2019 Integrated Annual Report
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Abbreviation Definition Abbreviation Definition Abbreviation Definition ACI Airports Council International EIA Environmental impact assessment MIAL Mumbai International Airport Private Limited ACSA Airports Company South Africa SOC Ltd EMS Environmental management system NDP National Development Plan AGM Annual general meeting ESAT Employee satisfaction survey NEHAWU National Education, Health and Allied Workers Union AMSIS Airport Management Share Incentive Scheme ESD Enterprise supplier development NUMSA National Union of Metalworkers of South Africa APEX Airport excellence in safety GDP Gross domestic product ORTIA O.R. Tambo International Airport ASQ Airport Service Quality GIAS Group Internal Audit Services PFMA Public Finance Management Act, No. 1 of 1999 B-BBEE Broad-based black economic empowerment GRU Guarulhos International Airport PIC Public Investment Corporation CAE Chief Audit Executive GruPar Guarulhos Participações S.A PLZ Port Elizabeth International Airport CEO Chief Executive Officer ICAO International Civil Aviation Organisation (Pty) Ltd Proprietary Limited CFO Chief Financial Officer IFRS International Financial Reporting Standards ROE Return on equity CIO Chief Information Officer IIA Institute of Internal Auditors ROCE Return on capital employed Companies Act Companies Act, No. 71 of 2008 IIRC International Integrated Reporting Council SANS South African National Standards COO Chief Operating Officer ISO International Standards Organisation SCM Supply chain management CPI Consumer price index IT Information technology SDG Sustainable Development Goals CSI Corporate social investment King IV King Code of Governance for South Africa 2016™ SED Socio-economic development CTIA Cape Town International Airport KPI Key performance indicator SMEs Small and medium-sized enterprises DFI Development Finance Institution KSIA King Shaka International Airport SOC State-owned company DoT Department of Transport LTI Long-term incentive SPE Special purpose entity EAP Economically active population MOI Memorandum of incorporation STI Short-term incentive EBITDA Earnings before interest, tax, depreciation and amortisation MOU Memorandum of understanding TABLE OF CONTENTS PAGE NAVIGATION ICONS 2 How we integrate Run airports Online information 4 About our integrated report 6 Group overview Develop airports Page reference 14 How our strategy creates value Consolidated annual 16 Strategy Grow footprint financial statements 18 Materiality process Assured by independent Our business 20 Business environment external auditor 20 Integrated risk management process Our people and Assured by internal audit 20 Stakeholder engagement society 22 Value creation process Our environment 26 Messages from leadership 28 Message from the Board Chairman 30 Message from the acting CEO PAGE Key material matters in depth 34 Transformation 37 Material matter: Transformation 44 Sustainability journey 53 Material matter: Economic regulation 48 Performance review 54 Material matter: Access to and cost of funding 50 Performance report back 61 Material matter: Safety and security 52 Message from the acting CFO 62 Material matter: Natural environment 60 Performance per strategic pillar 77 Material matter: New growth opportunities 81 Business enablement 88 Governance and remuneration 82 Material matter: Acquisition and retention of skills 90 Governance 86 Material matter: Technology and digitisation 118 Remuneration 128 Statistical review 130 Company information 1 How we integrate HOW WE INTEGRATE Airports Company South Africa SOC Ltd (the Group) owns and manages nine South African airports. We also participate in equity investments abroad as well as provide technical advisory and consultancy services to other airports globally. Our majority shareholder with a 74.6% stake, is the South African Government. In line with the government’s developmental objectives, we aim to create sustainable value over the short-, medium- and long-term which will positively impact not only our business, but our people, the society in which we operate, and our environment. This is achieved by managing Airports Company South Africa in an integrated manner. The diagram below illustrates how our business processes interact to produce our integrated strategy and approach to reporting. Appropriate governance controls and oversight are in place throughout the Group to ensure effective control, and a strong sense of ethics and legitimacy, which is reflected in good performance. Refer to page 90 External focus Internal focus Holistic focus Our strategic proposition Value creation model Performance against strategy Remuneration Through our stakeholder engagement Our inward focus is on the risks and Our holistic understanding of the Our strategy reflects our response plan We ensure that our value creation model utilises To reflect on the extent to which we have succeeded in We remunerate our people based on performance. process, we seek to understand the opportunities highlighted by our enter- challenges our Group faces and the in the short-, medium- and long-term, by resources and relationships (our capitals) optimally delivering against our strategy, we provide performance This promotes successful execution of our strategy. needs and concerns of our valued prise risk management system. opportunities available for improvement setting objectives and explaining how and is structured to enable strategy execution and feedback in the following sections of our report: stakeholders. and growth, enable us to respond to we aim to achieve them. value creation. material matters. Refer to page 20. Refer to page 112. Refer to page 18. Refer to page 16. Refer to page 22. Message from the Board Chairman on page 28. Refer to page 118. Message from the acting CEO on page 30. Performance review on page 48. Message from the acting CFO on page 52. Performance per strategic pillar on page 60. Business enablement on page 81. In these chapters, we also provide an outlook for expected future performance. Our commitment to stakeholders: To build purposeful and responsive relationships with our stakeholders so as to achieve agreed outcomes that support sustainable value creation. Through our business review process, we gain an understanding of changing global trends and how these impact our operating environment. 2 AIRPORTS COMPANY SOUTH AFRICA INTEGRATED REPORT 2019 External focus Internal focus Holistic focus Our strategic proposition Value creation model Performance against strategy Remuneration Through our stakeholder engagement Our inward focus is on the risks and Our holistic understanding of the Our strategy reflects our response plan We ensure that our value creation model utilises To reflect on the extent to which we have succeeded in We remunerate our people based on performance. process, we seek to understand the opportunities highlighted by our enter- challenges our Group faces and the in the short-, medium- and long-term, by resources and relationships (our capitals) optimally delivering against our strategy, we provide performance This promotes successful execution of our strategy. needs and concerns of our valued prise risk management system. opportunities available for improvement setting objectives and explaining how and is structured to enable strategy execution and feedback in the following sections of our report: stakeholders. and growth, enable us to respond to we aim to achieve them. value creation. material matters. Refer to page 20. Refer to page 112. Refer to page 18. Refer to page 16. Refer to page 22. Message from the Board Chairman on page 28. Refer to page 118. Message from the acting CEO on page 30. Performance review on page 48. Message from the acting CFO on page 52. Performance per strategic pillar on page 60. Business enablement on page 81. In these chapters, we also provide an outlook for expected future performance. Our pledge to our customers • To embed a culture of service excellence • To build an efficient customer-focused business, while contributing to socio-economic development 3 ABOUT OUR INTEGRATED REPORT ABOUT OUR INTEGRATED REPORT OUR REPORTING PHILOSOPHY OUR REPORTING SUITE We seek to provide investors and other stakeholders with the relevant material information they may require about A digital version of this integrated annual report and the our performance, strategy and future prospects. We strive to improve the quality and disclosure of our reporting documents listed below can be found at by aligning with relevant frameworks and best practice. www.airports.co.za. This integrated annual report Purpose and framework Scope and boundary Assurance Airports Company South Africa’s FY2018/19 integrated annual The IAR contains material information on the Group’s • Management and governance oversight. report (IAR) is a report to all our stakeholders. It sets out our performance for the financial year 1 April 2018 to 31 March • The strategic objectives and key performance indicators short-, medium- and long-term views on value creation. 2019 (the financial year under review). were internally and externally assured, and were audited both internally and by the Auditor-General of South Africa The report was built on the following frameworks and Our method for determining materiality is defined and as per the Public Audit Act of South Africa, No. 25 of 2004. standards: explained on page 18. • The National Treasury’s Framework for Managing Pro- • IIRC’s International Integrated Reporting <IR> Framework gramme Performance Information confirms that perfor- • IFRS We disclose