Mpumi Mpofu on Acsa clipping its wings to ‘get out alive’
Surviving Covid has meant canning builds and monetising assets
Mpumi Mpofu, CEO of Airports Company SA (Acsa), says it will do whatever it takes to rise from the ashes of the Covid-19 pandemic without going to the government with a begging bowl.
Six months ago Acsa told parliament it might need an R11bn government-backed cash injection over the next six years to get back to its pre-Covid level.
“It was an indication of how hard we’d been hit and how long it would take us to recover,” says Mpofu, whose appointment as CEO in February last year coincided with the arrival of the Covid onslaught.
“It [Covid] was something not even the most adventurous risk assessment would have dreamt of,” she says.
The airports company is bracing for heavy losses after delivering R1.5bn profit in the year to end-March 2020.
Faced with a 75% decline in global aviation traffic “we said what do we do? Because this is our core business. We needed a strategy that was agile, forthright, honest and transparent.”
It sold a 10% stake in Mumbai International Airport for R1.2bn and canned infrastructure projects worth R14.5bn, including extensions to runways and terminal buildings.
“This is stuff you can’t do when you’re hit by Covid and it’s quite clear you’re not going to have the traffic volume you projected for at least the next five years.”
Next up was its almost R8bn portfolio of non-core assets like cargo facilities, office parks, filling stations, industrial buildings and hotels, “all non-core to what we do, which is moving people and goods through airports”.
Now it has announced it is looking for a transaction adviser to tell it how best to monetise these assets.
“Unfortunately, everybody thinks that means asset disposal,” says Mpofu, who’s married to former EFF chair Dali Mpofu.
“I can say categorically it does not necessarily mean asset disposal. It’s about sweating these assets and making money out of them.
“Whatever the transaction adviser advises us we will take that advice, including partnerships.”
And selling assets, “if that’s what our transaction adviser advises us”.
Wouldn’t this require government approval?
The government has already approved the strategy, she says.
“But in certain instances we’ll probably have to notify the shareholder, depending on what assets and the amounts involved.”
Before anything is done the shareholder — the government — is briefed.
“Everybody is informed every step of the way and we get the necessary approvals.”
Will this delay the process? Not if she can help it, says Mpofu, who has had a long career in the civil service and knows the system inside out.
“We have quite robust stakeholder engagements with our shareholders, National Treasury and others who have authority over what we do.
“We’re not just a loose force on our own doing as we please.”
She feels strongly that other state-owned enterprises (SOEs) in crisis could follow Acsa’s example of self-help rather than resorting to government bailouts.
“The model of holding out a begging bowl and yet you actually own billions of assets should be a thing of the past.
“When you’re running a business on behalf of the state, the assumption that you are not allowed to look at what you have and develop the best financial plan to get you out of trouble must be a thing of the past.
“The bigger SOEs have huge asset bases, much bigger than ours, so when they ask for a bailout and yet they’re sitting on redundant assets, we find that quite strange.”
She says travel restrictions pushed Acsa into a corner where its survival was at stake.
“We knew we needed to be agile and pragmatic otherwise there was a real risk that Acsa would go under.
“It was probably the highest level of pressure the company has ever faced.”
The effect on its business was “devastating”. “We needed to get out alive. That desperation to survive is what drove us to come up with the most robust and pragmatic plan we could.”
Pragmatism is key.
“We run a very robust traffic forecasting system that can tell us well in advance what the next six months or a year looks like.”
Then they make the necessary adjustments. “Fortnightly, sometimes weekly, for the last year we’ve had to make adjustments to our financial plan. Being absolutely responsive to circumstances thrown at us.”
She says the measures they’ve taken will shield them from any further knocks such as a third and fourth wave of Covid.
They’ve arranged loan facilities of R3bn from banks, including R810m from the Development Bank of Southern Africa.
“We’re getting very clever at this. Finding partners who help to cushion us, create sustainability and improve our liquidity in spite of the downward trend in passenger figures.”
They’re looking to capitalise on growth on the cargo side, which “we’re finding very resilient”.
The collapse of South African Airways (SAA) has had “quite a significant” impact, but its contribution to Acsa’s revenue, 11% at the start of Covid, has been declining “significantly” for years. “They were getting stiff competition from the newer local airlines, and the Gulf carriers had already clawed a lot of market share away from them.”
She concedes that the hub status of OR Tambo International in Joburg, the jewel in Acsa’s crown, is under threat.
“There are practices in the global aviation space that suggest OR is not comfortably a hub into the future.”
The competition is from Ethiopia, Dubai and Singapore, but Acsa is not going to give up its hub to them without a fight.
“They’re employing integrated strategies to take our hub status. Our fightback contains exactly the same approach. That is international best practice and that is how we’re going to fight to keep our hub status.”
The resuscitation of SAA as a flag carrier is key to this approach, she says.
How confident is she this will happen? “A flag carrier does not need to be government controlled. Nothing stops it from being privately run. But it can be that government runs it on an equity partnership basis.”
Meanwhile, Acsa will exploit its status as “one of the most sought-after airport companies in Africa”.
“We have many business opportunities to do what we do best in SA for other countries in Africa as their economies revive: build, develop, operate and manage airports.”
The model of holding out a begging bowl and yet you actually own billions of assets should be a thing of the past