMBER 31 MARCH 2018 (FULL YEAR) (FULL YEAR) 2017 2017

6. BROAD-BASED BLACK ECONOMIC EMPOWERMENT

6.1 Achieve B-BBEE Percentage of Achievement of B-BBEE level 3 B-BBEE level 8 – B-BBEE Level 6 B-BBEE Level 6 B-BBEE Level 2 B-BBEE level 3 B-BBEE Level 2 B-BBEE level 2 targets discretionary spend B-BBEE targets as Annual Target on B-BBEE per the Transport *Progress *Progress The overall score *Progress The overall score Achieve preferential Charter *Progress towards towards achieving towards achieving is 69,95 which towards achieving is 85,42 which procurement Total discretionary achieving level 3 will level 3 will be Level 3 will be translates to a level 3 will be translates to a targets as set by the OPEX budgeted. be monitored on a monitored on a monitored on a B-BBEE Level 2 monitored on a B-BBEE Level 2 Transport Charter Total CAPEX quarterly basis quarterly basis quarterly basis quarterly basis budgeted

7. EMPLOYMENT EQUITY

7.1 ATS EE targets Achieve Achievement of AIC ATS AIC: 70,01% 69,19% ATS AIC 72,73% ATS AIC 71,34% ATS AIC 72,27% ATS AIC 68% ATS AIC 72,27% ATS AIC 68% ATS AIC (AIMO, ATSO, representation Target ATCO 1-3) towards alignment of Company staff Achievement of ATS ATS female: 42,43% 39,97% ATS female 44,73% ATS 44,63% ATS 46,55% ATS 44%% ATS 46,55% ATS 45% ATS profile with the female target female female female female female female demographics of the country

7.2 ATNS EE Achieve Achievement of ATNS AIC: 75,12% 75,84% ATNS AIC 76,90% AIC 76,66% AIC 76,98% ATNS AIC 76% AIC 76,98% ATNS AIC 76% ATNS AIC targets representation ATNS AIC targets towards alignment of Company staff Achievement ATNS female: 45,02% ATNS 46,12% ATNS 46,20% ATNS 47,35% ATNS 47% ATNS female 47,35% ATNS 47% ATNS profile with the of ATNS female 44,88% female female female female female female demographics targets of the country

142 143 OUTLOOK

Ensure long-term financial stability Other revenue Capital expenditure projections

ATNS’s revenue is based on the number of aircraft movements and the tariff increases and estimates Other revenue increased by 3,2% over a three-year ATNS will continue to contribute towards the implemented each year. The volume growth is a sum of the growth in movements and the change in period, mainly due to the following: infrastructure development and high-level aircraft mix. investment plan for the national transport sector. • Revenue earned from SADC VSAT III and THREE-YEAR FINANCIAL PERFORMANCE PROJECTIONS NAFISAT networks as a result of increased Further, ATNS has embarked on a process of Flight Information Region (FIR) crossings. consolidating the locations of its Head Office, • Technical support rendered to various support functions and core shared services (such DESCRIPTION 2018/19 2019/20 2020/21 3 YEAR countries, such as the contract secured with as the Area Control Centre). The objective is to BUDGET PROJECTIONS PROJECTIONS GROWTH Namibia to provide the Central Aeronautical centralise these in one campus, namely Isando Tariff revenue 1,497,917 1,590,736 1,722,529 4,8% Database (CAD) services. Property Development bringing more efficiencies, better utilisation of technology and appropriate Other revenue 187,406 195,714 206,062 3,2% • WGS – 84 surveys, flight and procedure design utilisation of ATNS owned land. This process projects carried out. Total revenue 1,685,323 1,786,449 1,928,590 4,6% is in its early stages that include necessary • External training revenue based on training Engineering Studies, Environmental Assessments Salaries and related costs 1,032,747 1,109,667 1,194,152 5,0% contracts that are currently in the pipeline. and consultation with the Industry. We expect that Traveling expenses 52,405 52,147 56,319 2,4% • The increase in small aerodromes due to the all necessary approvals will be in place in the first negotiated increases in contract renewals and quarter of 2019 with construction breaking ground Telecommunication expenses 54,310 57,344 61,085 4,0% the newly-secured ST Helena contract. immediately thereafter. Administration fees 92,545 87,536 90,558 -0,7% Electronic maintenance 93,168 103,639 107,133 4,8% CAPITAL EXPENDITURE PROJECTIONS Professional fees 26,362 24,141 26,073 -0,4% Other operational expenditure 146,375 135,581 147,830 0,3% The table below outlines our capital investment projections up to 2022. Total operating expenses 1,497,912 1,570,056 1,683,150 4,0% DESCRIPTION BUDGET PROJECTIONS EBITDA 187,411 216,393 245,441 9,4% 2018/2019 2019/2020 2020/2021 2021/2022 Overhead expenditure 140,595 143,124 179,474 8,5% Communications 50,849,273 20,945,633 69,815,940 77,458,500 Net funding -71,417 -55,037 -37,552 -19,3% Navigation 98,180,467 104,394,373 59,076,000 47,392,000 Profit before tax 118,232 128,306 103,518 -4,3% Surveillance 40,391,823 123,735,531 91,925,500 10,176,000 Tax 33,105 35,926 28,985 -4,3% Display systems 15,053,959 63,257,506 25,425,688 100,024,600 Simulator and systems 389,781 - 3,526,800 31,741,200 Net profit after tax 85,127 92,381 74,533 -4,3% Software 9,500,000 6,000,000 3,500,000 3,500,000 Tariff increases General: Buildings 36,500,000 36,500,000 12,500,000 17,500,000 General: Elect & mech equipment 3,500,000 9,000,000 9,000,000 3,500,000 The tariff increases and projections, as contained in the financial plan, are as follows: General: Test equipment 3,000,000 3,000,000 3,000,000 3,000,000 TARIFF INCREASES General: Tools 1,000,000 1,000,000 1,000,000 1,000,000 General: Office furniture & fittings 3,000,000 1,500,000 1,500,000 1,500,000 Description Actual Actual Budget Projection Projection General: Computer equipment 2,000,000 2,000,000 2,000,000 2,000,000 2016/17 2017/18 2018/19 2019/20 2020/21 Total 263,365,304 371,333,034 282,269,928 298,792,300 Traffic movement growth* -1,9% -2,4% 2,29% 2,21% 2,18% Tariff increase** 0% 1,5% 2,15% 0,5% 5,0%

Tariff revenue is expected to grow by an average of 4,8% over the three-year period as a result of an increase in both the tariff and traffic movements.

144 145 OUTLOOK CONTINUED

Enhance operational The future ATFM strategy and CONOPS will enable provision of service in several runways in the forward-relay deployment and individual sector ATNS to be at the forefront of ATFM enhancement same airport; the provision of several approach frequency allocation. efficiencies in line with global initiatives in support of the global ATFM concept. glide angles, displaced threshold, and guided ATM standards To achieve ATFM objectives, improved connectivity, missed approach. ATNS is in the early stages of The most efficient and safe sector configuration interoperability and predictability will be crucial to investigating the feasibility of deploying GBAS. for the NE sector - considering the limitations of ATM Planning and Research is currently drafting ensure optimised planning and management. deployed communication equipment - is being the following Concepts of Operations (CONOPS) to Performance-based Navigation developed. This initiative will go a long way meet the challenges associated with global ATM The maximised operational, administrative, to enhance safety and efficiencies at FAOR in and maintenance efficiencies obtained through Technology Developments: The South African Performance Based Navigation conjunction with existing operational procedures remoting aims to meet the needs of the ATM (PBN) Roadmap details the framework within and systems. Community as envisioned in the Global Air Traffic which the ICAO PBN concept will be implemented RATS CONOPS Management Operational Concept, with specific in South Africa for the foreseeable future. The Gauteng area PBN Plan (GAPP) focus on a seamless, globally interoperable ATM The International Air Transport Association (IATA) South African PBN Roadmap is guided by ICAO System. expects 7,2 billion passengers to travel in 2035, Doc. 9613 and relevant SARPS. The primary The GAPP project stems from a PBN Go Team a near doubling of the 3,8 billion air travellers in driver for this plan is to maintain and increase initiative that was sponsored by ATNS in August 2016. The prediction is based on a 3,7% annual PBCS safety, air traffic demand and capacity, and 2013. Changes to and development of procedures Compound Average Growth Rate (CAGR) noted in services and technology in consultation with are required due to the increase of traffic demands the release of the latest update to the Association’s ICAO, through various meetings, has called relevant stakeholders. The South African PBN within the Gauteng airspace, which has also 20-year Air Passenger Forecast. for the implementation of performance-based Roadmap also supports national and international increased the workload and responsibilities of the communication and surveillance to reduce interoperability and global harmonisation. existing controller function. Measures had to be Air Traffic Management seeks to balance air separation in the Oceanic Airspace (RNP 4). This considered that will enable the workload of the will enable states to reduce longitudinal separation traffic demand with airspace and system capacity South Africa under the guidance of the DoT will position to be contained within the acceptable level from 50NM to 30 NM in the Oceanic Airspace. To allowing for the safe, orderly and expeditious flow continue to implement and enhance PBN for of safety and service provision parameters and at successfully implement this technology, there is of traffic, while minimising delays and ensuring the State. Air traffic management (ATM) is the the same time increase the efficiencies. a need for a regional monitoring centre. ARMA, the maximum efficient and equitable utilisation of dynamic, integrated management of air traffic and which is managed by ATNS, has been tasked with airspace by the ATM Community. airspace including air traffic services, airspace The purpose of GAPP is to, amongst others, review the development of the regional monitoring centre management and air traffic flow management – procedures and the associated airspace to support and a cost recovery framework. ATNS is developing To ensure that ATNS positions itself as a leader in safely, economically and efficiently – through the PBN Implementation in line with the ATM Roadmap ATM Service delivery on the African continent, and a PBCS Plan that will enable the Company to provision of facilities and seamless services in and the National Airspace Master Plan (NAMP). to align ATNS ATM service structure with global fully implement this technology and also leverage collaboration with all parties. trends, ATNS will take a proactive role on the existing technology.. This project aims to optimise the Gauteng Airspace African continent in the development of seamless in terms of reduced track miles, enabling greater airspace and service provision. Ground-based augmentation system ACC Sectorisation efficiencies as well as improved safety. The (GBAS) following GAPP project milestones have been ATFM CONOPS The current area sectors configuration is inefficient identified: and likely to present scenarios that may infringe Navigation and Approach Aids (NAVAIDs) must on safety performance. The ACC sectors are The ATFM CONOPS presents ATNS’s future ATFM meet the requirements of accuracy, continuity, • Agree on Operational Requirements; configured as follows: NW, NE, SE, and SW and Concept to balance the demand and capacity for availability and integrity specified for each phase it is the NE sector that presents with the most • Create the Airspace Design Team; airports and airspace within South Africa and the of flight. In the past, as the traffic flow increased, efficiency and safety challenges due to the surrounding region. The Concept builds on existing the conventional NAVAIDs were not able to provide • Decide project objectives, scope and timescales; complexity in airspace layout, traffic flow and the ATFM/CDM principles and defines the strategy and the flexibility in airspace to absorb this growth. • Analyse the Reference Scenario – Collect data; future CONOPS for the next 15 to 20 years. As the development of new concepts and systems limitations of VHF communication. Challenges are occurred, ICAO introduced the Global Navigation even more prevalent during periods of high traffic • Select Performance Criteria, Safety Policy and Central to this CONOPS is the fundamental concept Satellite System (GNSS), which allows navigation in volumes. Area Controllers are mainly in favour of Safety Criteria; of balancing air traffic demand and capacity. all phases of flight and precision approach. re-sectorising the NE sector, (i.e. dissecting the • Agree on ATM/CNS Assumptions; While ANSPs and airport operators should strive NE sector into two sectors to alleviate complexity, • Airspace Design – Routes and Holds; to increase and optimise airspace and airport The FAA in the United States is the largest deployer while improving safety and efficiency at the capacity to meet demand, traffic growth, surges of a GBAS system, and refer to it as a Local Area same time). ACC sectorisation will also alleviate • Navigation Analysis of Airspace Design; in traffic and capacity constraining events cause Augmentation System (LAAS). The advantages of communication limitations (i.e. common-frequency • Airspace Design – Structures & Sectors; imbalances. GBAS include the reduction of critical and sensitive forward-relay stations are prone to interference), areas; curved approach; positioning service; the and enhance communications through optimised • Selecting an ICAO Navigation Specification;

146 147 OUTLOOK CONTINUED

• Airspace Concept Validation; adjust targets as and when necessary. In line with support our safety improvement efforts and embed Build a skilled and capable the Employment Equity Act, the current ATNS five- a safety culture in the organisation: • Procedure Design; year EE plan encompasses the following objectives: employee resource base • Procedure Validation; • Yearly safety workshop to discuss safety • ATC System Integration; • Working towards creating a balanced profile performance for the last 12 months, identify Staff wellness of employees within the Company through contributing factors and develop a safety action • Awareness and Training; all occupational categories and levels in the plan for the following financial year; During the year, ATNS performed a survey • Implementation; and workforce; (the “Barrett Survey”) among employees to • Review and re-energising of daily assess overall organisational wellness. The • Post Implementation Review. • Eliminating any discriminatory practices in teleconferences; survey findings revealed that there were certain terms of race, gender or disability; • Monthly safety communiqué to communicate challenges leading to low employee morale. These Once completed, the project will enhance safety, • Providing for the Company’s present and future safety performance and messages; included poor levels of communications, working improve efficiencies, and requirements for skilled staff, in line with its in silos, and a perception of low levels of employee • Safety meetings conducted at Unit and Regional business plan; and engagement in key organisational and strategic • support traffic synchronisation; levels to discuss safety performance, risks and decisions. • Implementing, monitoring and evaluating • conflict management; and mitigations; appropriate measures aimed at redressing • Meetings with General Aviation at least once In the year ahead, ATNS intends to develop an • demand and capacity balancing in the airspace the effects of the past imbalances created a year to discuss factors contributing to safety appropriate response strategy to address the where the highest demand is experienced. by discriminatory employment policies and events and safety risks and hazards; survey findings and will build on other staff- practices. wellness programmes already in place. These • Meetings with Airlines at least twice a year to include: Create a transformative discuss operational efficiency and safety; and Build a culture of safety organisation • Engagements between ATSUs to support • ICAS - Employee Assistance Programme enhanced service delivery and safety • Discovery Health and Bonitas medical aid Safety is the primary driver for the collective Employment equity remains a business imperative performance. Programmes to ensure that our workplace profile is aligned efforts of ATNS. The safety performance remains a • NMG to national demographics and the integrated concern and will continue to receive management • ATNS HR and Wellness Team Programme. transport sector’s B-BBEE charter. attention. Improved Disaster Recovery Plan Additional initiatives will include establishing The five-year EE plan is intended to transform The following are routine activities to drive the This project aims to enhance ATNS’s preparedness a ‘health and wellness’ committee, proactively the ATNS employee profile to reflect national safety culture. In addition to identified safety in the event of business interruptions, which may identifying ‘at risk’ individuals, targeted demographics and will be reviewed annually to interventions, the following routine activities hinder normal operations. The project will focus information and education, the promotion of on the ATS as it is one of the critical functions of healthy activities and behaviours, the involvement the organisation. The following areas have been of executive leadership in programmes, and ATNS EMPLOYMENT EQUITY TREND AND TARGETS (%) RELATING TO WOMEN AND PEOPLE WITH highlighted as being at risk when the business has employee rewards. DISABILITIES to recover from a disaster and to restore normal operations in the shortest possible time: EMPLOYEE CATEGORY 2010/ 2011/ 2012/ 2013/ 2014/ 2015/ 2016/ 2017/ 2018/ 2019/ Manage the organisation’s 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 • Facilities contribution to climate change • People Air traffic service – 48,1 49,0 52,33 56,01 62,29 67,45 68,72 68 70 71 • Tools (documents, equipment, procedures etc.) AIC ATNS is committed to implementing more efficient • Security measures in procedure design, which will ensure Air traffic service – 33,5 34,0 35,70 36,82 41,75 38,68 42 45 44 45 • IT that aircrafts optimise the airspace to gain not only Female • Suppliers fuel savings, but also cost savings and ultimately Organisation-wide – 58,1 60,9 63,37 67,06 69,56 73,88 74 75 76 77 emission reductions. The Company aims to ensure AIC This project will be implemented in a phased that the deployment of aviation infrastructure approach, prioritising O.R Tambo. The anticipated Organisation-wide – 33,9 37,4 38,52 40,92 44,05 43,77 47 47 48 50 has minimal environmental impact and promotes Female outcome is improved resilience of the ATS systems alternative energy sources to contribute to the against defined disasters. industry sustainability goals. PWD 2,76 3,09 2,91 2,85 2,79 2,48 3 3,3 3,5 3,5

148 149 OUTLOOK CONTINUED

The outlook for enhancing environmental ATNS’s long-term energy efficiency management Develop enterprise-wide potential environmental impacts. Environmental performance of air traffic management operations objectives are summarised as follows: compliance audits conducted for the ATNS legal will consider the acquisition of an emission awareness for environmental register will culminate in an ‘aspects and impacts’ reporting tool to measure the efficiency of • Determine current consumption trends. impacts register, which will support the development of published procedures, as they pertain to the ATNS’s Environmental Management System ISO • Determine energy reduction targets for each implementation of Continuous Climb Operations 14001:2015 implementation plan. site. To ensure that enterprise-wide awareness and Continuous Descend Operations from upper is created for environmental impacts, ATNS • Review current energy efficiency long term plan. airspace and terminal areas. will continue to institute associated training, Operational practices • Develop a detailed implementation plan. procedural and operational practices. Going forward, the Company will analyse data The following operational practices will be • Integrate energy objectives in the core received from the ATNS smart energy-metering Training implemented to ensure environmental compliance project to: organisational plans. – both in the business’ daily practices and its For the year ahead, ATNS will implement the CAPEX investment projects: • measure and analyse the current energy The Operational Efficiency Programme following enterprise-wide awareness initiatives: consumption trends; (OEP) identifies airspace design and tactical • Performance monitoring scorecard. improvements to enable ATNS, together with • determine a baseline for the major energy • E-learning courses. its stakeholders, to improve flight efficiency • Sustainability policy. users to assist in implementing interventions to and capacity, as well as to reduce adverse • Environmental communication plan. lower the Company’s energy footprint, and • Enhancement of Sustainability and environmental impacts in the terminal areas. In • Environmental knowledge bank. Environmental Strategy Implementation. • monitor and track energy consumption for an future, improving flight efficiency in our service efficient energy saving plan. delivery will become critical. • Environmental Management System ISO Procedures and processes 14001:2015 implementation plan. • Sustainability guidelines. Environmental assessments of proposed projects will be enhanced through the introduction of • Measure operational efficiency to support green procedures and processes to assess all projects agenda (noise, emissions) in ATM Planning and from the planning stage to minimise actual and operations.

150 151 CONSOLIDATED 5-YEAR REVIEW

This section reviews ATNS’s financial performance for the regulated business over a five-year period, The actual compound annual growth rate (CAGR) on operating costs from 2013/14 to 2017/18 was slightly commencing in the 2013/14 financial year and culminating in 2017/18. below the expected 9.87% at 8.0%. Operational costs remained high at around 73% of revenue and this is expected to continue into the future. A significant portion of this relates to staff costs at 70% of the total ATNS’s operations are funded from revenue and debt from external markets. Revenue is used to fund operational expenditure, while around 10% of operating costs have a foreign currency component. The latter operating costs, while debt funds capital expenditure. A debt/equity ratio of 45% is the maximum target to exposes the Company to foreign exchange fluctuations risk. Different options to counter this risk exposure maintain a balance between external and internal funding. have been considered, including obtaining foreign exchange contracts to cover material exposure.

The year-on-year performance of revenue, operating costs, staff costs and capital expenditure compared to With ATNS competing globally to attract and retain critical ATM skills, it often pays a premium for employees the Permission is outlined below: due to the scarcity of their skills in the market and their value to the business. During the year under review, operating costs increased to R1,3 billion, and this included ATNS’ staff cost of R885 million (2017: R817 GRAPH 23: OVERVIEW OF PERFORMANCE OF PERMISSION AGAINST ACTUAL REVENUE FOR THE million). PERIOD 2013/14 TO 2017/18 GRAPH 25: OVERVIEW OF STAFF COSTS FOR 5-YEAR PERIOD 2013/14 TO 2017/18 Revenue R’m Staff Costs R’m 2,000 1,000

800 948 1,500 1,640 885 1,594 1,552 1,513 1,556 817 817 1,425 754 745 1,369 1,412 1,346 600 733 1,293 686 l 1,000 l Act 627 627 Act l l Perm 400 Perm

500 200

- - 2013/14 2014/15 2015/16 2016/17 2017/18 2013/14 2014/15 2015/16 2016/17 2017/18

The permission process has been facilitated under challenging economic conditions over the past five years, Approximately 60% of staff costs are for air traffic control related services. The Company competes with with South Africa’s low economic growth placing pressure on domestic carriers. Furthermore, the recent its international peers for air traffic controllers, resulting in high salaries offered to retain these skills. downgrade of South Africa by rating agencies is likely to negatively impact the already subdued traffic The Company has considered several mitigating options, including clearing the congestion in the training movements, which could adversely affect ATNS’s revenue prospects going forward. pipeline to have a sufficient pool of air traffic controllers. Staff costs will remain high for a foreseeable future irrespective of the significant anticipated investment in technology. Due to previous Permission Cycle over-recoveries (less asset capitalisation), the Regulating Committee (RC) levied a claw-back of R183 million, resulting in the tariff adjustment increasing by 7.5% (2019), 0,5% (2020), GRAPH 26: OVERVIEW OF CAPEX (BASED ON THE CASHFLOW) PERFORMANCE FOR 5-YEAR PERIOD 5.0% (2021), 0.6% (2022) and 2.1% (2023) respectively. However, in line with the applicable Act, ATNS is 2013/14 TO 2017/18 reviewing the Permission to levy Air Traffic Service Charges awarded by the Regulator on the 6th of August 2018 for the period 2018/19 to 2022/23. CAPEX R’m GRAPH 24: OVERVIEW OF OPERATING COSTS FOR 5-YEAR PERIOD 2013/14 TO 2017/18 350 Operating Costs R’m 300 1,400 307 305 250 296 1,200 1,393 1,300 1,382 248 1,201 200 1,000 230 227 l Act 1,058 1,101 1,070 l Perm 800 958 l Act 150 856 870 151 600 l Perm 100 137 135 400 113 50 200 - - 2013/14 2014/15 2015/16 2016/17 2017/18 2013/14 2014/15 2015/16 2016/17 2017/18

152 153 CONSOLIDATED 5-YEAR REVIEW CONTINUED

GRAPH 27: PROFIT BEFORE TAX

Profit Before Tax R’m

400

350 385 349 349 300 339 326 250 266 200 l Act 215 220 150 192 183 l Perm 100 50 0 2013/14 2014/15 2015/16 2016/17 2017/18

As stated previously, actual CAGR on operating costs for the five-year period was slightly below the expected 9,87% at 8,0%. Operational costs remained high at around 73% of revenue and this is expected to continue into the future.

The changes in operational costs impacted on the profit before taxation, with the highest impact being experienced in the 2017/18 financial period. The variance between ‘actual’ and ‘permission’ is mainly due to, among others, the salaries and related costs being lower than the Permission by R66 million due to vacant positions. The underspending was not anticipated at the time of Permission.

154 155 LIST OF ACRONYMS

ACRONYM FULL NAME ACRONYM FULL NAME 4D 4 Dimensional CNS Communications, Navigation and Surveillance AAGR Average Annual Growth Rate CO2 Carbon di-oxide

AASA Airlines Association of Southern Africa CO2e Carbon di-oxide equivalent ABET Adult Basic Education and Development CSI Corporate Social Investment A-CAD African Centralised Aeronautical Database CSIR Council for Scientific and Industrial Research A-CDM Airport – Collaborative Decision Making DEA Department of Environmental Affairs ACSA Airports Company of South Africa DEFRA UK Department for Environment, Food, Rural Affairs ADS-B Automatic Dependent Surveillance-Broadcast DG Director General AFI African Indian Ocean DIRCO Department of International Relations and Cooperation AFS Annual Financial Statements DME-DME Distance Measuring Equipment AIC African, Indian, or Coloured DoT Department of Transport AIM Aeronautical Information Management DR Disaster Recovery AIMO Aeronautical Information Management Office DRP Disaster Recovery Plan AIRPROX Aircraft Proximity DTI Department of Trade and Industry AIS Aeronautical Information Service DVOR Doppler Very High Frequency Omni-Directional Range ANSP Air Navigation Service Provider EE Employment equity APCH Approach EQ Emotional Intelligence APV Approach with Vertical guidance ERM Enterprise Risk Management ASBU Aviation System Block Upgrades ERP Enterprise Resource Planning ASECNA L’Agence pour la Sécurité de la Navigation Aérienne en Afrique et á Madagascar ESD Enterprise Supplier Development ASHFAS African Symposium on Human Factors and Aviation Safety EME Exempted Micro Enterprise A-SMGCS Advanced Surface Movement Guidance & Control System EMP Environmental Management Plan ATA Aviation Training Academy EMS Environmental Management System ATC Air Traffic Control or Air Traffic Controller ENVWG Environmental Working Group ATCO Air Traffic Controller ETS Engineering Training Services ATFM Air Traffic Flow Management EXCO Executive Committee ATM Air Traffic Management or Air Traffic Movement FAA Federal Aviation Administration ATNS Air Traffic and Navigation Services SOC Limited FAEL ICAO Code for East London International Airport ATS Air Traffic Services FAOR ICAO code for OR Tambo International Airport ATSO Air Traffic Service Officer FIR Flight Information Region ATSEP Air Traffic Safety Electronics Personnel FY Financial Year ATSU Air Traffic Service Unit GANP Global Air Navigation Plan B-BBEE Broad-Based Black Economic Empowerment GAPP Gauteng Area PBN Plan BCM Business Continuity Management GBAS Ground-based augmentation system BCP Business Continuity Plan GDP Gross Domestic Product BSC Balance Score Card GEDP Graduate Engineers Development Programme CAA Civil Aviation Authority GNSS Global Navigation Satellite System CAD Centralised Aeronautical Database GRI Global Reporting Initiative CAEP Committee on Aviation Environmental Protection GASP Global Aviation Safety Plan CANSO Civil Air Navigation Services Organisation HC Human Capital CAPEX Capital Expenditure HR Human Resources CCO Continuous Climb Operations IATA International Air Transport Association CDO Continuous Descent Operations ICAO International Civil Aviation Organisation CEO Chief Executive Officer ICAS Independent Counselling and Advisory Services CDM Collaborative Decision Making ICT Information Communication Technology

156 157 LIST OF ACRONYMS CONTINUED

ACRONYM FULL NAME ACRONYM FULL NAME id site Identification Site RNP Required Navigation Performance IFATSEA International Federation of Air Traffic Safety Electronic Association ROCE Return on Capital Employed IFRS International Financial Reporting Standard RSA Republic of South Africa IIRC International Integrated Reporting Council RSI Risk Safety Index ILS Instrument Landing System R/T Radio Telephone ISO International Standards Organisation SACAA South African Civil Aviation Authority IT Information Technology SAAF South African Air Force Kg Kilogram SAAST South African Agency for Science and Technology Advancement KPI Key Performance Indicator SADC Southern African Development Community kWh Kilo Watt Hour SANAS South African National Accreditation System KZN KwaZulu-Natal SANS Saudi Air Navigation Services L Litre SARP Standards and Recommended Practice LAAS Local Area Augmentation System SAWS South African Weather Service MANCOM Management Committee SCM Supply Chain Management MC Management Control SDG Sustainable Development Goal MHZ Mega Hertz SEC Social and Ethics Committee MOU Memorandum of Understanding S-ED Socio-economic Development MTSF Medium-Term Strategic Framework SID Standard Instrument Departure MWh Mega Watt Hour SIEM Security Information Event Management NAFISAT North Eastern African-Indian Ocean VSAT Network SLA Service Level Agreement NAMP National Airspace Master Plan SMME Small, Medium and Micro Enterprise NAVAIDS Navigation and Approach Aids SMS Safety Management System NDP National Development Plan SOP Standard Operating Procedure NEM National Environmental Management SSS System Support Suite (SSS NEMA National Environmental Management Act STAR Standard Terminal Arrival NEM:PA National Environmental Management: Protected Areas Act Steercom Steering Committee NGO Non-Governmental Organisation STEM Science Technology Engineering and Mathematics NQF National Qualification Framework TECD Top Employers Certification Dinner OEM Original Equipment Manufacturer TETA Transport Education Training Authority OEP Operational Efficiency Programme TS Technical Services OJTI On-the-Job Training Instructor UMFA GTS Utility Management for Africa OPSCOM Operations Committee UNFCCC United Nations Framework Convention on Climate Change OT Operations Technology UNGC United Nations Global Compact PBN Performance-Based Navigation VHF Very High Frequency PFMA Public Finance Management Act VNAV Vertical Navigation PMO Project Management Office VSAT Very Small Aperture Terminal PP Preferential Procurement Wake RECAT Wake Turbulence Re-Categorisation PPMO Portfolio and Programme Management Office WAN Wide Area Network PWD People with Disabilities PWD People with Disabilities QSE Qualifying Small Enterprise WGS-84 World Geodetic System 1984 RANP Regional Air Navigation Plan WMP Waste Management Plan RC Regulating Committee XTRAX ATNS internal safety incidents reporting system R&D Research and Development ZAR South African Rand RNAV Area Navigation

158 159 COMPANY INFORMATION

ATNS Head Office Air Traffic Management Postal address Tel: +27 11 928 6439 Fax: +27 11 395 1045 Private bag X15 Kempton Park 1620 Technical services Tel: +27 11 928 6469 Street address Fax: +27 11 395 1049 Block C, Eastgate Office Park South Boulevard Road Aviation Training Academy Bruma Postal address 2198 Private bag X1 Gauteng Bonaero Park Republic of South Africa 1622

Contact details Contact details Tel: +27 11 607 1000 Tel: +27 11 570 0400 Fax: +27 11 607 1570 Fax: +27 11 395 3347 Website: www.atns.com Email: [email protected] Bankers Nedbank Southern Region Contact: Charles Barnes Postal Address Tel: +27 11 295 7486 (PA) Private bag X17 Cape Town International Airport Street address 7525 135 Rivonia Road Sandton Air Traffic Management 0128 Tel: +27 21 937 1122 Fax: +27 21 934 5530 Auditors Rakoma and Associates. Technical services Bryanston Gate Office Park Tel: +27 21 937 1153 Cnr Curzon Rd and Main Road Fax: +27 21 937 1181 Bryanston, Johannesburg, 2194

PO Box 1117 Northern Region Randpark Ridge Postal address 2156

Johannesburg International Airport Tel: +27 11 463 5781 Private bag X1 Fax: +27 11 463 0186 Bonaero Park 1622 e-mail address:[email protected]

160

AIR TRAFFIC & NAVIGATION SERVICES SOC LIMITED FINANCIAL 20 REPORT 18 TABLE OF CONTENTS

The reports and statements set out below comprise the audited financial statements presented to the shareholder

Certificate by the Company Secretary 2

Statement of Responsibility by the Board of Directors 3

Audit and Risk Committee Report 4 – 6

Directors’ Report 7 – 10

Independent Auditors’ Report 11 – 19

Statement of Financial Position 21

Statement of Profit and Loss and Other Comprehensive Income 22

Statement of Changes in Equity 23

Statement of Cash Flows 24

Accounting Policies 25 – 34

Notes to the Audited Financial Statements 36 – 72

1 CERTIFICATE BY THE COMPANY SECRETARY STATEMENT OF RESPONSIBILITY BY THE BOARD OF DIRECTORS

In my capacity as a company secretary, I hereby confirm, in terms of Section 88(2)e, of the companies act, (No. 71 of 2008) that for the year ended 31 March 2018, the Company has lodged with the Registrar of Companies, The directors hereby present their report and the audited financial statements all such returns that are required by the public company in terms of this Act and that such returns are true, for the year ended March 31, 2018. correct and up to date.

The directors are responsible for the preparation, Therefore the directors are satisfied that Air integrity and fair presentation of the financial Traffic and Navigation Services SOC Limited is a statements of Air Traffic and Navigation Services going concern and have continued to adopt the SOC Limited. going concern basis in preparing the financial statements. The audited financial statements presented on pages 21 to 72 have been prepared in accordance The external auditors are responsible for with International Financial Reporting Standards, independently reviewing and reporting on Air the Companies Act, No. 71 of 2008 and the Public Traffic and Navigation Services SOC Limited’s Finance Management Act, No. 1 of 1999. The audited financial statements. The audited financial guidelines of the King IV Report on Corporate statements have been examined by the Company’s Governance 2016 have also been taken into external auditors and their report is presented on account. These financial statements have been pages 11 to 19. prepared in accordance with appropriate accounting During the year under review, the Board of policies and include amounts based on judgments directors retained full and effective control over Air and estimates made by management. The directors Traffic and Navigation Services SOC Limited and have supervised the preparation of information monitored management in implementing Board included in the annual report and are responsible plans and strategies. for both its accuracy and consistency. The directors are of the opinion, based on the The directors considered the cash position of information available to date, that Air Traffic the Company as at March 31, 2018, the cash and Navigation Services SOC Limited’s financial requirements for at least twelve months from statements fairly present the financial position of that date and incremental borrowings facilities Air Traffic and Navigation Services SOC Limited and available. the results of its operations and cash flow for the The directors have every reason to believe that the year ended March 31, 2018. Company has adequate resources in place to be Ayanda Manqele able to continue in operation for the foreseeable Company Secretary (Acting) future.

15 October 2018

Chairman Chief Executive Officer

Johannesburg Johannesburg 15 October 2018 15 October 2018

2 3 AUDIT & RISK COMMITTEE REPORT

the safeguarding of assets and the operation The term of the current external auditor has ended, The Audit & Risk Committee (the committee) is pleased to present its report of adequate internal systems and control and a process is underway by the committee to for the financial year ended 31 March 2018. processes; recommend the appointment of a new external auditor. Ensure that independent assurance is provided on the IT Governance and controls supporting Non-audit services provided by the This independent statutory committee is appointed The committee met only twice during the year the company’s IT services. by the shareholder. The committee’s statutory under review due to the fact that the Committee external auditors composition did not meet the statutory minimum overseeing the safety management system, responsibilities are defined by the Public Finance No non-audit fees were paid to the external requirements between the period September 2017 including the implementation of appropriate Management Act and the Companies Act and it has auditors for the year under review. The company to March 2018. The Committee was required to safety interventions by the Company. further responsibilities delegated to it by the board. does not have a policy for appointing external have met at least four times in terms of its terms of auditors to carry out non-audit services About the committee reference. Execution of statutory and The Chief Executive Officer, Chief Financial Officer, delegated duties Internal control, risk governance, legal The committee operates under formal terms of Chief Audit Executive, and External Auditor attend and regulatory compliance and safety reference which have been approved by the board. As mentioned above, the committee did not meet meetings by invitation. management the minimum composition requirements for a significant part of the year and accordingly it was Committee membership Role and responsibilities Based on the results of internal and external audit unable to effectively execute all of its duties as set reports, and information and explanations given In terms of its terms of reference, the committee The committee’s responsibilities include, but are out in its terms of reference. by management, the committee is of the view that should comprise three directors who are not limited to: the systems of internal control, risk governance The committee has, inter alia, performed the considered independent non-executive directors in and legal and regulatory compliance are partially terms of both the Companies Act and King IV. reviewing the effectiveness of the internal following: effective. In addition, the committee is concerned control systems regarding finance, accounting, with the large number of unresolved audit findings Membership of the committee during the year legal compliance and ethics that management External Auditor from the 2016-17 and 2017-18 financial years. under review were as follows: and the Board have established; The committee considered the following post year The committee noted that certain operational safety B Ssamula (Chairperson) – resigned overseeing the risk management process, end: targets for the period under review were not met. 14 September 2017 including the consideration of the risk Management have undertaken to implement the management policy and plans of the Company, External audit plan; I Nkama – resigned 13 September 2017 necessary remedial measures. and the significant risks facing the Company; The external audit fee; EM Mphahlele – resigned 13 September 2017 overseeing the auditing, accounting and Terms of engagement of the external auditors; Integrated reporting S Hari – resigned 13 September 2017 financial reporting processes; The independence and objectivity of the external The committee considered the following: DG Mwanza – appointed 17 November 2017 reviewing and appraising the performance of auditors; The annual financial tatementss for fair external auditors and the internal audit function; Subsequent to year end, the following changes The accounting and auditing concerns identified presentation with the relevant requirements of were made to the membership of the committee: overseeing internal audit and integrated by the external auditors the PFMA, Companies Act and IFRS; reporting; S Badat – appointed 25 April 2018 to report on the quality of the management and KN Vundla – appointed 25 April 2018 monthly or quarterly reports submitted in terms KS Boqwana – appointed 25 April 2018 of the PFMA and/or any applicable legislation;

T Kgokolo – appointed 25 April 2018 and ensure that a combined assurance model is resigned on 1 October 2018 following his applied to provide a coordinated approach to all appointment as Acting Chief Executive Officer. assurance activities

S Thobela – appointed 24 May 2018 and assist the Board in discharging its duties resigned on 11 September 2018 following his relating to compliance with good corporate appointment as Board Chairperson governance and the Company’s Code of Ethics,

4 5 AUDIT & RISK COMMITTEE REPORT CONTINUED DIRECTORS’ REPORT

The reliability and accuracy of financial and non- as well as capacity challenges for a significant financial information provided by management; portion of the year. The directors have pleasure submitting the financial statements of the

Risks that may impact the integrity of the An external quality assessment review of the Company for the year ended March 31, 2018. Integrated Report; and internal audit function was completed subsequent to year end. The review raised significant findings Disclosure of sustainability information in the relating to, inter alia, non-conformity with the The directors are fully committed in conducting Integrated Report to ensure that it is reliable 1. Nature of business Institute of Internal Auditors (IIA) standards, the business in accordance with generally accepted and does not conflict with the financial results. delivery of the internal audit plan for the year Main business and operations corporate practices. Although the Board is under review and the capacity of the internal audit accountable to the Minister, and acts in the Going concern function. The findings from the review will receive The Company is principally engaged in the interests of the Company, its inclusive decision- supply of air traffic and navigation services and making approach accommodates the legitimate A documented assessment has been reviewed by the necessary attention during the current financial the maintenance of the air traffic and navigation interests and expectations of its stakeholders. the committee, including key assumptions prepared year. infrastructure. Other operations of the Company by management of the going-concern status of The directors support the notion that good include the supply of aeronautical information the Company and the committee is satisfied that Combined assurance governance is essentially about effective services, technical and aerodrome services, the adoption of the going concern basis for the leadership and that sustainability is a moral and A combined assurance plan as recommended by aeronautical communication VSAT network and preparation of the annual financial statements is economic imperative in running a business. King IV was not in place for the year under review. the training of air traffic control and technical appropriate. This is receiving the required attention from staff for a larger market extending outside of 3. Safety regulation management. South Africa. Internal audit ATNS is regulated by the South African Civil Evaluation of the Chief Financial Officer The committee considered the following to the 2. Governance environment Aviation Authority (SACAA) as mandated under extent it could whilst properly constituted: (CFO) and Finance Function the Aviation Act 74 of 1962 and associated ATNS is a state owned company incorporated regulations and technical standards. The The Committee is satisfied that the Acting CFO Internal Audit Charter; under the Air Traffic and Navigation Services Act has been amended and the closing date has the appropriate qualifications and experience. Company Act of 1993 (Act 45, 1993) as a limited for comments was on 02 November 2016 for annual audit plan including the alignment of the The finance function has experienced certain liability company. The Government of South draft Civil Aviation Amendment Bill, 2016 and audit plan with the Company’s key risks; challenges with regard to its capacity and structure. Africa, through the Minister of Transport, is awaiting final approval. The main amendment These challenges are in the process of being internal audit reports; the sole shareholder. ATNS falls under the is the inclusion of Environmental oversight and addressed by management. governance umbrella created by the Public promotion of safety and security standards, this management action plans; On behalf of the Audit and Risk Committee Finance Management Act (Act 1,1999) and is in support of the Global Aviation objectives of co-ordination with external auditors: and related regulations and guidelines issued by safety, security and environmental protection. National Treasury. ATNS will continue to adopt leading practices the independence and effectiveness of the and be agile in the approach to continuously function In compliance with the requirements of the comply with applicable legal requirements. Public Finance Management Act (PFMA), ATNS The work performed by the internal audit function Suleman Badat Chairman concludes an annual Shareholder’s Compact was hampered by the lack of a Chief Audit Executive 15 October 2018 4. Economic regulation with the Shareholder Representative. The Shareholder’s Compact contains Shareholder The Air Traffic and Navigation Services Company expectations in the form of predetermined Act of 1993 (Act 45, 1993), subjects the Company objectives and key performance information, to independent economic regulation overseen and ensures that the Board and the by the Regulating Committee. The Committee Shareholder Representative are aligned in their promulgates tariffs to be levied by ATNS to the understanding and acceptance of strategic clients during a five year regulatory Permission objectives. Progress on performance is regularly cycle, based on a single till price cap regulatory reviewed by the Board and reported to the regime. The Committee also prescribes minimum Shareholder Representative quarterly. service standards for each Permission period.

6 7 DIRECTORS’ REPORT CONTINUED

Permission application for the period 2018/19 to 7. Share capital 11. Directors 2022/23 permission cycle was submitted to the Regulating Committee in November 2017. This The sole shareholder of the Company is The directors of the Company during the year process is expected to be completed soon. the Minister of Transport, on behalf of the and to the date of this report were as follows: government of South Africa, in terms of section 6(5) of the Air Traffic and Navigation 5. Overall performance Name Nationality Capacity Appointed Retired/Resigned/ Services Company Act 1993 (Act 45 of 1993). Terminated During the year under review, revenue There were no changes in the authorised or increased by 2% to R1,594 billion (2017: R1,557 issued share capital of the Company during P. Riba South African Chairperson (Former) 1 September 2015 18 May 2017 billion) driven by a slight increase in air traffic the year under review. movements. The Company effected a tariff D.S.T. Mthiyane South African Chief Executive Officer (Former) 5 July 2013 30 September 2018 adjustment of 1.5% which increased our tariff 8. Capital commitments revenue to R1.3 billion. M.W. Ndlovu South African Chief Financial Officer 1 April 2013 24 May 2018 The Company total capital commitments for N. Mtshali South African Non Executive 1 September 2015 14 September 2017 Numerous cost-containment initiatives the year under review was R432 million. implemented throughout the Company helped B. Ssamula South African Non Executive 1 September 2015 14 September 2017 to limit the increase in net operating expenses At present the Company is in good position to fund the capital expenditure through cash This resulted in operating costs increasing by S. Hari South African Non Executive 1 September 2015 13 September 2017 6.3% to R1,382 billion (2017: R 1,300 billion) generated from operations. mainly due to staff costs, telecommunication E.M. Mphahlele South African Chairperson (Former) 1 September 2015 8 August 2018 expenses as well as impact of the fluctuating 9. Changes in accounting policies I. Nkama South African Non Executive 1 September 2015 13 September 2017 foreign exchange rates on our administration The accounting policies adopted are and contract maintenance costs. P.Q. Dhlamini South African Non Executive 1 September 2015 31 December 2017 consistent with those of the previous financial Capital expenditure remained fairly constant at year except for those noted in the financial D.G. Mwanza South African Non Executive 1 September 2015 31 August 2018 R305 million (2017: R307 million). statements. T. Kgokolo* South African Chief Executive Officer (Acting) 1 October 2018 Our balance sheet maintained its strength 10. Adoption of International with liquidity ratio of 4.5:1 (2017: 5.2:1) and K.N.Vundla South African Non Executive 13 April 2018 our gearing is at 0.5% (2017:0%), this puts the Financial Reporting Standards Company in a better position to raise funding for (IFRS) L.N. Ngema South African Non Executive 13 April 2018 the imminent capital expenditure. The Company’s financial statements are Z.G. Myeza South African Non Executive 13 April 2018 Cash generated from operations decreased by presented in accordance with the International S.Badat South African Non Executive 13 April 2018 15% to R366 million (2017: R431 million) mainly Financial Reporting Standards which is due to financial difficulties faced by some of contrary to chapter 28 of the Treasury S.Thobela** South African Chairperson 21 May 2018 our major customers as well as increased Regulations which specifies that the operational costs. Statements of Generally Accepted Accounting K.S. Boqwana South African Non Executive 13 April 2018 Practice (SA GAAP) should be used. 6. Dividends E Letlape South African Non-Executive 13 April 2018 10 May 2018 This departure was subsequently approved No dividends were declared or paid to the in terms of section 79 of the PFMA by the * T. Kgokolo was appointed as a non-executive director effective 13 April 2018 and he resigned from the shareholder during the year (2017: R nil). Accountant General of National Treasury board to take up the Acting Chief Executive Officer role on 1 October 2018. and remain in effect until further notice or amendment to the Treasury Regulations. ** S. Thobela was appointed as the Chairperson of the board effective 14 August 2018.

8 9 DIRECTORS’ REPORT CONTINUED INDEPENDENT AUDITORS’ REPORT

12. Going concern circumstances which exist that would impede the Company’s ability to continue as a going Independent auditor’s report to Parliament and the Shareholder on Air Traffic The directors consider that the Company has concern. and Navigation Services SOC Limited adequate resources to continue operating for the foreseeable future and therefore consider An additional seven Directors were appointed it appropriate to adopt the going concern on 13 April 2018 by the shareholder for a basis in preparing the Company’s financial period of six months. Report on the audit of the financial incurred. We could not confirm that all irregular expenditure incurred was disclosed statements. The directors have satisfied On the 04 July 2018 the board of directors statements by alternative means. Consequently, we were themselves that the Company is in a sound extended the Chief Executive Officer’s contract unable to determine whether any adjustments financial position and that it has access to (D.S.T Mthiyane) by three months from 01 July Qualified opinion were necessary to the irregular expenditure sufficient borrowing facilities to meet its to 30 September 2018. An Acting CFO was 1. We have audited the financial statements of the stated at R54,2 million (2017: R27,7 million) as foreseeable cash requirements. appointed with effect from 1 October 2017. Air Traffic and Navigation Services SOC Limited disclosed in note 35 of the financial statements. set out on pages 21 to 72, which comprise the 13. Events after the reporting 14. Prior year misstatements period statement of financial position as at 31 March Context for the opinion During the year under review, the Company 2018, the statement of profit or loss and other 4. We conducted our audit in accordance with Directors are not aware of any significant embarked on a fixed assets clean up project. comprehensive income, statement of changes in the International Standards on Auditing events that occurred after the reporting As a result of this process, errors which equity and statement of cash flows for the year (ISAs). Our responsibilities under those date that would require adjustments to related to the prior years were identified and then ended, as well as the notes to the financial standards are further described in the auditor’s or disclosure in the financial statements. were corrected retrospectively resulting in the statements, including a summary of significant responsibilities for the audit of the financial Furthermore, management is not aware of any restatement of prior period figures. accounting policies. statements section of this auditor’s report. 2. In our opinion, except for the possible effects of the matters described in the basis for 5. We are independent of the public entity in qualified opinion section of this auditor’s accordance with the Independent Regulatory report, the financial statements present fairly, Board for Auditors’ Code of professional conduct in all material respects, the financial position of registered auditors (IRBA code) and other of Air Traffic and Navigation Services SOC independence requirements applicable to An additional seven Directors Limited as at 31 March 2018, and financial performing audits of the financial statements performance and cash flows for the year then in South Africa. We have fulfilled our other were appointed for a period of ended in accordance with International Financial ethical responsibilities in accordance with the Reporting Standards and the requirements of IESBA code and in accordance with other ethical six months. the Public Finance Management Act of South requirements applicable to performing audits Africa, 1999 (Act No. 1 of 1999) (PFMA) and in South Africa. The IRBA code is consistent Companies Act of South Africa, 2008 (Act No. 71 with the International Ethics Standards Board of 2008) (the Companies Act). for Accountants’ Code of ethics for professional accountants (parts A and B). Basis for qualified opinion 6. We believe that the audit evidence we have obtained is sufficient and appropriate to provide Irregular expenditure a basis for our qualified opinion. 3. We were unable to obtain sufficient appropriate audit evidence to confirm that all irregular Emphasis of matters expenditure incurred was disclosed in the notes to the financial statements as the public 7. We draw attention to the matters below. Our entity did not have adequate processes in place opinion is not modified in respect of these to identify and record irregular expenditure matters.

10 11 INDEPENDENT AUDITORS’ REPORT CONTINUED

Material impairments – Trade and other concern, disclosing, as applicable, matters 16. Our procedures address the reported included as part of the reported performance receivables relating to going concern and using the performance information, which must information. Accordingly, our findings do not going concern basis of accounting unless the be based on the approved performance extend to these matters. 8. As disclosed in note 15 to the financial accounting authority either intends to liquidate planning documents of the public entity. statements, material losses to the amount of 17. We evaluated the usefulness and reliability the public entity or to cease operations, or has We have not evaluated the completeness R26,8 million were incurred as a result of a of the reported performance information in no realistic alternative but to do so. and appropriateness of the performance write-off and impairment of trade and other accordance with the criteria developed from indicators included in the planning documents. receivables. Auditor’s responsibilities for the audit the performance management and reporting Our procedures also did not extend to any framework, as defined in the general notice, of the financial statements Material impairments – Intangible assets disclosures or assertions relating to planned for the following selected objectives presented and property, plant and equipment 13. Our objectives are to obtain reasonable performance strategies and information in the annual performance report of the public assurance about whether the financial in respect of future periods that may be entity for the year ended 31 March 2018: 9. As disclosed in note 10 and note 11 to the statements as a whole are free from material financial statements, material losses to the misstatement, whether due to fraud or error, amount of R17,1 million were incurred as Objectives Pages in the annual and to issue an auditor’s report that includes a result of a write-off and impairment of performance report our opinion. Reasonable assurance is a high property, plant and equipment and intangible level of assurance, but is not a guarantee that assets. 1.1 Risk Safety Index - Reduce risk associated with the safety events 136 – 137 an audit conducted in accordance with the ISAs will always detect a material misstatement 1.2 Safety service provision – Increase the successful safe operation 136 – 137 Restatement of corresponding figures when it exists. Misstatements can arise from 1.3 Operational efficiency – Reduce overall traffic delays 136 – 137 10. As disclosed in note 34 to the financial fraud or error and are considered material if, individually or in aggregate, they could statements, the corresponding figures for 1.4 Operational efficiency – Achievement of CNS Systems availability 136 – 137 31 March 2017 were restated as a result of reasonably be expected to influence the an error in the financial statements of the economic decisions of users taken on the basis 1.6a Performance Based Navigation (PBN) Operational enhancements – Design 138 – 139 public entity at, and for the year ended, of these financial statements. reports for submission to SACAA (RNP APCH - FAOR) 31 March 2018. 14. A further description of our responsibilities 1.6b Performance Based Navigation (PBN) Operational enhancements – Design for the audit of the financial statements is 138 – 139 reports for submission to SACAA (RNAV 1 SID/STAR) Responsibilities of the accounting included in the annexure to this auditor’s authority for the financial statements report. 1.6c Performance Based Navigation (PBN) Operational enhancements – Design 138 – 139 11. The board of directors, which constitutes reports for submission to SACAA the accounting authority is responsible for Report on the audit of the annual 2.1 Development of optimized and efficient aviation infrastructure in a cost the preparation and fair presentation of the performance report effective manner – Compliance with the commitment plan milestones for 138 – 139 financial statements in accordance with the 2017/18 CAPEX (R131,480,500) International Financial Reporting Standards Introduction and scope and the requirements of the PFMA and 2.2 Operation of satellite communication networks SADC VSAT 2 – Achievement 15. In accordance with the Public Audit Act of 138 – 139 Companies Act, and for such internal control of the revenue and ensure network availability as per SLA targets South Africa, 2004 (Act No. 25 of 2004) (PAA) as the accounting authority determines and the general notice issued in terms is necessary to enable the preparation of 2.3 Operation of satellite communication networks NAFISAT – Achievement of thereof, we have a responsibility to report 138 – 139 financial statements that are free from the revenue and ensure network availability as per SLA targets material findings on the reported performance material misstatement, whether due to fraud information against predetermined objectives 4.1a Implementation of environmental plan – ATNS 2017/18 Carbon footprint or error. 140 – 141 for selected objectives presented in the annual inventory report 12. In preparing the financial statements, the performance report. We performed procedures accounting authority is responsible for to identify findings but not to gather evidence 4.1b Implementation of environmental plan – Environmental performance 140 – 141 assessing ATNS’ ability to continue as a going to express assurance. assessments

12 13 INDEPENDENT AUDITORS’ REPORT CONTINUED

18. We performed procedures to determine unable to determine whether any adjustments manner – Compliance with the commitment the prescribed financial reporting framework whether the reported performance information were required to the achievement of 99.97% as plan milestones for 2017/18 CAPEX and supported by full and proper records as was properly presented and whether reported in the annual performance report. (R131,480,500) required by section 55(1) (a) and (b) of the performance was consistent with the approved PFMA and section 29(1)(a) of the Companies Implementation of environmental plan – performance planning documents. We Operational efficiency - Achievement of Act. ATNS 2017/18 Carbon footprint inventory performed further procedures to determine CNS Systems availability report 29. Material misstatements of non-current assets whether the indicators and related targets 22. We were unable to obtain sufficient appropriate identified by the auditors in the submitted were measurable and relevant, and assessed Implementation of environmental plan – audit evidence for the reported 1.4 Operational financial statements were corrected and the reliability of the reported performance Environmental performance assessments the supporting records were provided information to determine whether it was valid, efficiency - achievement of CNS systems availability. This was due to limitations placed subsequently, but the uncorrected material accurate and complete. Other matters on the scope of our work. We were unable misstatements and supporting records that 19. The material findings in respect of the to confirm the reported achievement by 24. We draw attention to the matters below. Our could not be provided for irregular expenditure reliability of the selected objectives are as alternative means. Consequently, we were opinions are not modified in respect of these resulted in the financial statements receiving a follows: unable to determine whether any adjustments matters. qualified opinion. were required to the achievement of 99.78% Operation of satellite communication (Communication), 96.30% (Navigation) and Achievement of planned targets Expenditure management networks SADC VSAT 2 - Achievement 99.97% (Surveillance) as reported in the annual 30. Effective steps were not taken to prevent of the revenue and ensure network performance report. 25. Refer to the annual performance report irregular expenditure, as required by section availability as per SLA target on pages 136 to 143 for information on the 23. We did not raise any material findings on achievement of planned targets for the 51(1)(b)(ii) of the PFMA. The expenditure 20. We were unable to obtain sufficient appropriate the usefulness and reliability of the reported year. This information should be considered disclosed does not reflect the full extent audit evidence for the reported achievement of performance information for the following in the context of the material findings on of the irregular expenditure incurred, full the 2.2 Operation of satellite communication objectives: the reliability of the reported performance extent of the irregular expenditure could not networks SADC VSAT 2 - Achievement of the information in paragraphs 19 to 21 of this be quantified as indicated in the basis for revenue and ensure network availability as per Risk Safety Index - Reduce risk associated report. qualification paragraph. with the safety events the SLA targets. This was due to limitations 31. Effective steps were not taken to prevent placed on the scope of our work. We were Safety service provision – Increase the Report on the audit of compliance fruitless and wasteful expenditure amounting unable to confirm the reported achievement successful safe operation with legislation to R0.6 million, as disclosed in note 36 to the by alternative means. Consequently, we were annual financial statements, as required by Operational efficiency – Reduce overall unable to determine whether any adjustments section 51(1)(b)(ii) of the PFMA. The majority traffic delays Introduction and scope were required to the achievement of 99.89% as of the fruitless and wasteful expenditure reported in the annual performance report. 26. In accordance with the PAA and the general Performance Based Navigation (PBN) disclosed in the financial statements was notice issued in terms thereof, we have a Operational enhancements – Design caused by payment of a supplier that delivered Operation of satellite communication responsibility to report material findings on the reports for submission to SACAA incomplete work. Fruitless and wasteful networks NAFISAT- Achievement of the compliance of the public entity with specific (RNP APCH - FAOR) expenditure amounting to R0.4 million was revenue and ensure network availability matters in key legislation. We performed incurred on Web application firewall services. as per SLA targets Performance Based Navigation (PBN) procedures to identify findings but not to 21. We were unable to obtain sufficient appropriate Operational enhancements – Design gather evidence to express assurance. Liability management audit evidence for the reported achievement of reports for submission to SACAA 27. The material findings on compliance with 32. Credit cards were not used for permitted the 2.3 Operation of satellite communication (RNAV 1 SID/STAR) specific matters in key legislations are as purposes, as set out in treasury regulation networks NAFISAT - Achievement of the Performance Based Navigation (PBN) follows: 31.2.7. revenue and ensure network availability as per Operational enhancements – Design the SLA targets. This was due to limitations reports for submission to SACAA Annual financial statements placed on the scope of our work. We were unable to confirm the reported achievement Development of optimized and efficient 28. The financial tatementss submitted for by alternative means. Consequently, we were aviation infrastructure in a cost effective auditing were not prepared in accordance with

14 15 INDEPENDENT AUDITORS’ REPORT CONTINUED

Consequence management Internal control deficiencies Other reports 47. An independent consultant investigated an allegation of possible irregularities in 33. We were unable to obtain sufficient appropriate 38. We considered internal control relevant to our 42. We draw attention to the following respect of the appointment of suppliers of audit evidence that disciplinary steps were audit of the financial statements, reported engagements conducted by various parties the public entity at the request of the public taken against officials who had incurred performance information and compliance with that had, or could have, an impact on the entity, which covered the period October irregular expenditure as required by section applicable legislation; however, our objective matters reported in the public entity’s financial 2016 to December 2017. The investigation 51(1)(e)(iii) of the PFMA. This was due to a was not to express any form of assurance on statements, reported performance information, concluded on September 2017 and resulted lack of proper and complete records that were it. The matters reported below are limited to compliance with applicable legislation and in the suspension and later dismissal of the not maintained as evidence to support the the significant internal control deficiencies that other related matters. These reports did employee after disciplinary proceedings were investigations into irregular expenditure. resulted in the basis for the qualified opinion, not form part of our opinion on the financial undertaken. the findings on the annual performance report statements or our findings on the reported 48. An independent consultant investigated an Other information and the findings on compliance with legislation performance information or compliance with allegation of possible misappropriation of included in this report. legislation. 34. The accounting authority is responsible for the public entity’s assets at the request of the other information. The other information the public entity, which covered the period Leadership comprises the information included in the Investigations 17 January 2017 to 20 January 2017. The investigation concluded on August 2017 and annual report, which includes the directors’ 39. There was a lack of adequate oversight 43. There were investigations performed in the resulted in disciplinary hearing proceedings report, the audit committee’s report and the responsibility regarding financial reporting, current year into fraud allegations and SCM against the employee. These proceedings were company secretary’s certificate as required performance information and compliance and related issues. completed and resulted in the dismissal of the by the Companies Act. The other information related controls as material misstatements employee. does not include the financial statements, the were identified for irregular expenditure and 44. An investigation by an independent consultant auditor’s report and those selected objectives reported performance information. into the unauthorised payment of bonuses to 49. Internal audit investigated an allegation of presented in the annual performance report a director, former director and a prescribed possible inappropriate recruitment processes that have been specifically reported in this Financial and performance officer is being conducted. The board resolved being followed for appointment of certain auditor’s report. to not pursue the investigation further due to employees at the request of the public entity, 40. There was a lack of adequate review and lack of evidence. which covered the period of March 2017. The 35. Our opinion on the financial tatementss monitoring of compliance with laws and investigation concluded on February 2018 and and findings on the reported performance 45. An independent consultant investigated an regulations which resulted in instances of non- resulted in disciplinary hearing proceedings information and compliance with legislation allegation of possible theft of assets of the compliance with supply chain management against the employee. These proceedings were do not cover the other information and we do processes and irregular expenditure which public entity’s assets at the request of the in progress at the date of this auditor’s report. not express an audit opinion or any form of is the basis of our modified opinion. Non- public entity, which covered the period January assurance conclusion thereon. compliance could have been prevented if 2013 to December 2014. The investigation 50. Internal audit investigated an allegation concluded in November 2016 and resulted in a of possible irregularities in respect of the 36. In connection with our audit, our responsibility compliance with laws and regulations had criminal case against the employee. The case appointment of suppliers of the public entity at is to read the other information and, in doing been adequately monitored. the request of the public entity, which covered so, consider whether the other information was in progress at the date of this auditor’s 41. The public entity did not have a proper record the period of August 2016 to March 2017. is materially inconsistent with the financial report. management system to maintain information The investigation concluded on July 2017 and statements and the selected objectives that supported the reported performance in 46. An independent consultant investigated an resulted in disciplinary hearing proceedings presented in the annual performance report, the annual performance report. This includes allegation of possible irregularities in respect against the employee. No charges were or our knowledge obtained in the audit, or controls that relate to the verification and of the appointment of suppliers of the public instigated. otherwise appears to be materially misstated. storing of actual performance information. The entity at the request of the public entity, which 37. If, based on the work we have performed, we portfolio of evidence is not maintained in one covered the period October 2016 to December conclude that there is a material misstatement centralised place as the responsibility for the 2017. The investigation concluded in March in this other information, we are required to safeguarding and integrity of the information 2018 and resulted in the suspension and report that fact. No material inconsistencies lies with the process owners for each resignation of the various employees before were identified. performance objective. any disciplinary proceedings were undertaken.

16 17 INDEPENDENT AUDITORS’ REPORT CONTINUED

Audit related services Annexure – Auditor’s responsibility conclude on the appropriateness of the board obtain sufficient appropriate audit evidence of directors, which constitutes the accounting regarding the financial information of 51. Agreed upon procedures engagements for the audit authority’s use of the going concern basis of the entities or business activities within were performed to review the conversion 1. As part of an audit in accordance with the accounting in the preparation of the financial the group to express an opinion on the adjustments from International Financial ISAs, we exercise professional judgement and statements. We also conclude, based on consolidated financial statements. We are Reporting Standards (IFRS) to Generally maintain professional scepticism throughout our the audit evidence obtained, whether a responsible for the direction, supervision and Recognised Accounting Practice (GRAP) audit of the consolidated and separate financial material uncertainty exists related to events performance of the group audit. We remain on the Treasury pack to ensure conversion statements, and the procedures performed on or conditions that may cast significant doubt solely responsible for our audit opinion. adjustments are captured correctly for reported performance information for selected on ATNS’ SOC Limited and its subsidiaries consolidation purposes. No material objectives and on the public entity’s compliance ability to continue as a going concern. If we Communication with those charged misstatements were identified. The report with respect to the selected subject matters. conclude that a material uncertainty exists, with governance covered the period ending 31 March 2018. we are required to draw attention in our 3. We communicate with the accounting authority 52. Agreed upon procedures engagements were Financial statements auditor’s report to the related disclosures in regarding, among other matters, the planned performed for the Correction Factor (CF) the financial statements about the material 2. In addition to our responsibility for the audit scope and timing of the audit and significant and the Revenue Weighted Percentage Tariff uncertainty or, if such disclosures are of the consolidated and separate financial audit findings, including any significant Increase (RWPTI) for the period 2018/19. The inadequate, to modify the opinion on the statements as described in this auditor’s report, deficiencies in internal control that we identify procedures performed required us to audit the financial statements. Our conclusions are we also: during our audit. CF and RWPTI to ensure compliance with the based on the information available to me at the date of this auditor’s report. However, permission letters issued by the Regulating identify and assess the risks of material We also confirm to the accounting authority that we future events or conditions may cause a Committee. misstatement of the consolidated and have complied with relevant ethical requirements public entity to cease continuing as a going separate financial statements whether regarding independence, and communicate concern Auditor tenure due to fraud or error, design and perform all relationships and other matters that may audit procedures responsive to those risks, evaluate the overall presentation, structure reasonably be thought to have a bearing on our 53. In terms of the IRBA rule published in and obtain audit evidence that is sufficient and content of the financial statements, independence and, where applicable, related Government Gazette Number 39475 dated and appropriate to provide a basis for our including the disclosures, and whether safeguards. 4 December 2015, we report that Rakoma and opinion. The risk of not detecting a material the financial statements represent the Associates Incorporated has been the auditor misstatement resulting from fraud is higher underlying transactions and events in a of Air Traffic and Navigation Services SOC than for one resulting from error, as fraud manner that achieves fair presentation Limited for 3 years. may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control

obtain an understanding of internal control Collins Malunga relevant to the audit in order to design Partner audit procedures that are appropriate in the Registered Auditor circumstances, but not for the purpose of expressing an opinion on the effectiveness of 15 October 2018 the public entity’s internal control Ground Floor Building B evaluate the appropriateness of accounting Monte Circle Office Park policies used and the reasonableness of 178 Montecasino Boulevard accounting estimates and related disclosures Fourways made by the board of directors, which Johannesburg 2191 constitutes the accounting authority

18 19 STATEMENT OF FINANCIAL POSITION AS AT MARCH 31, 2018

Notes 2018 2017 R R Restated

Assets Non-Current Assets Property, plant and equipment 10 929,002,447 665,615,280 Intangible assets 11 107,445,107 108,557,499 Capital work in progress 12 408,383,966 502,416,969 Long term Prepayments 13 431,434 - 1,445,262,954 1,276,589,748

Current Assets Loans and receivables 14 14,155,784 16,151,353 Income tax receivable 20 24,571,271 721,149 Trade and other receivables 15 247,386,683 193,794,166 Prepayments 16 10,602,938 4,893,997 Cash and cash equivalents 17 1,342,664,164 1,326,732,100 1,639,380,840 1,542,292,765 Total Assets 3,084,643,794 2,818,882,513

Equity and Liabilities Equity Share capital 18 190,646,000 190,646,000 Retained earnings 2,426,675,904 2,236,521,780 2,617,321,904 2,427,167,780

Liabilities

Non-Current Liabilities Finance lease obligation 21 8,347,087 3,383,474 Deferred income tax liabilities 19 91,563,580 90,966,066 99,910,667 94,349,540

Current Liabilities Short term finance lease obligation 21 4,350,395 2,907,545 Operating lease liability 22 595,125 1,533,295 Trade and other payables 23 233,702,372 193,661,182 Provisions for other liabilities and charges 24 128,763,331 99,263,171 367,411,223 297,365,193 Total Liabilities 467,321,890 391,714,733 Total Equity and Liabilities 3,084,643,794 2,818,882,513

20 21 STATEMENT OF PROFIT AND LOSS STATEMENT OF CHANGES IN EQUITY AND OTHER COMPREHENSIVE INCOME

Notes 2018 2017 Share Capital Retained earnings Total equity R R R R R Restated Opening balance as previously reported 190,646,000 1,962,297,958 2,152,943,958 Revenue 3 1,593,535,348 1,556,447,125 Prior year adjustments (net of tax) - 89,719,250 89,719,250 Foreign exchange losses 4 (29,874,630) (13,705,614) Restated balance at April 1, 2016 190,646,000 2,052,017,208 2,242,663,208 Depreciation costs 10 (110,315,660) (81,451,016) Restated profit for the year - 184,504,572 184,504,572 Impairment loss 10 (5,798,017) Total Comprehensive Income for the year - - - Amortisation on intangible assets 11 (13,786,571) (23,944,707) Total comprehensive income for the year - 184,504,572 184,504,572 Staff costs 5 (884,772,844) (816,546,505) Restated balance at April 1, 2017 190,646,000 2,236,521,780 2,427,167,780 Other expenses 6 (367,529,701) (377,584,836) Profit for the year - 190,154,124 190,154,124 Operating profit 181,457,925 243,214,447 Total Comprehensive Income for the year - - - Finance revenue 7 85,787,619 83,383,250 Total comprehensive income for the year - 190,154,124 190,154,124 Finance costs 8 (1,592,987) (221,954) Balance at March 31, 2018 190,646,000 2,426,675,904 2,617,321,904 Note(s) 18 Profit before taxation 265,652,557 326,375,743 Income tax expense 9 (75,498,433) (141,871,171)

Profit for the year 190,154,124 184,504,572 Other comprehensive income for the year, net of tax - -

Total comprehensive income for the year, net of tax 190,154,124 184,504,572

22 23 STATEMENT OF CASH FLOWS ACCOUNTING POLICIES

Notes 2018 2017 1. Corporate Information 1.3 Foreign currency translation R R Restated ATNS is a state owned company with A foreign currency transaction is recorded, on limited liability incorporated in South Africa. initial recognition in South African Rand, by Operating activities The Company’s registration number is applying to the foreign currency amount the Cash receipts from customers 1,647,129,901 1,631,438,338 1993/004150/06, and its registered address spot exchange rate between the functional and office is Block C, Eastgate Office Park, currency and the foreign currency at the date Cash paid to suppliers and employees (1,280,812,523) (1,200,287,125) South Boulevard Road, Bruma, 2198, Republic of the transaction. Cash generated from operations 26 366,317,378 431,151,213 of South Africa. The Company is principally Exchange differences arising on the settlement Finance revenue 7 85,787,619 83,383,250 engaged in the provision of air traffic and of monetary items or on translating monetary navigation services. Finance costs 8 (1,592,987) (221,954) items at rates different from those at which Income tax paid 20 (98,751,041) (94,157,786) The financial statements of the Company for they were translated on initial recognition Net cash flows from operating activities 351,760,969 420,154,723 the year ended 31 March 2018 were authorised during the period or in previous audited for issue in accordance with a resolution of the financial statements are recognised in profit or Investing activities Board of Directors on 15 October 2018. loss in the period in which they arise. Purchase of property, plant and equipment 25 (280,444,459) (306,362,099) When a gain or loss on a non-monetary item Proceeds from sale of property, plant, equipment and intangibles 27 43,859 78,306 1.1 Basis of preparation is recognised to other comprehensive income Purchase of intangible assets 11 (24,023,426) (310,984) The financial statements have been prepared and accumulated in equity, any exchange Increase in long-term prepayments 13 (431,434) - on a historical cost basis. The financial component of that gain or loss is recognised to statements are presented in South African other comprehensive income and accumulated Net cash flows from investing activities (304,855,460) (306,594,777) Rand, which is the Company’s functional and in equity. When a gain or loss on a non- Financing activities presentation currency. monetary item is recognised in profit or loss, any exchange component of that gain or loss is Finance lease 21 (1,098,815) (1,122,312) Amounts presented in the financial statements recognised in profit or loss. were rounded off to the nearest Rand. Net increase in cash and cash equivalents 45,806,694 112,437,634 Cash flows arising from transactions in a Cash and cash equivalents at beginning of year 1,326,732,100 1,228,000,080 Statement of compliance foreign currency are recorded in South African Net foreign exchange difference 4 (29,874,630) (13,705,614) Rand by applying to the foreign currency The financial statements of ATNS have been amount the exchange rate between the South Cash and cash equivalents at end of year 17 1,342,664,164 1,326,732,100 prepared in accordance with, and comply African Rand and the foreign currency at the with International Financial Reporting date of the cash flow. Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and in 1.4 Property, plant and equipment the manner required by the Companies Act of South Africa and the PFMA. Land is not depreciated and is shown at cost less accumulated impairment.

1.2 Summary of significant accounting Plant and equipment is stated at cost less policies accumulated depreciation and impairment. Cost includes all costs directly attributable to The principal accounting policies applied in bringing the assets to working condition for the preparation of these financial statements their intended use. are set out below. These policies have been consistently applied to all the years presented, Subsequent costs are included in the asset’s unless otherwise stated. carrying amount or recognised as a separate

24 25 ACCOUNTING POLICIES CONTINUED

asset, as appropriate, only when it is probable as a result of acquiring the asset or using Depreciation of an asset begins when it is 1.5 Capital work in progress that future economic benefits associated with it for purposes other than the production of available for use, i.e. when it is in the location the item will flow to the Company and the inventories. and in a condition necessary for it to be Capital work in progress is measured at cost. capable of operating in the manner intended by cost of the item can be measured reliably. All Major property, plant, equipment and Major spare parts and stand by equipment management. Depreciation of an asset ceases other repairs and maintenance are charged intangible assets which are commissioned over which are expected to be used for more than at the earlier of the date that the asset is to the statement of profit and loss during the a period of time are reflected as capital work in one period are included in property, plant classified as held for sale and the date that the financial period in which they are incurred. progress on the statement of financial position. and equipment. In addition, spare parts and asset is derecognised. Capital work in progress is transferred to The cost of an item of property, plant and stand by equipment which can only be used in property, plant, equipment and intangible equipment is recognised as an asset when: connection with an item of property, plant and Each part of an item of property, plant and equipment are accounted for as property, plant equipment with a cost that is significant assets when available for use. it is probable that future economic benefits and equipment. in relation to the total cost of the item is associated with the item will flow to the depreciated separately. 1.6 Intangible assets Company and; Major inspection costs which are a condition of continuing use of an item of property, plant Major renovations are depreciated over the An intangible asset is recognised when: the cost of the item can be measured and equipment and which meet the recognition remaining useful life of the related asset it is probable that the expected future reliably. criteria above are included as a replacement or to the date of the next major renovation, economic benefits that are attributable to in the cost of the item of property, plant and whichever is sooner. The initial estimate of the costs of dismantling the asset will flow to the entity and; equipment. Any remaining inspection costs and removing the item and restoring the Regular major inspections of certain items from the previous inspection are derecognised. the cost of the asset can be measured site on which it is located is also included in of property, plant and equipment are a reliably. the cost of property, plant and equipment, Depreciation on assets is calculated using the pre-requisite for the continuing use of the where the entity is obligated to incur such straight line method to allocate their cost over equipment. As such these inspection costs Intangible assets are initially recognised at expenditure, and where the obligation arises its estimated useful life, as follows: are capitalised in the carrying amount of the cost. property, plant and equipment (to the extent that the recognition criteria are satisfied) as Expenditure on research (or on the research a replacement. These inspection costs are phase of an internal project) is recognised as Item Estimated useful life depreciated over the period remaining before an expense when it is incurred. ATC display system 12 years the next compulsory major inspection. An intangible asset arising from development Buildings 50 years The assets’ residual values, useful lives and (or from the development phase of an internal methods of depreciation are reviewed, and project) is recognised when: Communication equipment 10‑15 years adjusted if appropriate, at each reporting date. it is technically feasible to complete the Computer equipment 3‑7 years An asset’s carrying amount is written down asset so that it will be available for use or Electrical and mechanical equipment 10 years immediately to its recoverable amount if the sale; asset’s carrying amount is greater than its Intangibles 7 years estimated recoverable amount. there is an intention to complete and use or sell it; Leasehold property 6 years An item of property, plant and equipment is there is an ability to use or sell it; Motor vehicles 5 years derecognised upon disposal or when no future economic benefits are expected from its use Navigation aids 15 years it will generate probable future economic or disposal. Any gain or loss on derecognition benefits; Office equipment 6 years of the asset (calculated as the difference between the net disposal proceeds and the there are available technical, financial Radar equipment 15 years carrying amount of the asset) is included in and other resources to complete the Simulator equipment 10 years the statement of profit and loss in the year the development and to use or sell the asset; asset is derecognised. and Tools and test equipment 8‑20 years

26 27 ACCOUNTING POLICIES CONTINUED

the expenditure attributable to the asset Changes in expected useful life or the expected If the recoverable amount of an asset is less value and subsequently amortised using the during its development can be measured pattern of consumption of the future economic than its carrying amount, the carrying amount effective interest method less any allowance reliably. benefits embodied in the asset are accounted of the asset is reduced to its recoverable for impairment. for by changing the amortisation period amount. That reduction is an impairment loss. Gains and losses arising from derecognition, Intangible assets are carried at cost less any or method, as appropriate, and treated as An impairment loss of assets carried at impairment or the amortisation process are accumulated amortisation and any impairment changes in accounting estimates. losses. The useful lives of intangible assets are cost less any accumulated depreciation or recognised in the profit and loss. assessed as either finite or indefinite. The amortisation expense on intangible assets amortisation is recognised immediately in with finite lives is recognised in the statement profit or loss. Impairment of financial assets An intangible asset is regarded as having of profit and loss in the expense category an indefinite useful life when, based on all A reversal of an impairment loss of assets The Company assesses at each reporting date consistent with the function of the intangible relevant factors, there is no foreseeable limit carried at cost less accumulated depreciation whether a financial asset or group of financial asset. to the period over which the asset is expected or amortisation other than goodwill is assets is impaired. to generate net cash inflows. Amortisation Following initial recognition, intangible assets recognised immediately in profit or loss. Any is not provided for these intangible assets, are carried at cost less any accumulated reversal of an impairment loss of a revalued Assets carried at amortised cost but they are tested for impairment annually amortisation and any accumulated impairment asset is treated as a revaluation increase. If there is objective evidence that an and whenever there is an indication that the losses. impairment loss on assets carried at asset may be impaired. For all other intangible 1.8 Financial instruments amortised cost has been incurred, the amount assets amortisation is provided on a straight Costs associated with developing computer of the loss is measured as the difference line basis over their useful life. software programs are capitalised when Financial assets incurred, however the costs to maintain are between the asset’s carrying amount and the The amortisation period and the amortisation expensed. The Company classifies its financial assets in present value of estimated future cash flows method for intangible assets are reviewed at the following categories: loans and receivables. (excluding future expected credit losses that each reporting date. Gains or losses arising from derecognition The classification depends on the purpose have been incurred) discounted at the financial of an intangible asset are measured as the for which the financial assets were acquired. asset’s original effective interest rate (i.e. Reassessing the useful life of an intangible difference between the net disposal proceeds Directors determine the classification of its the effective interest rate computed at initial asset with a finite useful life after it was and the carrying amount of the asset and are financial assets at initial recognition and recognition). The carrying amount of the asset classified as indefinite is an indicator that the recognised in the statement of profit and loss re-evaluate this designation at each balance is reduced through the use of an allowance asset may be impaired. As a result the asset when the asset is derecognised. sheet date. account. The amount of the loss is recognised is tested for impairment and the remaining in profit or loss. carrying amount is amortised over its useful 1.7 Impairment of tangible and Regular-way purchases and sales of financial life. assets are recognised at trade date, being Reversal of impairment losses on amortised intangible assets the date on which the Company commits to cost financial assets is limited to what the Internally generated brands, mastheads, The Company assesses at each reporting purchase or sell the asset. carrying value would have been at the reversal publishing titles, customer lists and items date whether there is any indication that an date, if no impairment losses were recognised similar in substance are not recognised as asset may be impaired. If any such indication Loans and receivables in the past. intangible assets. exists, the Company estimates the recoverable Loans and receivables are non-derivative For trade receivables, an allowance for Amortisation is provided to write down the amount of the asset. financial assets with fixed or determinable impairment is recognised when there is intangible assets, on a straight line basis, to If there is any indication that an asset may be payments that are not quoted in an active objective evidence (such as the probability of their residual values as follows: impaired, the recoverable amount is estimated market. They are included in current assets, insolvency or significant financial difficulties of Computer software for the individual asset. If it is not possible except for maturities greater than twelve the debtor) that the Company will not be able months after the reporting date. These are to estimate the recoverable amount of the to collect all of the amounts due under the classified as non-current assets. Loans and Acquired computer software licenses are individual asset, the recoverable amount of original terms of invoice. The carrying amount capitalised on the basis of the costs incurred to receivables are classified as ‘trade and other is reduced through use of an allowance the cash- generating unit to which the asset acquire and bring to use the specific software. receivables’ (excluding prepayments) and ‘cash account. Impaired debts are derecognised belongs is determined. These costs are amortised over their estimated and cash equivalents’ in current assets and as when they are assessed as uncollectible, and useful lives (3 – 7 years) and assessed for The recoverable amount of an asset or a cash- ‘loans and receivables’ in non-current assets is written off against either the allowance impairment whenever there is an indication generating unit is the higher of its fair value in the statement of financial position. Loans account or directly through profit or loss if no that the intangible asset may be impaired. less costs to sell and its value in use. and receivables are initially recognised at fair allowance was recognised for the impairment.

28 29 ACCOUNTING POLICIES CONTINUED

Cash and cash equivalents all the risks and rewards of the asset nor The carrying amount of the asset is reduced If the Company has a contract that is transferred control of the asset, the asset is through the use of an allowance account, onerous, the present obligation under the Cash and cash equivalents comprises cash on recognised to the extent of the Company’s and the amount of the loss is recognised contract is recognised and measured as a hand and demand deposits, and other short- continuing involvement in the asset. Continuing in profit or loss within operating expenses. provision. term highly liquid investments that are readily involvement that takes the form of a guarantee When a trade receivable is uncollectable, it is convertible to a known amount of cash and are Contingent assets and contingent liabilities over the transferred asset is measured at written off against the allowance account for subject to an insignificant risk of changes in are not recognised. Contingencies are the lower of the original carrying amount trade receivables. Subsequent recoveries of value. These are initially recorded at fair value, disclosed in note 28. of the asset and the maximum amount of amounts previously written off are credited and subsequently recorded at amortised cost. consideration that the Company could be against operating expenses in profit or loss. required to repay. 1.11 Retirement benefit costs Trade and other payables Trade and other receivables are classified as b. Financial liabilities loans and receivables. The Company has a defined contribution Financial liabilities are recognised on the scheme as retirement benefit for its Company’s statement of financial position A financial liability is derecognised employees, The assets of the scheme are when the Company becomes party to the 1.9 Share capital when the obligation under the liability is held in a separate trustee-administered contractual provisions of the instrument. discharged, cancelled or has expired. Ordinary shares are classified as equity. fund. The defined contribution fund is a Trade and other payables are initially Equity instruments issued by the Company pension plan under which the Company When an existing financial liability is recognised at fair value and subsequently are recorded as the proceeds received, net of pays fixed contributions into a separate replaced by another from the same amortised using the effective interest method. direct issue costs. entity. The Company has no legal or lender on substantially different terms, constructive obligation to pay further Trade and other payables are generally paid or the terms of an existing liability are 1.10 Provisions contributions if the fund does not hold 30 days from statement or invoice date. Gains substantially modified, such an exchange or sufficient assets to pay all employees the or losses are recognised in profit and loss. modification is treated as a derecognition Provisions are recognised when: benefits relating to employee service in the of the original liability and the recognition current and prior periods. Derecognition of financial assets and of a new liability, and the difference in the the Company has a present obligation as a result of a past event; liabilities respective carrying amounts is recognised The scheme is funded by contributions in profit or loss. a. Financial assets it is probable that an outflow of resources from the employees and the Company, embodying economic benefits will be taking into account the recommendations A financial asset or, where applicable, a Trade and other receivables required to settle the obligation and; of independent qualified actuaries. The part of a financial asset or part of a group Company’s contributions to the defined Trade receivables are measured at of similar financial assets is derecognised a reliable estimate can be made of the contribution scheme are charged to profit initial recognition at fair value, and are when: obligation. and loss in the year to which they relate. subsequently measured at amortised cost 1. the rights to receive cash flows from the using the effective interest rate method. The amount of a provision is the present asset have expired, or Appropriate allowances for estimated value of the expenditure expected to be 1.12 Leases irrecoverable amounts are recognised in required to settle the obligation. 2. the Company has transferred its rights The determination of whether an profit or loss when there is objective evidence to receive cash flows from the asset and Where some or all of the expenditure arrangement is, or contains a lease, is that the asset is impaired. Significant either, required to settle a provision is expected based on the substance of the arrangement financial difficulties of the debtor, probability to be reimbursed by another party, the at inception date or whether the fulfillment a. has transferred substantially all the that the debtor will enter bankruptcy or reimbursement shall be recognised when, of the arrangement is dependent on the risks and reward of the asset, or financial reorganisation, and default or and only when, it is virtually certain that use of a specific asset or assets or the delinquency in payments (more than 90 days b. has neither transferred nor retained reimbursement will be received if the entity arrangement conveys a right to use the overdue) are considered indicators that the substantially all the risks and rewards of settles the obligation. The reimbursement asset. A reassessment is made after trade receivable is impaired. The allowance the assets, but has transferred control is treated as a separate asset. The amount inception of the lease only if one of the recognised is measured as the difference of the asset. recognised for the reimbursement does not following applies: between the asset’s carrying amount and exceed the amount of the provision. When the Company has transferred its rights the present value of estimated future cash 1. There is a change in contractual terms, to receive cash flows from an asset and has flows discounted at the effective interest rate Provisions are not recognised for future other than a renewal or extension of the neither transferred nor retained substantially computed at initial recognition. operating losses. arrangement; or

30 31 ACCOUNTING POLICIES CONTINUED

2. A renewal option is exercised or extension Company as a lessor to exercise its judgement in the process of not readily available on internet or no recent granted, unless the term of the renewal applying the Company’s accounting policies purchases were made of such assets or extension was initially included in the Leases in which a significant portion of the in areas that involve a higher degree of lease term, or risk and rewards of ownership are retained judgement or complexity, or areas where Judgements by the lessor are classified as operating assumptions and estimates are significant 3. There is a change in the determination leases (net of any incentives received from to the annual financial statements. Although Impairment of trade receivables of whether fulfillment is dependent on a the lessor) and are charged to profit and loss these estimates are based on management’s specified asset; or Management has applied judgement in on a straight-line basis over the lease term. best knowledge of current events and actions estimating the extent of any impairment 4. There is a substantial change to the they may undertake in the future, actual deemed necessary on the gross carrying asset. 1.13 Revenue Recognition results may differ from these estimates. value of trade receivables and have impaired Revenue is recognised to the extent that it is Where a reassessment is made, lease Estimates all accounts in arrears for a period longer accounting commences or ceases from the probable that the economic benefit will flow than normal expected trading terms. date when the change in circumstances gave to the entity, risk and rewards are passed to The key assumptions concerning the Management considered the payment history rise to the reassessment for scenarios (1), (3) the customer and the revenue can be reliably future and other key sources of estimation and the financial ability of the customers or (4) and at the date of renewal or extension measured. Revenue is measured at the fair uncertainty at the reporting date, that have when estimating the impairment of trade period for scenario (2). value of the consideration received, excluding a significant risk of causing a material discounts, rebates and VAT or duty. The adjustment to the carrying amount of the receivables. For arrangements entered into prior to following specific recognition criteria must assets and liabilities in the next financial 1 January 2005, the date of inception is also be met before revenue is recognised: year are listed below: 1.15 Taxes deemed to be 1 January 2005 in accordance with the transitional requirements of IFRIC 4. Rendering of services Provisions Current tax assets and liabilities

Company as a lessee Revenue includes en-route, aerodrome and Provisions were raised and management Tax for current and prior periods is, to the approach fees, small aerodrome services, determined an estimate based on the extent unpaid, recognised as a liability. If the Leases are classified as finance leases technical maintenance services, aeronautical information available as well as past amount already paid in respect of current whenever the terms of the lease transfer information services, VSAT networks and experience. Additional disclosure of these and prior periods exceeds the amount due substantially all the risks and rewards of Aviation training fees. Services fees are estimates of provisions is included in the for those periods, the excess is recognised as ownership to the lessee. All other leases are recognised in the accounting period in which notes to the annual financial statements an asset. classified as operating leases. the services are rendered, by reference to under provisions for other liabilities and Tax assets and liabilities for the current and the completion of the specific transaction, charges. Finance leases are capitalised at the prior periods are measured at the amount assessed on the basis of the actual service inception of the lease at the fair value of expected to be recovered from or paid to provided as a proportion of the total services Property, plant and equipment and the leased asset or, if lower, at the present the taxation authorities, using the tax rates to be provided. Intangible assets value of the minimum lease payments. Lease and tax laws that have been enacted or payments are apportioned between the Management has made certain estimates substantively enacted by the end of the Finance revenue finance charges and reduction of the leased with regards to the determination of balance sheet date. liability so as to achieve a constant rate of Finance revenue is recognised as interest estimated useful lives and residual values of interest on the remaining balance of the accrues (using the effective interest method). items of property, plant and equipment and Deferred tax assets and liabilities liability. Interest income is included in finance intangible assets. A deferred tax liability is recognised for all revenue in profit and loss. Capitalised leased assets are depreciated In estimating the useful lives of the assets, taxable temporary differences, except to the over the shorter of the estimated useful life management considered the industry extent that the deferred tax liability arises of the asset and the lease term, if there is 1.14 Significant accounting estimates standards, the present status of the assets from the initial recognition of an asset or no reasonable certainty that the Company and judgements and the expected future benefits associated liability in a transaction which at the time of will obtain ownership by the end of the lease with the continued use of the assets. the transaction, affects neither accounting The preparation of annual financial term. profit nor taxable profit. statements in conformity with IFRS requires Management has made certain estimates At balance sheet date no finance lease the use of certain critical accounting with regards to determining the value of R1 A deferred tax asset is recognised for all existed. estimates. It also requires management assets where there prices of the assets were deductible temporary differences to the

32 33 ACCOUNTING POLICIES CONTINUED

extent that it is probable that taxable profit retention and non-monetary benefits such will be available against which the deductible as medical care), are recognised in the temporary difference can be utilised. A period in which the service is rendered and deferred tax asset is not recognised when it are not discounted. The expected cost of arises from the initial recognition of an asset compensated absences is recognised as an or liability in a transaction which at the time expense as the employees render services of the transaction, affects neither accounting that increase their entitlement or, in the case profit nor taxable profit. of non-accumulating absences, when the absence occurs. A deferred tax asset is recognised for the carry forward of unused tax losses to the 1.17 Irregular, fruitless and wasteful extent that it is probable that future taxable profit will be available against which the expenditure unused tax losses can be utilised. Irregular expenditure means expenditure Deferred tax assets and liabilities are other than unauthorised expenditure measured at the tax rates that are expected incurred in contravention of, or not in to apply to the period when the asset is accordance with, a requirement of any realised or the liability is settled, based applicable legislation, including the PFMA on tax rates and tax laws that have been and/or policies. enacted or substantively enacted by the end Fruitless and wasteful expenditure means of the balance sheet date. expenditure that was made in vain and would have been avoided had reasonable care been Value Added Tax exercised. Revenue, expenses and assets are Irregular expenditure receivables are recognised net of the amount of Value Added measured at the amount that is expected Tax (VAT) except: to be recovered and are de- rerocognised where the value added tax incurred on when settled or written-off as irrecoverable. a purchase of assets or services is not Irregular expenditure is removed from the recoverable from taxation authority, in balance of the irregular expenditure notes which case the VAT is recognised as part when is either; of the cost of acquisition of the asset or a. condoned by the relevant authority if no as part of the expense item as applicable; official was found to be liable in law. and receivables and payables that are b. recovered from an official liable in law stated with the amount VAT included. c. written-off if it’s irrecoverable from an The net amount of VAT recoverable from, or official liable in law; or payable to, the taxation authority is included d. written-off if it’s not condoned and not as part of receivables or payables in the recoverable. statement of financial position. 1.18 Related party transactions 1.16 Employee benefits The Company operates in an economic environment currently dominated by Short‑term employee benefits entities directly or indirectly owned by the The cost of short-term employee benefits, South African Government. All national (those payable within twelve months after departments of government and state the service is rendered, such as paid controlled entities are regarded as related annual leave leave and sick leave, bonuses, parties in accordance with IAS 24.

34 35 NOTES TO THE AUDITED FINANCIAL STATEMENTS

2. New Standards and contract, and applies the lease accounting loss patterns or customer bases. However, IAS 11 Construction Contracts and related Interpretations requirements only to the lease components. those historical provision rates would require Interpretations (IFIC 13 Customer Loyalty adjustments to take into account current Programmes). The effective date of this amendment is and forward looking information. The new 2.1 Standards and interpretations not for years beginning on or after 01 January The objective of IFRS 15 is to clarify the impairment requirements are likely to bring 2019. The Company expects to adopt the principles of revenue recognition. yet effective or relevant significant changes. Although provisions amendments when they become effective. Standards issued but not yet effective up to the for trade receivables may be relatively IFRS 15 establishes a single revenue date of issuance of the Company’s financial The adoption of this amendment may be straightforward to calculate, new system and framework. The core principle of the statements are listed below. This listing is expected to have a material impact on the approaches may be needed framework is, that an entity should recognise of standards and interpretations issued, results of the Company. revenue to depict the transfer of promised In other changes, IFRS 9 (2014) also introduces which the Company reasonably expects to goods or services to customers in an amount additional application guidance to clarify the be applicable at a future date. The Company IFRS 9 Financial instruments that reflects the consideration to which the requirements for contractual cash flows of a intends to adopt those standards when they entity expects to be entitled in exchange for financial asset to be regarded as giving rise to become effective. IFRS 9 Financial Statements (2014) those goods or services. incorporates the final requirements on all payments that are Solely Payments of Principal and Interest (SPPI), one of the two criteria that IFRS 16 Leases three phases of the financial instruments To accomplish this, IFRS 15 requires the projects – classification and measurement, need to be met for an asset to be measured at application of the following five steps: IFRS 16 Leases supersedes IAS 17 Leases, impairment, and hedge accounting. amortised cost. Previously, the SPPI test was IFRIC 4 Determining whether an Arrangement restrictive, and the changes in the application 1. Identify the contract IFRS 9 (2014) adds to the existing IFRS 9: contains a Leases, SIC 15 Operating leases- of the SPPI test will result in additional 2. Identify the performance obligation(s) Incentives and SIC 27 Evaluating the Substance financial assets being measured at amortised New impairment requirements for all of Transactions Involving the Legal Form of a cost. For example, certain instruments with 3. Determine the transaction price financial assets that are not measured at Lease. regulated interest rates may now qualify for fair value through profit and loss. 4. Allocate the transaction price to each amortised cost measurement, as might some IFRS 16 eliminates the classification by a performance obligation Amendments to the previously finalised instruments which only marginally fail the lessee of leases as either operating or finance. classification and measurement strict SPPI test. 5. Recognise revenue when each performance Instead all leases are treated in a similar way requirements for financial assets. obligation is satisfied. to finances leases in accordance with IAS 17. A third measurement category has also been Under IFRS 16, leases are recorded on the In a major change, which will affect all added for debt instruments – FVTOCI. This Furthermore the guidance significantly balance sheet by recognising a liability for the entries, a new ‘expected loss’ impairment new measurement category applies to debt enhances the required qualitative and present value of its obligation to make future model in IFRS 9 (2014) replaces the’ ‘incurred instruments that meet the SPPI contractual quantitative disclosures related to revenue. lease payments with an asset (comprised of loss’ model in IAS 39 Financial Instruments: cash flow characteristics test and where the The main objective of the requirements is the the amount of the lease liability plus certain Recognition and Measurement. Under IFRS entity is holding the debt instrument to both disclosure of sufficient information in terms of other amounts) either being disclosed 9 (2014), the impairment model is more collect the contractual cash flows and to sell the nature, amount, timing and uncertainty of separately in the statement of financial position ‘forward looking’ model in that a credit event the financial assets. revenue and cash flows arising from contracts (within right-of-use assets) or together with (or impairment ‘trigger’) no longer has to with customers. The effective date of this amendment is for property, plant and equipment. The most occur before credit losses are recognised. For years beginning on or after 1 January 2018. The effective date of this amendment is for significant effect of the new requirements will financial assets measured at amortised cost or The Company expects to adopt the amendment years beginning on or after 01 July 2017, Early be an increase in recognised lease assets and fair value through other comprehensive income when they become effective. adoption permitted. The Company expects to financial liabilities. (FVTOCI), an entity will now always recognise adopt the amendments for the first time in the (at a minimum) 12 months of expected losses The adoption of this amendment will not be There are some exemptions. IFRS 16 contains 2018 financial statements options which do not require a lessee to in profit or loss. Lifetime expected losses will expected to have a material impact on the recognise assets and liabilities for a short be recognised on these assets when there is results of the Company. The adoption of this amendment will not be term leases (i.e. leases of 12 months or less, a significant increase in credit risk after initial expected to have a material impact on the including the effect of any extension options recognition. IFRS 15 Revenue from Contracts results of the Company. and leases of low-value assets. with Customers For trade receivables there is a practical IFRS 16 clarifies that a lessee separate leases expedient to calculate expected credit losses IFRS 15 Revenue from Contracts with components and services components of a using a provision matrix based on historical Customers supersedes IAS 18 Revenue,

36 37 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

3. Revenue 6. Other expenses

2018 2017 2018 2017 R R R R Restated Restated

En-route and approach fees 1,402,408,229 1,376,490,388 Administration expenses 61,466,117 69,888,218 SADC VSAT 11 46,469,170 48,739,100 Audit fees NAFISAT revenue 35,778,834 42,260,049 External Audit 3,262,461 1,299,892 Small aerodrome fees 50,420,819 47,651,893 Fees for audit services 3,262,461 1,299,892 Training to third parties 20,979,086 16,108,651 Internal audit 183,869 1,101,788 Sundry revenue 10,464,159 12,429,895 Fees for audit services (118,502) 1,049,574 Technical maintenance 9,196,523 5,891,708 Fees for other services 302,371 52,214 Extended hours 3,374,345 1,967,382 Bad debts 6,653,498 10,468,372 Rental received-sites 267,141 474,000 Insurance 9,690,246 10,292,536 Aeronautical information services 12,240,046 2,539,671 Profit on sale of property, plant and equipment (54,950) 219,272 Weather Services 1,936,996 1,894,388 Write-offs of property, plant and equipment 13,831,141 22,407,692 Management consulting services 23,148,766 26,778,860 1,593,535,348 1,556,447,125 Marketing expenses 21,268,457 4,408,172 Motor vehicle expenses 1,912,998 16,475,981 4. Foreign exchange gains/(losses) Municipal expenses, rates and taxes 15,273,303 Operating lease rentals 2018 2017 Land and buildings 11,993,167 9,432,271 R R Straight-lined lease payments 9,181,659 8,197,694 Restated Rent 2,811,508 1,234,577 Loss on foreign exchange realised (2,012,525) 1,202,853 Equipment rental 2,409,665 932,288 Loss on foreign exchange unrealised (27,862,105) (14,908,467) Professional fees 20,677,731 21,675,322 (29,874,630) (13,705,614) Repairs and maintenance expenses 72,977,288 75,810,254 Security 4,541,254 3,655,784 5. Staff costs Telecommunication expenses 50,025,225 49,609,080 Travel expenses 48,269,465 53,129,054 367,529,701 377,584,836 2018 2017 R R Restated

Salaries and wages 708,871,677 656,652,451 Incentive Bonus 73,382,720 68,068,238 Rewards and Recognition 4,141,864 3,045,737 Long Service Awards 2,735,000 1,975,000 Pension costs – defined contribution scheme 71,175,100 64,848,267 Training and development 15,034,765 13,406,144 Recruitment costs 2,225,247 2,579,324 Relocation costs 6,202,798 5,093,071 Bursar Costs 1,003,673 878,273

884,772,844 816,546,505

38 39 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

7. Finance revenue 9. Income tax expense Major components of income tax expense for the year ended 2018 2017 R R 31 March 2018 and 2017 are: Restated 2018 2017 Investment revenue R R Interest on bank deposits 77,846,436 73,446,356 Restated 77,846,436 73,446,356 Current income tax Interest on debtors 7,941,183 9,794,793 Prior year over/under-provision - 488,445 Interest received – Other - 142,101 Current income tax charge 74,900,919 102,927,475 85,787,619 83,383,250 74,900,919 103,415,920

Deferred tax 8. Finance costs Current year 597,514 (13,949,042) Prior year (over)/under provision - 8,414 2018 2017 Arising from prior period adjustments - 52,395,879 R R Restated 597,514 38,455,251 75,498,433 141,871,171 Interest on finance lease obligation 1,571,191 10,964 Total borrowing costs 1,571,191 10,964 Current year deferred tax movements relates to the following: 1,571,191 10,964 Property, plant and equipment 7,074,655 37,339,928 Interest paid – Other 21,796 210,990 Prepayments 454,957 (698,894) Provisions (3,831,693) 11,637 1,592,987 221,954 Finance lease obligation (937,921) 1,006,115 Deferred income (2,611,128) - Operating leases 262,688 501,148 Impairment of trade receivables allowance 185,956 295,317

597,514 38,455,251

Reconciliation of the tax expense The tax on the Company’s profit before tax differs from the South African standard rate of tax as follows:

Standard rate of tax 28.00% 28.00% Prior year adjustment – deferred tax - % 15.24% (Over)/under provision – current tax - % 0.14 % Total Non-Temporary differences 0.42 % - % Foreign tax not recovered - % 0.02 %

Effective rate of tax 28.42 % 43.40%

During the 2017/18 fixed asset verification process of property, plant and equipment, errors were identified which were corrected for the period under a result the cost and accumulated depreciation was restated. The deferred tax was restated accordingly. An analysis of the information previously provided for tax purposes will be performed in order to determine if there is an impact on tax returns as a result of the fixed asset verification process.

40 41 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

10. Property, plant and equipment

2018 2017 R R Restated Cost Accumulated Carrying value Cost Accumulated Carrying value depreciation depreciation

Land 13,431,800 - 13,431,800 13,431,800 - 13,431,800 Buildings 215,508,757 (72,395,669) 143,113,088 210,716,476 (60,628,252) 150,088,224 Leasehold improvements 70,966,268 (54,259,500) 16,706,768 64,734,931 (51,056,461) 13,678,470 Communication equipment 275,361,525 (74,359,077) 201,002,448 128,648,985 (61,231,080) 67,417,905 Electrical and mechanical equipment 70,988,928 (39,793,496) 31,195,432 65,505,688 (34,141,642) 31,364,046 Navigational aids 94,040,228 (64,938,505) 29,101,723 88,346,072 (58,851,892) 29,494,180 Tools and test equipment 34,454,712 (12,841,892) 21,612,820 33,924,811 (10,694,160) 23,230,651 ATC display systems 134,590,366 (53,121,263) 81,469,103 70,857,397 (41,596,468) 29,260,929 Simulator equipment 28,345,029 (15,971,562) 12,373,467 25,715,589 (12,875,226) 12,840,363 Radar equipment 435,341,909 (184,965,570) 250,376,339 345,135,096 (160,842,232) 184,292,864 Office furniture and equipment 29,761,012 (15,160,913) 14,600,099 27,953,730 (10,789,762) 17,163,968 Computer equipment 164,852,516 (63,168,807) 101,683,709 122,581,983 (36,900,544) 85,681,440 Motor vehicles 15,629,657 (3,294,006) 12,335,651 8,124,378 (453,938) 7,670,440

Total 1,583,272,707 (654,270,260) 929,002,447 1,205,676,936 (540,061,657) 665,615,280

Reconciliation of property, plant and equipment – 2018

R R R R R R Opening balance Additions Depreciation Impairment loss Write off Closing balance

Land 13,431,800 - - - - 13,431,800 Buildings 150,088,224 4,792,281 (5,969,400) (5,798,017) - 143,113,088 Leasehold improvements 13,678,470 8,305,435 (4,511,039) - (766,098) 16,706,768 Communication equipment 67,417,905 148,892,072 (13,694,664) - (1,612,865) 201,002,448 Office furniture and equipment 17,163,968 1,856,856 (4,385,117) - (35,608) 14,600,099 Motor vehicles 7,670,440 7,505,278 (2,840,067) - - 12,335,651 Electrical and mechanical equipment 31,364,046 5,567,013 (5,668,301) - (67,326) 31,195,432 Computer equipment 85,681,440 42,270,532 (26,268,263) - - 101,683,709 Navigational aids 29,494,180 5,694,156 (6,086,613) - - 29,101,723 Tools and test equipment 23,230,651 529,900 (2,147,731) - - 21,612,820 ATC display systems 29,260,929 63,732,968 (11,524,794) - - 81,469,103 Simulator equipment 12,840,363 2,629,438 (3,096,334) - - 12,373,467 Radar equipment 184,292,864 90,206,812 (24,123,337) - - 250,376,339

665,615,280 381,982,741 (110,315,660) (5,798,017) (2,481,897) 929,002,447

42 43 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

Reconciliation of property, plant and equipment – 2017 (Restated)

R R R R R Opening balance Additions Disposals Depreciation Closing balance

Land 13,431,800 - - - 13,431,800 Buildings 155,119,224 521,159 - (5,552,159) 150,088,224 Leasehold property 12,672,108 4,975,438 - (3,969,076) 13,678,470 Communication equipment 52,298,055 23,101,891 (18,173) (7,963,868) 67,417,905 Office furniture and equipment 19,284,258 2,009,169 - (4,129,459) 17,163,968 Motor vehicles 444,727 7,413,331 - (187,618) 7,670,440 Electrical and mechanical equipment 29,759,762 6,574,095 - (4,969,811) 31,364,046 Computer equipment 92,861,715 10,385,479 - (17,565,754) 85,681,440 Navigational aids 32,364,424 2,902,309 - (5,772,553) 29,494,180 Tools and test equipment 24,288,769 1,046,126 - (2,104,244) 23,230,651 ATC display systems 35,274,559 33,123 - (6,046,753) 29,260,929 Simulator equipment 12,806,920 2,845,064 - (2,811,621) 12,840,363 Radar equipment 195,857,888 8,813,071 - (20,378,095) 184,292,864

676,464,209 70,620,255 (18,173) (81,451,011) 665,615,280

Assets subject to finance lease (Net carrying amount)

R R

Motor vehicles 12,236,117 9,638,283 IT equipment 704,913 442,063

12,941,030 10,080,346

A register containing the information required by Regulation 25(3) of the Companies Regulations, 2011 is available for inspection at the registered office of the Company.

44 45 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

11. Intangible assets

2018 2017 R R Restated Cost Accumulated Carrying value Cost Accumulated Carrying value amortisation amortisation

Computer software 274,581,880 (167,136,773) 107,445,107 261,907,701 (153,350,202) 108,557,499

Reconciliation of intangible assets – 2018

R R R R R Opening balance Additions Disposals/Write-offs Amortisation Closing balance

Computer software 108,557,499 24,023,426 (11,349,247) (13,786,571) 107,445,107

Reconciliation of intangible assets – 2017 (Restated)

R R R R Opening balance Additions Amortisation Closing balance

Computer software 132,191,222 310,984 (23,944,707) 108,557,499

12. Capital work in progress 13. Long-term prepayments

2018 2017 2018 2017 R R R R Restated Restated

Opening net book value 502,416,969 306,446,409 Prepayments 431,434 - Additions 279,956,428 290,084,867 Other adjustments (5,339,973) 2,931,354 Included in Long term prepayments, are maintenance, licenses and other operating expenses paid in advance. Prior year adjustment - (15,097,264) The Company expects to receive credits for the related expenditure in the 2020 and 2021 financial year. Other projects related costs - 6,504,926 Transferred to property, plant and equipment (368,649,458) (88,453,323)

408,383,966 502,416,969

The balance consists of the following categories of property, plant, equipment and intangible asset: Radar equipment 82,910,106 36,015,778 Communication equipment 98,479,321 196,751,060 Navigational aids 50,386,220 42,655,211 Simulator 1,267,027 509,839 Leasehold improvement - 840,003 Electrical and mechanical equipment 5,359,082 3,276,772 Software 4,362,091 9,530,088 ATC display system 95,916,228 181,694,247 Buildings 66,149,595 31,143,971 Computer equipment 3,489,585 - Other 64,711 -

408,383,966 502,416,969

46 47 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

14. Loans and receivables Exposure to credit risk The instruments included in loans and receivables expose management to credit risk as follows: 2018 2017 R R 2018 Restated R

Risk financing insurance policy 14,155,784 16,151,353 Maximum exposure Value of posed by the instrument instrument The insurance policy is a cell captive asset Risk financing insurance policy 14,155,784 14,155,784 Current assets Loans and receivables 14,155,784 16,151,353 2017 R The policy provides cover for ATNS to limit the Medium credit grade – the counter party has Restated excess premiums that are payable on certain evidenced instances of defaults and/or Maximum exposure Value of insurance risks. The above financial asset is non re-negotiations of contractual terms in prior posed by the instrument instrument interest bearing and comprises USD-denominated periods on the repayment of outstanding Risk financing insurance policy 16,151,353 16,151,353 and South African Rand bearing assets which amounts. An assessment of the financial position are not quoted in an active market. The carrying and liquidity position of the party has provided The Company has not reclassified any financial assets from cost or amortised cost to fair value, or from fair amount is regarded as a fair approximation of the evidence of financial difficulties that may impede value to cost or amortised cost during the current or prior year. fair value, and is accessible within 30 days. the recoverability of the outstanding amounts. The counter parties included in this credit grade Pledged as security category are active in an industry that is highly 15. Trade and other receivables sensitive to market fluctuations and volatility Financial instruments None of the instruments included in loans and in the international economies. As such the receivables were pledged as security for any counter parties included in the medium credit 2018 2017 financial obligations. grade category pose a medium credit risk to the R R Company. Collateral held Restated Low credit grade – The counter party has evidenced Trade receivables 266,453,931 211,059,610 The instruments are unsecured and therefore no high occurrences of defaults and/or re-negotiations Less: Allowance for losses on trade receivables (26,868,905) (24,212,393) collateral is held. of contractual terms in prior periods. Furthermore Trade receivables – net 239,585,026 186,847,217 an assessment of the financial position and Other receivables 7,801,657 6,946,949 Credit quality liquidity position of the party has provided evidence 247,386,683 193,794,166 of financial difficulties that may impede the The credit quality of loans and receivables that 247,386,683 193,794,166 recoverability of the outstanding amounts. As such are neither past due nor impaired are assessed/ the counter parties included in the low credit grade The movement in the impairment of trade receivables monitored by reference to historical information category pose a high credit risk to the Company. allowance during the year was as follows: about counter party default rates. The credit quality Balance at 1 April 24,212,393 19,993,573 rating of each of these financial instruments are as The terms and conditions attached to the Impairment loss recognised 6,653,498 10,468,372 follows: instruments included in loans and receivables have Receivables written off during the year (3,996,986) (6,249,552) not been re-negotiated during the period. High credit grade – the counter party has Balance at 31 March 26,868,905 24,212,393 evidenced no instances of defaults. Furthermore There were no breaches or defaults on any portion an assessment of the financial position of the (either capital or instrument) of the loans and Trade receivables generally have 30 days terms. The Company reserves the right to charge interest on overdue Company has not evidenced a weakening in either receivables during the year. Also none of these accounts with effect from the date the indebtedness was incurred. The rate of interest charged is prime rate the financial position or liquidity of the Company. instruments are either past due or impaired. This plus two percentage basis points. As such the counter parties included in the high further supports management’s assessment of the credit grade category pose a low credit risk to the credit quality of the financial instruments included Company with the recoverability of the outstanding in loans and receivables. amounts being almost certain.

48 49 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

The ageing of trade receivables at the reporting date was: High credit grade – The counter party has grade category pose a medium credit risk to the evidenced no instances of defaults and/or Company. re-negotiations of contractual terms in prior R R R Low credit grade – The counter party has evidenced periods. Furthermore an assessment of the Gross Impaired Not impaired high occurrences of defaults and/or re-negotiations financial position of the Company has not evidenced of contractual terms in prior periods. Furthermore 2018 a weakening in either the financial position or an assessment of the financial position and liquidity of the Company. As such the counter Not past due 158,778,030 865,322 157,912,708 liquidity position of the party has provided evidence parties included in the high credit grade category Past due by 30 days 47,760,971 861,340 46,899,631 pose a low credit risk to the Company with the of financial difficulties that may impede the Past due by 31 to 60 days 37,187,150 2,414,463 34,772,687 recoverability of the outstanding amounts being recoverability of the outstanding amounts. As such Past due by more than 60 days 22,727,780 22,727,780 - almost certain. the counter parties included in the low credit grade 266,453,931 26,868,905 239,585,026 category pose a high credit risk to the Company. Medium credit grade – The counter party has evidenced instances of defaults and/or re- The terms and conditions attached to the R R R instruments included in trade and other receivables Restated Restated Restated negotiations of contractual terms in prior periods on the repayment of outstanding amounts. An have not been re-negotiated during the period. Gross Impaired Not impaired assessment of the financial position and liquidity South Africa’s low economic rate has put pressure 2017 position of the party has provided evidence on domestic carries. This has resulted in defaults of financial difficulties that may impede the Not past due 151,813,251 - 151,813,251 and breaches on some of the trade and other recoverability of the outstanding amounts. The Past due by 30 days 22,108,212 - 22,108,212 receivables during the period under review. Past due by 31 to 60 days 13,467,232 - 13,467,232 counter parties included in this credit grade category are active in an industry that is highly The Company continues to assess its exposure Past due by more than 60 days 23,670,915 24,121,393 (450,478) sensitive to market fluctuations and volatility to defaults by assessing the quality of the 211,059,610 24,121,393 186,938,217 in the international economies. As such the financial instruments included in trade and other counter parties included in the medium credit receivables.

Exposure to credit risk The Company has no significant concentration of the Company may utilise the related deposit in The instruments included in trade and other receivables expose management to credit risk as follows: credit risk. It has policies in place to ensure that settlement of the debt. rendering of services are made to customers with an appropriate credit history. Trade receivables Provision for impairment allowance for trade and 2018 comprise a large number of customers. The top other receivables is recognised when there is R three customers comprise 47% (2017: 46%) of objective evidence that the debt would be impaired. Maximum exposure Value of instrument posed by the instrument trade receivables. Ongoing credit evaluations are performed on the financial position of these Pledged as security Trade receivables 239,585,026 239,585,026 customers. None of the instruments included in the trade and 2017 In addition, exposure is reduced by deposits of other receivables were pledged as security for any R R7,382,420 (2017: R6,924,279) held on behalf financial obligations. Restated of customers, as well as bank guarantees of Maximum exposure Value of instrument R104,854,494 (2017: R99,465,493) from customers Credit quality posed by the instrument in the name of the Company. The deposits are included in cash and cash equivalents (note 17) as The credit quality of trade and other receivables Trade receivables 186,847,217 186,847,217 unrestricted cash, with the related liability included that are neither past due nor impaired are in other payables (note 23). When the customer assessed/monitored by reference to historical Fair value ceases to trade and settles the outstanding debt, information about counterparty default rates. the Company is obliged to return the deposit The credit quality rating of each of these financial The carrying value of trade and other receivables approximates their fair values. Refer to note 30 for related to the customer. Should the customer default, instruments are as follows: party information.

50 51 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

16. Prepayments Medium credit grade – The country party has of contractual terms in prior periods. Furthermore evidenced instances of defaults and/or re- an assessment of the financial position and negotiations of contractual terms in prior periods liquidity position of the party has provided evidence 2018 2017 on the repayments of outstanding amounts. An of financial difficulties that may impede the R R recoverability of the outstanding amounts. As such Restated assessment of the financial position and liquidity position of the party has provided evidence the counter parties included in the low credit grade 10,602,938 4,893,997 of financial difficulties that may impede the category pose a high credit risk to the Company. recoverability of the outstanding amounts. The Included in prepayments, are rental expense and other operating expenses paid in advance. The Company The terms and conditions attached to the counter parties included in this credit grade expects to receive credits for the related expenditure in the 2019 financial year. instruments included in cash and cash equivalents category are active in an industry that is highly have not been re-negotiated during the year. sensitive to marked fluctuations and volatility The carrying value of prepayments approximates their fair values. in the international economies. As such the There were no breaches or defaults on any portion counter parties included in the medium credit (either capital or interest) of the cash and cash 17. Cash and cash equivalents grade category pose a medium credit risk to the equivalents during the year. Also none of these instruments are either past due or impaired. This Cash and cash equivalents consist of: Company. further supports management’s assessment of the 2018 2017 Low credit grade – The counter party has evidenced credit quality of the financial instruments included R R high occurrences of defaults and/or re-negotiations in cash and cash equivalents. Restated

Bank balances 67,271,888 96,594,556 Exposure to credit risk Bank balances – US Dollar denominated 187,947,143 179,440,165 The instruments included in cash and cash equivalents expose management to credit risk as follows: Other cash and cash equivalents 90,003 240,000 Short‑term deposits 1,087,355,130 1,050,457,379 2018 R 1,342,664,164 1,326,732,100 Maximum exposure Value of Cash and cash equivalents include the following for the purpose posed by the instrument instrument of the cash flow statement: Cash and cash equivalents 1,342,664,164 1,326,732,100 Cash and cash equivalents 1,342,664,164 1,342,664,164

2017 Pledged as security the credit quality of cash and cash equivalents are R ensured by only contracting with highly reputable Restated None of the instruments included in cash and financial institutions registered in terms of the Maximum exposure Value of cash equivalents were pledged as security for any Banks Act of South Africa and endorsed by National posed by the instrument instrument financial obligations. Treasury. Cash and cash equivalents 1,326,732,100 1,326,732,100 Credit quality High credit grade – the counter party has evidenced no instances of defaults and/or re-negotiations of Fair value The credit quality of cash and cash equivalents is contractual terms in prior periods. Furthermore the credit rating of the financial institutions. Cash The carrying value of cash and cash equivalents approximates their fair values. an assessment of the financial position of the and cash equivalents attract interest at variable Company has not evidenced a weakening in either rates linked to prime. Restrictions to the use of cash the financial position or liquidity of the Company. The credit quality of cash and cash equivalents that As such the counter parties included in the high No restrictions have been imposed on the Company with regards to the extent to which bank and cash are neither past due nor impaired are assessed/ credit grade category pose a low credit risk to the balances of the Company may be used. monitored by reference to historical information Company with the recoverability of the outstanding about counter party default rates. Furthermore amounts being almost certain.

52 53 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

18. Share capital 20. Tax paid

2018 2017 2018 2017 R R R R Restated Restated

Authorised Balance at beginning of the year 721,149 8,049,997 500 million ordinary shares with a par value of R 1 each 500,000,000 500,000,000 Current tax for the year recognised in profit or loss (74,900,919) (103,415,920) Adjustment to deferred tax due to prior year error - 1,929,286 Issued and fully paid: Balance at end of the year (24,571,271) (721,149) 190 646 000 ordinary shares with a par value of R 1 each 190,646,000 190,646,000 (98,751,041) (94,157,786) Number of Rand value ordinary shares of shares 21. Finance lease obligation Reconciliation of the number of shares outstanding Outstanding shares at April 1, 2017 190,646,000 190,646,000 2018 2017 Shares issued - - R R Restated Outstanding shares at March 31, 2017 190,646,000 190,646,000 Shares issued - - Minimum lease payments due

Outstanding shares at March 31, 2018 190,646,000 190,646,000 Not later than 1 year 5,585,260 3,783,853 Later than one year and not later than 5 years 9,392,982 4,587,726 19. Deferred income tax liabilities 14,978,242 8,371,579 less: future finance charges (2,280,760) (2,080,560) A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the Present value of minimum lease payments 12,697,482 6,291,019 deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction, affects neither accounting profit nor taxable profit. Non‑current liabilities 8,347,087 3,383,474 Current liabilities 4,350,395 2,907,545 The movement on the deferred income tax account is as follows: 12,697,482 6,291,019

2018 2017 R R 2018 2017 Restated R R Restated At beginning of the year (90,966,066) (52,510,815) Recognised in statement of profit and loss and other comprehensive income (597,514) (38,446,837) Total lease liability 12,697,482 6,291,019 Prior year under provision - (8,414) Movement in 2017/2018 lease liability 6,406,463 6,291,019 Additions on leases 7,505,278 7,413,331 (91,563,580) (90,966,066) Finance lease payment (1,098,815) (1,122,312) Deferred income tax liability relates to the following:

Property, plant and equipment (128,971,898) (121,897,242) It is company policy to lease certain motor vehicles and printers under finance leases. Finance leases (68,193) (1,006,114) Provisions 38,404,848 34,573,155 The average lease term is 3-5 years for both the printers and motor vehicles, which is equal to the useful lives of these assets. Loss allowance on trade receivable (1,880,823) (1,694,868) Operating leases 166,635 429,323 Interest rates are fixed for the various leased motor vehicles with the average rate of 11.5% and instalments 24C allowance (14,604,800) (14,604,800) are payable monthly in arrears. Income received in advance 17,215,928 14,604,800 Prepayments (1,825,277) (1,370,320) The Company’s obligations under finance leases are secured by the lessor’s charge over the leased assets.

(91,563,580) (90,966,066)

54 55 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

22. Commitments 23. Trade and other payables

Authorised capital expenditure 2018 2017 R R Restated 2018 2017 R R Financial instruments Restated Trade payables 53,504,524 37,994,693 Capital and operating expenditure contracted for at the reporting 53,504,524 37,994,693 date but not yet incurred is as follows: Accrued expenses 94,170,814 74,516,841 Property, plant and equipment 432,421,028 460,068,706 Other payables 81,426,278 76,120,322 229,101,616 188,631,856 Operating expenditure 164,535,587 78,753,203 Non‑financial instruments Operating leases – as lessee (expense) VAT payable 4,600,756 5,029,326

Minimum lease payments due 233,702,372 193,661,182 Not later than 1 year 11,065,743 6,224,300 Later than 1 year and not later than 5 years 44,365,340 1,579,085 Fair value of trade and other payables 55,431,083 7,803,385

Equalisation of operating lease liability R R Gross Total Opening balance 1,533,295 3,323,108 Current year adjustment (938,170) (1,789,813) The ageing of trade payables 2018

595,125 1,533,295 Not past due 39,244,754 39,244,754 Past due by 30 days 6,653,695 6,653,695 The Company has entered into commercial leases on certain buildings and items of office equipment. Past due by 31 to 60 days 2,273,319 2,273,319 These leases have an average life of between three and five years. With the exception of leases relating to Past due by more than 60 days 5,332,856 5,332,856 copiers, there are no renewal options included in the contracts. There are no restrictions placed on the 53,504,624 53,504,624 Company by entering into these contracts.

R R Gross Total Restated Restated

The ageing of trade payables 2017 Not past due 31,973,553 31,973,553 Past due by 30 days 4,828,083 4,828,083 Past due by 31 to 60 days 219,071 219,071 Past due by more than 60 days 973,986 973,986

37,994,693 37,994,693

All trade and other payables are due within 30 days.

The terms and conditions attached to the instruments included in trade and other payables have not been re-negotiated during the period.

There were no breaches or defaults on any portion (either capital or interest) of the trade and other payables during the year.

Refer to note 34 for related party information.

56 57 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

24. Provisions for other liabilities and charges 25. Cash flows from investing activities Reconciliation of provisions for other liabilities and charges – 2018 2018 2017 R R R R R R R Restated Opening Additions Utilised during Over/(Under) Closing balance the year transferred balance Property, plant and equipment 5,828,004 13,327,653 to expenses Capital work in progress 274,616,455 293,034,446

Leave pay 29,902,089 58,702,916 (54,955,250) - 33,649,755 280,444,459 306,362,099 Performance bonus 67,971,672 73,326,920 (67,889,301) (10,787) 73,398,504 Other 1,389,410 33,237,974 (13,482,021) 569,709 21,715,072 26. Cash generated from operations 99,263,171 165,267,810 (136,326,572) 558,922 128,763,331 2018 2017 Reconciliation of provisions for other liabilities and charges – 2017 (Restated) R R Restated

R R R R R Profit before taxation 265,652,557 326,375,743 Opening Additions Utilised during Over/(Under) Closing Adjustments for: balance the year transfered to balance Depreciation and amortisation 124,102,231 105,395,723 expenses Loss/(profit) on sale of property, plant and equipment 13,776,191 219,272 External audit fees 320,660 1,650,000 (1,970,660) - - Finance revenue (85,787,619) (83,383,250) Leave pay 25,710,888 53,793,660 (49,602,458) - 29,902,089 Finance costs 1,592,987 221,954 Performance bonus 68,685,504 67,971,672 (68,782,070) 96,566 67,971,672 Impairment loss 5,798,016 - Other 8,806,499 9,027,009 (16,444,098) - 1,389,410 Movements in operating lease assets and accruals (938,170) (1,789,812) Movements in provisions and other non-cash items 29,500,173 (5,602,844) 103,523,551 132,442,340 (136,799,286) 96,566 99,263,171 Write-off of intangible assets 11,094 - Uncertainties and assumptions: Net foreign exchange difference 29,874,630 13,705,614 Changes in working capital: a. Leave Pay Trade and other receivables (51,596,948) 9,235,022 Prepayments (5,708,941) 2,465,998 The leave pay provision is raised on the unutilised leave days owing to employees at balance sheet date. Trade and other payables 40,041,177 64,307,793

b. Performance bonus 366,317,378 431,151,213

The performance bonus provision is calculated based on the performance of the Company as well as the 27. Proceeds on disposal of property, plant and equipment individual performance ratings for the financial year ended 31 March 2018.

c. Other 2017 2018 R Includes provision for Swaziland Civil Aviation Authority (SWACAA) on overflights billing that ATNS does on R Restated behalf of SWACAA. Proceeds on sale of property, plant and equipment 43,859 78,306

58 59 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

28. Guarantees and contingent certified by the reporting actuaries to be in Related party transactions liabilities a sound financial position. The Company contributions to the ATNS Retirement 2018 2017 Litigation is in the process against the Fund amounted to R71,175,099 (2017: R R Company relating to a dispute with a supplier R64,848,267). Restated for services rendered whereby the supplier is The Company does not provide any post- Sales of services seeking a claim of R 2,330,418. retirement benefits to employees and has Airports Company of South Africa 14,541,308 12,739,252 The Company has guarantee that it would no exposure to any post-retirement benefit North West Province 9,355,265 8,726,927 pay to the suppliers an amount of R3,937,185 obligations. South African Civil Aviation Authority 3,973,401 2,822,165 (2017: 3,151,085) and cessions and other South African Air Force 2,316,435 2,574,850 mattes arising in the ordinary course of 30. Related party disclosure South African Airways 355,694,443 396,721,601 business. South African Express 104,959,188 113,040,630 The sole shareholder of the ATNS is the Tulca (Pty) Ltd – Mango Airlines 151,687,456 142,884,647 Minister of Transport on behalf of the South 29. Retirement benefit information Other 25,871,724 24,049,081 African government in terms of section 6(5) 668,399,220 703,559,153 Substantially all employees are members of the Air Traffic and Navigation Services of the ATNS retirement fund. The fund is a Company Act 1993. ATNS is a Schedule 2 Purchases of goods and services defined contribution fund and is governed public entity in terms of the Public Finance Airports Company of South Africa 12,795,953 13,313,114 Management Act and therefore falls within by the Pension Funds Act of 1956 which Eskom 8,230,624 7,950,251 the national sphere of government. requires an actuarial valuation to be carried South African Civil Aviation Authority 10,168,488 13,324,810 out every 3 years. The related parties of ATNS consist mainly South African Revenue Services 229,047,646 229,486,605 21,351,929 20,154,110 The ATNS retirement fund was established of government departments, state-owned Telkom 2,295,920 1,138,225 on 1 April 1994. The fund has been exempted enterprises, and other public entities in the Other from valuation with effect from 10 April national sphere of government, as well as 283,890,560 285,367,115 2012 and will from that date be subjected to directors and key management personnel. These transactions are carried out on commercial terms & conditions. quarterly assessments. The list of public entities and the respective subsidiaries in the national sphere of Year end balances arising from related party activity The Fund applied for valuation exemption government is provided by National Treasury. Receivables from related parties with effect from 31 January 2016 and the Airports Company of South Africa 4,621,399 3,718,051 Unless otherwise disclosed, all transactions Registrar approved the application on 70,856,305 33,998,879 with the below related parties are concluded South African Airways 30 November 2016. The valuation exemption 27,151,905 26,862,706 on an arm’s length basis. Furthermore, no South African Express will terminate on 31 January 2019. 15,760,332 12,517,675 expense has been recognised in the current Tulca (Pty) Ltd – Mango Airlines 7,979,080 3,681,324 The latest actuarial assessment of the ATNS period for impairment of trade receivables Other Retirement Fund was at 31January 2014. in respect of the amounts owed by related 126,369,021 80,778,635 At that time, the ATNS retirement fund was parties. Payables to related parties Airports Company of South Africa 926,359 982,445 Eskom 730,825 492,987 South African Civil Aviation Authority 3,502,085 - South African Revenue Services 4,678,806 5,016,097 Telkom 730,825 1,915,674 Department of Transport 52,160,000 52,160,000 Other - 16,248

62,728,900 60,583,451

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received.

All the companies listed above report to the various ministerial departments of the government and hence are considered related parties.

60 61 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

31. Directors, Emoluments and Prescribed officers

The service contracts for the executive directors is for a term of 5 years. The notice period for the Chief The executive management team is eligible for an annual performance related bonus payment linked to Executive Officer is 6 months. The service contract for the non-executive directors is for a period of appropriate business sector targets. The structure of the bonus plan and award is recommended by the 3 years, subject to retirement at the annual general meeting. Compensation for non-executive directors Human Resources Committee in accordance with the bonus scheme rules. The performance related is in accordance with the State Owned Enterprise guidelines. The contract of the Chief Executive Officer bonus is limited to 25% for the Executive Manager’s individual cost to company and 30% for the Chief also deals with compensation if the Chief Executive Officer is dismissed or if there is material change in Executive Officer based on his individual cost to company. There were no post-employment benefits, the role, responsibilities or remuneration. share based payments or other long-term benefits paid in the current financial year.

Executive – 2018 Executive – 2017 (Restated)

R R R R R R Basic salary Incentive Bonus Total Basic salary Incentive Bonus Total 2016/17 2015/16

DST Mthiyane 4,090,056 1,008,679 5,098,735 DST Mthiyane 3,711,745 1,038,740 4,750,485 MW Ndlovu 2,835,377 546,056 3,381,433 MW Ndlovu 2,640,104 616,344 3,256,448 S Malinga 2,833,940 300,528 3,134,468 S Malinga 1,536,192 - 1,536,192 S Mngomezulu 2,165,876 486,703 2,652,579 S Mngomezulu 2,016,568 502,438 2,519,006 HJ Marais 2,077,982 175,224 2,253,206 HJ Marais 1,933,130 366,023 2,299,153 TV Ndou 2,146,441 449,476 2,595,917 TV Ndou 2,004,044 498,721 2,502,765 DH Sangweni 2,557,528 581,062 3,138,590 DH Sangweni 2,374,816 559,282 2,934,098 T Thankge (Resigned: 07 February 2018) 1,820,358 396,631 2,216,989 T Thankge 1,923,380 390,916 2,314,296 T Myeza 2,418,150 534,581 2,952,731 T Myeza 2,218,559 502,397 2,720,956 P Boshielo 1,948,439 366,068 2,314,507 P Boshielo 1,810,298 - 1,810,298 J Matshoba 2,145,164 327,278 2,472,442 J Matshoba 1,781,648 329,485 2,111,133 AA Swartbooi (Resigned: 31 March 2018) 1,792,386 - 1,792,386 PC Marais (Retired: 31 December 2016) 2,228,242 474,089 2,702,331 N Lekota 1,089,539 168,934 1,258,473 28,831,697 5,172,286 34,003,983 27,268,265 5,447,369 32,715,634

Non‑executive – 2018 Non‑executive – 2017 (Restated)

R R R R Directors’ fees Total Directors’ fees Total

P Riba 92,446 92,446 P.Riba 636,465 636,465 N Mtshali 238,149 238,149 N.Mtshali 481,297 481,297 B Ssamula 327,027 327,027 B.Ssamula 632,972 632,972 S Hari 220,813 220,813 S.Hari 458,384 458,384 EM Mphahlele 1,119,743 1,119,743 E.M Mphahlele 610,548 610,548 I Nkama 281,830 281,830 I. Nkama 564,951 564,951 PQ Dhlamini 330,542 330,542 P.Q. Dhlamini 545,831 545,831 DG Mwanza 583,407 583,407 D.G. Mwanza 444,602 444,602

3,193,957 3,193,957 4,375,050 4,375,050

62 63 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

Prescribed officers – 2018 Prescribed officers – 2017 (Restated)

R R R R R R Basic salary Incentive Bonus Total Basic salary Incentive Bonus Total 2016/17 SW Nkabinde 1,338,401 152,140 1,490,541 LT Ndelu 1,138,334 109,591 1,247,925 K Sebopa 1,221,504 116,668 1,338,172 SW Nkabinde 1,433,967 187,083 1,621,050 H Reid 1,713,566 318,805 2,032,371 N Phakathi 1,304,852 221,733 1,526,585 JM Manyakoana 1,680,258 295,924 1,976,182 R Madlala 1,539,976 233,427 1,773,403 JM Moholola 1,393,916 267,902 1,661,818 H Reid 1,820,769 329,065 2,149,834 DJ Watts 1,400,239 216,143 1,616,382 JM Manyakoana 1,834,086 319,467 2,153,553 CH Gersbach 1,389,408 195,421 1,584,829 JM Moholola 1,629,028 274,785 1,903,813 10,137,292 1,563,003 11,700,295 DJ Watts 1,496,125 237,137 1,733,262 CH Gersbach 1,488,243 197,356 1,685,599 The above employees have been classified as prescribed officers and accordingly, salaries and related costs K Sebopa 1,351,076 177,640 1,528,716 relating to their remuneration is herewith disclosed. 15,036,456 2,287,284 17,323,740

32. Financial risk management, objectives and policies

Categories of financial instruments and maturity analysis – 2018 Categories of financial instruments and maturity analysis – 2017 (Restated)

R R R R R R R R R R Total Due not later Due later than Due later than Due later than Total Due not later Due later than Due later than Due later than than 1 month 1 month and 3 months and 5 years and than 1 month 1 month and 3 months and 5 years and not later than not later than not later than not later than not later than not later than 3 months 1 year 10 years 3 months 1 year 10 years

Trade and other Trade and other receivables receivables Trade and other receivables 186,847,217 151,813,251 22,108,212 13,467,232 (541,478) Trade and other receivables 239,585,026 157,912,708 46,899,631 34,772,687 - Trade and other payables Financial liabilities - - - -- Trade payable 37,994,693 31,973,553 4,828,083 219,071 973,986 Trade and other payables Accrued expenses 74,516,854 10,793,469 11,586,070 52,137,315 - Other payables 76,120,322 6,785,523 13,571,046 55,763,753 - Trade payable 48,171,768 39,244,754 6,653,695 2,273,319 - Accrued expenses 99,543,670 7,847,568 15,695,136 70,628,110 5,332,856 188,631,869 49,552,545 29,985,199 108,120,139 973,986 Other payables 81,426,278 6,785,523 13,571,046 61,069,709 -

229,101,716 53,877,845 35,919,877 133,971,138 5,332,856

64 65 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

Financial risk factors Market risk – Interest rate risk

The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk The Company’s income and operating cash flows are substantially independent of changes in market and interest rate risk), credit risk and liquidity risk. The Company’s overall risk management programme interest rates. The Company’s cash flow interest rate risk arises from long term borrowings, cash and cash focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the equivalents and finance lease liabilities. The Company is not exposed to fair value interest rate risk as the Company’s financial performance. Where applicable, the Company uses financial instruments to hedge Company does not have any fixed interest bearing financial instruments carried at fair value. The Company certain risk exposures. manages its exposure to cash flow interest rate risk by ensuring that cash flows from operations are sufficient to cover the variable interest cash flows and by using derivative instruments to hedge certain exposures. Market risk – Foreign exchange risk At the reporting date the interest rate profile of the Company’s interest bearing financial instruments was as The Company transacts internationally and is exposed to foreign exchange risk arising from various currency follows: exposures, primarily with respect to the US dollar (USD), Australian Dollar (AUS$), Great British Pound (GBP) and the Euro (EUR’s). Foreign exchange risk arises from future commercial transactions, recognised 2018 2017 assets and liabilities. The Company manages its exposure to foreign exchange risk by ensuring that the net R R Restated uncovered foreign currency position is minimised and by using the derivative instruments to hedge certain exposures where applicable. Variable rate instruments – Linked to Prime

Rand USD Cash and cash equivalents 1,342,664,164 1,326,732,100

2018 Trade and other receivables 247,386,701 193,794,166

Loans and receivables 10,703,216 908,978 Trade and other payables (223,702,372) (188,660,761) Trade and other receivables 11,730,602 996,229 Cash and cash equivalents 187,947,143 15,961,540 Total interest rate exposure 1,366,348,493 1,331,865,505 Trade and other payables (5,020,356) (426,357)

205,360,605 17,440,390 Sensitivity analysis An increase of 100 basis points in the JIBAR and Prime interest rate at the reporting date would have Rand USD increased/(decreased) profit before tax by the amounts shown below. This analysis assumes that all other 2017 variables remain constant. Risk financing insurance policy 12,725,690 932,285 2018 2017 Trade and other receivables 10,177,991 745,640 R R Cash and cash equivalents 179,440,165 13,145,800 Restated 202,343,846 14,823,725 Increase of 100 basis points in prime rate 13,663,484 13,318,655

Sensitivity analysis Decrease of 100 basis points in prime rate (13,663,484) (13,318,655)

A 10% strengthening in the Rand against the above currencies at 31 March 2018 would have decreased profit before tax by the amounts shown below. This analysis assumes that all other variables, in particular interest Credit risk rates, remain constant. The analysis was performed on the same basis for 31 March 2017. Credit risk arises from loans and receivables, trade and other receivables and cash and cash equivalents. A 10% weakening in the Rand against the above currencies at 31 March 2018 would have had the equal but opposite effect to the amounts shown below, on the basis that all other variables remain constant. The Company has no significant concentration of credit risk. It has policies in place to ensure that sales of services are made to customers with an appropriate credit history. Trade receivables comprise a number 2018 2017 of customers. The top three customers comprise approximately 46% of the core revenue. Ongoing credit R R evaluations are performed on the financial position of these customers. In addition, exposure is reduced by Restated deposits and bank guarantees held on behalf of customers. It is the policy of the Company to renegotiate Profit or loss credit terms with long-standing customers who have a good credit history with the Company. These customers are monitored on an ongoing basis to ensure that the customer remains within the renegotiated USD 20,536,061 20,234,385 terms.

66 67 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

Derivative counterparties and cash 33. Events after the reporting Details of the appropriations are as follows: transactions are limited to high-credit- period quality financial institutions. The Company 2017 Restated has policies that limit the amount of credit Management is not aware of any significant exposure to any one financial institution. events that occurred after the reporting Correction of Opening balance of Cost of Property, Plant and Equipment (409,210,894) Credit risk in respect of the risk financing date that would require adjustments to Correction of Opening balance Accumulative Depreciation of Property, Plant and Equipment 481,282,211 insurance policy is managed by ensuring or disclosure in the financial statements. Decrease of depreciation for the current year 10,176,459 that financial assets are ring-fenced in a Furthermore management is not aware of Increase in deferred taxation arising from changes in cost and accumulated depreciation (33,444,572) cell captive and are managed by a reputable any circumstances which exist that would Impact on retained earnings 48,803,204 asset manager according to approved impede the Company’s ability to continue as guidelines. a going concern. Intangible assets The maximum exposure to credit risk is Additional seven board of Directors where During the 2017/18 fixed asset verification process, errors were identified on the intangible assets as disclosed represented by the carrying amount of each appointed on the 13 April 2018 by the in the 2016/17 financial statements. These errors were corrected for the period under review retrospectively, financial asset in the statement of financial shareholder for a period of six months. position (net of impairment losses where Details of the appropriations are as follows: relevant). 34. Prior year error 2017 Capital risk management Corrections were made and appropriated to Restated the Retained Earnings account during the Correction of Opening balance Accumulative Amortisation on Intangible assets (41,135,842) The Company’s objective when managing financial year end 31 March 2018. Correction of Amortisation on Intangible assets 297,760 capital (equity and assets) is to safeguard the Company’s ability to continue as a going The nature of the correction are as follows; Increase in amortisation of intangible assets for the current year 1,580,832 concern and to maintain an optimal capital Increase in deferred taxation arising from changes in cost and accumulated depreciation (18,951,307) structure to reduce the cost of capital, in Property, Plant and Equipment Impact on retained earnings (58,208,557) order to provide returns for shareholders. During the 2017/18 fixed asset verification Finance lease assets/finance lease liability In order to maintain or adjust this capital process of Property, plant and equipment, errors were identified which were structure, the Company may draw down on The finance leases were incorrectly capitalised in the wrong financial period. These errors were corrected for corrected for the period under review. available banking facilities, sell assets to the period under review retropsectively, reduce debt or obtain long term funding from Assets that should have been included stakeholders. in the existing assets register were Details of the appropriations are as follows: identified and therefore there was a cost The Company monitors capital on the adjustment. Componentisation and condition 2017 Restated basis of a gearing ratio. The gearing ratio assessments of all assets was done during is calculated as total debt divided by total 2017/18 verification process, as a result Correction of Finance lease liability 3,555,362 capital. Total debt is calculated as non- of the componentisation and condition Correction of finance lease assets (3,555,362) current borrowings plus current borrowings. assessment Accumulative depreciation was Impact on retained earnings - Total capital is calculated as “total equity” restated retrospectively. shown in the statement of financial position. The gearing ratio for the current financial year is 0% (2017 : 0%). The Company has a gearing threshold of 45%.

There were no changes to the Company’s approach to capital management during the year.

68 69 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

Capital work in progress Provisions

During the prior years, expenses had been incorrectly capitalised to work in progress. These errors were The retentions were incorrectly captured to provisions instead of being captured to liabilities. Reallocations of corrected for the period under review retropsectively. retentions from provisions to trade and other payables was corrected on the period under review.

Details of the appropriations are as follows: Details of the appropriations are as follows:

2017 2017 Restated Restated

Correction of Opening balance Capital Work in Progress (15,097,264) Provisions (5,000,434) Correction of prior year tax liability 1,929,280 Trade and other payables 5,000,434

Impact on retained earnings (13,167,984) Impact on retained earnings -

35. Irregular Expenditure

R R R R R R Opening FY14/15 FY15/16 Restated Current year Total balance identified in identified in FY 16/17 movement FY 16/17 FY17/18 FY17/18

Reconciliation of irregular expenditure – 2018

Opening balance 9,272,821 - - 9,272,821 - 9,272,821 Amount recognised in current year 18,401,082 673,684 9,616,770 28,691,536 16,207,417 44,898,952

27,673,903 673,684 9,616,770 37,964,357 16,207,417 54,171,773

R R Amount Total

Details of irregular expenditure for 2018

Insufficient number of quotations 51,335 51,335 Quotations awarded in excess of procurement threshold 172,680 172,680 Payments exceeds contract value 405,013 405,013 Purchase order raised after receipt of the invoice 6,804,687 6,804,687 Credit Card expenses 1,377,362 1,377,362 Suppliers paid without contract 7,396,339 7,396,339

16,207,416 16,207,416

70 71 NOTES TO THE AUDITED FINANCIAL STATEMENTS CONTINUED

R R Amount Total

Details of irregular expenditure for 2017 (Restated)

Insufficient Number of quotations 1,125,531 1,125,531 Insufficient number of quotations for emergencies – no proper procurement 100,000 100,000 process followed Quotations awarded in excess of procurement threshold 5,945,257 5,945,257 Splitting of quotations 700,780 700,780 Payments exceeds contract value 2,527,163 2,527,163 Purchase order raised after invoice date for suppliers without contracts 1,967,341 1,967,341 Consultants appointed without following procurement process 17,237,641 17,237,641 Suppliers paid without contract 5,677,351 5,677,351 Credit card expenses 2,683,293 2,683,293

37,964,357 37,964,357

36. Fruitless and wasteful expenditure

Movement in the Total current year

Reconciliation of Fruitless and wasteful expenditure - 2018

Amount recognised in current year 607,538 607,538

Details of fruitless and wasteful expenditure

Interest and penalties 57,580 57,580

Web application Firewall services 462,533 462,533

Appointment of special advisors 87,425 87,425

607,538 607,538

During the year under review various services were engaged in manner that resulted in fruitless and wasteful expenditure.

An investigation is being undertaken to establish the facts.

In prior year there was no fruitless and wasteful expenditure.

72