Major airport projects cancelled
Acsa plans to cut its capital expenditure by 95%.
Company’s revised corporate plan will now cap capital expenditure at R1 billion a year.
Airports Company South Africa (Acsa) is set to cancel several planned expansion projects and slash its capital expenditure budget by almost 95% because of the expected impact of Covid-19 on air travel demand.
The cancellation of major projects in the tender stage will pile even more pressure on South Africa’s construction sector, which has been starved of substantial projects in recent years as a result of shrinking government infrastructure expenditure.
Acsa is a state-owned enterprise that manages and operates nine airports in South Africa.
Company spokesperson Gopolang Peme confirmed that it is planning to reduce capital expenditure over the next few years.
Peme said that during its recent presentation to the parliamentary portfolio committee on transport, Acsa indicated that capital expenditure of R17.9 billion was planned for 2021 to 2023 “before the Covid-19 pandemic hit” but part of the company’s revised corporate plan is now “to cap capital expenditure at R1 billion a year”.
“Some projects that are in the tender stage will be cancelled. Other projects in the planning stage will be deferred.”
Peme said the reasons all relate to the financial impact of Covid-19 on Acsa.
“We are projecting a 50% reduction in [air] traffic for the current year and slow recovery up to 2025. Infrastructure expansion is often linked to demand. With demand being subdued the immediate need for capacity expansion is lessened,” he said.
“The board is considering the range of projects that would be involved before finalising the capital expenditure reductions.
“It is therefore not possible to say with certainty at this stage which projects will be affected.”
However, Raubex chief executive officer Rudolf Fourie confirmed earlier this month when the group reported on its financial results for the year to end-February that Acsa had cancelled projects that had gone out to tender because of Covid-19.
‘Understandable’
“You can understand their position. They have got no passengers anymore and have no need to expand their runways,” said Fourie.
Raubex did not disclose which specific tenders Acsa had cancelled.
But Marc Ter Mors, global head equity research at SBG Securities, said the projects relate to runway improvements and expansions at Cape Town International and OR Tambo International Airports.
WBHO confirmed in March this year it had submitted tenders for infrastructure projects worth a total of R40 billion that were awaiting adjudication, including two tenders for Acsa projects worth a total of R4.5 billion at Cape Town and OR Tambo international airports.
Fourie said the implications of Covid-19 on Raubex are complex and unpredictable and it is not possible to quantify the financial impact at this time.
“We need to understand what the post Covid-19 life is going to be like in construction,” he said.
Swing to public-private partnerships
Fourie added that opportunities for Raubex’s infrastructure division to participate in public-private partnership (PPP) projects are starting to come to the fore and the government has released three major PPP projects.
“We will be quite keen to see how the government develops this space. We are quite excited about the prospects of this and believe this is the way post Covid-19 to finance contracts and to develop and execute contracts,” he said.