OUR MATERIALITY CONTEXT

In addition to identifying the top risks we face in the current operating environment, we identify the most significant economic, industry, ESG matters that have the potential to impact our ability to create sustainable value well into the future.

Matters that are material to the sustainability of our business relate to our internal and external operating environment, key stakeholder concerns, and the risks that may or do impact our business. Consideration of these matters informs our business model, strategy, capital resource allocation and stakeholder engagement process.

Material matters are identified by drawing information from a range of sources.

Material matters analysis

The impact of the Covid-19 pandemic, subsequent geopolitical events, the global cost-of-living crisis and jet fuel shortages have radically changed the environment in which we operate as well as stakeholder expectations and perceptions.

The following analysis examines matters that are material to the sustainability, success and growth of our business over time. In each case, we describe the nature of the matter, our response to it, the impact of our response on our stakeholders, the strategic objectives of that response, the risk areas it relates to and the immediate outcomes we have to consider as a business.

Material matter Macro-environmental instability

Description

The process of globalisation, rapid technological development, the residual impact of the Covid-19 pandemic, the effects of geopolitical events, and the global cost-of-living crisis have all resulted in greater socio-economic instability around the world. As societies and economies are now so interconnected and interdependent, no single economy can be said to be insulated from external shocks, over which they may have little or no control.

This makes accurate predictive modelling difficult and mitigation strategies are therefore provisional by nature.

Our response

Our response to both external and internal shocks is to adopt a scenario planning approach to strategy and operational planning. This enables us to be flexible and agile as an organisation. We use this approach within the greater framework of our three strategic pillars: Run Airports, Develop Airports and Grow Footprint.

Impact on stakeholders

Pandemic-related lockdowns around the world closed off certain markets altogether, influenced passengers’ ability to travel, and affected the ability of suppliers and service providers to operate.

In the post-pandemic period, global events such as Russia’s invasion of Ukraine and the Israeli/Palestinian conflict have impacted on energy costs, supply chains, the cost-of-living and passenger purchasing behaviour. Globally, all of these factors resulted in a reconfiguration of routes and flight frequencies and, locally, the reconfiguration of the entire industry.

Strategic objectives

Ongoing uncertainty, both locally and internationally, means there is inevitably some level of ambiguity in our predictive models and risk mitigation strategies. We nevertheless continue to manage the business according to the Recover and Sustain Strategy and the revised Financial Plan adopted in 2020 as well as our most recent Corporate Plan.

Risk areas

  • Business Sustainability
  • Financial Sustainability
  • Regulatory Uncertainty
  • Business Diversification
  • Safety and Security
  • Digital Transformation
  • Cybersecurity
  • People Strategy
  • Business Integration
  • Operational Planning
Immediate considerations and/or outcomes

Ongoing uncertainty, both locally and internationally, means there is inevitably some level of ambiguity in our predictive models and risk mitigation strategies. We nevertheless continue to manage the business according to the Recover and Sustain Strategy and the revised Financial Plan adopted in 2020 as well as our most recent Corporate Plan.

Material matter Economic regulation

Description

Our aeronautical income is derived from regulated charges or tariffs. These comprise aircraft landing and parking charges and passenger services charges, which are reviewed in three-year cycles. The Airports Company Act (No. 44 of 1993) provides for an independent statutory body, the Regulating Committee, to oversee the economic regulation of the Group. Decision-making regarding regulated charges has, however, been unpredictable and has impacted on long‑term financial and infrastructure planning and decision-making over the past four periods.

Our response

We consistently engage with the Economic Regulator regarding the best regulatory framework within which to secure our recovery and create a platform for future growth. We also engage with the Department of Transport on an ongoing basis.

Impact on stakeholders

A lack of predictability relating to our aeronautical revenue impacts on our ability to plan and invest in the necessary infrastructure to meet future demand. This, in turn, impacts on stakeholders that operate within our aviation ecosystem such as airlines, passengers and tenants, as well as on the broader South African economy.

Strategic objectives
  • Secure business and financial recovery, sustainability and growth
  • Support internal and external transformation

Risk areas

  • Business Sustainability
  • Financial Sustainability
  • Regulatory Uncertainty
  • Business Diversification
  • Business Integration
  • Operational Planning
Immediate considerations and/or outcomes

Constraints on revenue generation resulting from the regulatory model has limited our ability to take advantage of growth opportunities and has placed pressure on our ability to diversify our revenue. In the 2024 financial year, we were, however, able to resume key projects in our maintenance and infrastructure development programmes in order to support business growth.

Material matter Digital technologies and cybersecurity

Description

Rapidly evolving digital technologies enable us to improve our operational efficiencies, levels of innovation, stakeholder satisfaction, and our safety and security. Most of our stakeholders continue to demand innovation and readily embrace new initiatives. While advances in technology and progress in digitalisation represent many opportunities, we are alert to the risks associated with these, especially the risk of cyber attacks, which has increased exponentially since the advent of remote and hybrid working.

Our response

Our IT and Digitalisation Strategy provides for us to adopt and leverage appropriate digital technologies in order to enhance operational efficiencies and the customer experience while simultaneously protecting our systems and information. During the Covid-19 pandemic, several initiatives in the strategy were placed on hold due to financial constraints. Key initiatives were nevertheless identified and prioritised, and funds were made available to implement them.

Impact on stakeholders

Our increased use of digital technology is enabling us to process passengers more safely, efficiently and conveniently, engage with multiple stakeholders online, and provide a digitally enabled working environment for our employees. It has vastly improved our operational, financial management and communications capabilities.

Strategic objectives
  • Increase business efficiency, stakeholder satisfaction, and safety and security
  • Comply with all legal and regulatory requirements
  • Constantly introduce new innovations
  • Protect our business against cyber attacks
  • Secure our reputation as a leading airports management group
  • Create a solid and sustainable digital platform for growth

Risk areas

  • Business Sustainability
  • Financial Sustainability
  • Business Diversification
  • Safety and Security
  • Digital Transformation
  • Cybersecurity
  • Regulatory Compliance
  • Brand and Reputation
  • People Strategy
  • Business Integration
  • Operational Planning
Immediate considerations and/or outcomes

Technological advancement and digitalisation require a high level of capital investment. Budgets nevertheless remain constrained and this is likely to impact on costs in the medium- to long-term.

Material matter Business growth

Description

Growth in the domestic, regional and international environments remains a key focus of our strategy. While our short-term focus has been on securing our recovery from the Covid-19 pandemic and navigating subsequent challenges, our medium- to long-term focus is on rebuilding and extending our route network, innovating to improve efficiencies and the airport user experience, maintaining our airports effectively, and resuming and/or undertaking key medium- and longterm infrastructure-development projects. We will also continue to actively seek opportunities that provide alternative sources of revenue and improve our longterm sustainability in South Africa, Africa and around the world.

Our response

To support our Recover and Sustain Strategy, an enhanced operating model backed by a fit-for-growth Capability Model has been developed and implementation is ongoing.

Impact on stakeholders

The diversification of our revenue streams is reducing our dependence on aeronautical revenue and our debt-to-finance ratios. The recovery and growth of our business is creating employment opportunities and stimulating economic activity both within and beyond our operations.

Strategic objectives
  • Secure recovery and create a solid platform for growth
  • Secure business and financial sustainability
  • Diversify our business
  • Transform our business and contribute to broader socio-economic transformation
  • Grow our footprint
  • Support economic growth and job creation

Risk areas

  • Business Sustainability
  • Financial Sustainability
  • Business Diversification
  • Safety and Security
  • Digital Transformation
  • Cybersecurity
  • Regulatory Compliance
  • Brand and Reputation
  • Business Integration
  • Operational Planning
Immediate considerations and/or outcomes

By diversifying our revenue sources, we are reducing our dependence on aeronautical revenue and creating a more robust and sustainable business.

Material matter Safety and security

Description

We constantly review our safety and security model and benchmark it against international best practice. We also continuously engage with our law enforcement partners and invest in security enhancements, including integrated communications systems. Prevention and threat response procedures are in place to deal with crises should they arise and to ensure both personal safety and continuity of operations. This integrated safety and security approach throughout our environment is essential to provide airport security and aviation security in general.

Our response

We continue to engage with various stakeholders, including SACAA and our law enforcement partners, and to invest in security advancements to mitigate safety and security risks. Preventative and threat response procedures are in place at all our airports to deal with crises should they arise and to ensure personal safety and the continuity of operations.

Impact on stakeholders

Our airports continue to remain free of major safety incidents or security breaches.

Strategic objectives
  • Provide a safe and secure environment for all of our stakeholders including our staff
  • Ensure that we have robust threat identification and prevention measures in place
  • Ensure that we have well-defined crisis response procedures in place
  • Ensure that we are able to secure business continuity in the events of a crisis
  • Secure our data and IT systems

Risk areas

  • Business Sustainability
  • Financial Sustainability
  • Safety and Security
  • Digital Transformation
  • Cybersecurity
  • Regulatory Compliance
  • Brand and Reputation
Immediate considerations and/or outcomes

Increased safety and security measures come at a financial cost but also improve efficiency and have a positive influence on the overall passenger experience. Within the context of ongoing budget constraints we are introducing state-ofthe- art innovations such as biometric identification technology to create digital tokens for passengers, which will enhance security and facilitate the movement of passengers throughout our airports. Further innovations include behaviour monitoring technology, which will help us monitor potential security threats.

Material matter Funding

Description

Negative perceptions of South Africa’s economic prospects and of poor financial management in the public sector continue to be a significant issue. Our ability to access affordable funding may be affected by this and it may become a significant material threat to the long-term financial sustainability of our business.

Our response

Throughout the past four periods, we have been able to secure affordable funding, most notably by taking a loan from the Development Bank of Southern Africa (DBSA) and by issuing preferential shares. We also sold our stake in Mumbai International Airport Private Limited in the 2022 financial year.

Impact on stakeholders

The quality of the services we provide could be affected by ageing infrastructure and/or a lack of capacity. This, in turn, could impact negatively on our business and financial sustainability,

Strategic objectives
  • Secure business and financial sustainability
  • Fund the diversification of the business
  • Maintain and develop infrastructure
  • Support innovation
  • Provide quality services aligned with international best practice
  • Provide optimal safety and security
  • Fund digital transformation and cybersecurity
  • Secure our reputation
  • Support internal and external transformation

Risk areas

  • Business sustainability
  • Financial sustainability
  • Regulatory Uncertainty
  • Business Diversification
  • Safety and Security
  • Digital Transformation
  • Cybersecurity
  • Regulatory Compliance
  • Brand and Reputation
  • Business Integration
  • Operational Planning
Immediate considerations and/or outcomes

Our ability to access affordable funding influences our ability to maintain our existing assets and embark on major infrastructure projects and programmes. Limited capacity to secure funding would affect our ability to implement our strategic objectives, earn revenue, remain financially sustainable and grow our business. Conversely, the cost of funding means that we need to be selective about the projects we undertake.

Material matter Acquisition and retention of skills

Description

Our employees are an essential component to our value-creation process as they have the skills needed to deliver excellence in all aspects of our business. In order to manage our skills mix effectively, we attract, retain and appropriately develop employees with critical skills, which supports our long-term sustainability. The Covid-19 pandemic did, however, impact on our skills profile and, in the 2024 financial year, we therefore fast-tracked recruitment to address the deficits we still have.

Our response

The human resources cost-reduction programme we undertook in the 2021 and 2022 financial years resulted in many experienced employees leaving the Group and required both a freeze on recruitment and a reduction in training and development spend.

Although these changes impacted on the organisation, our HR Optimisation Procedures mitigated their effect and enabled us to ensure business continuity. For example, they gave us the flexibility to deploy resources to areas of the business in which there were serious constraints and to insource certain activities that had previously been outsourced.

Impact on stakeholders

Through active consultation with our staff and other stakeholders, we were able to implement our human resources cost-reduction programme ethically and effectively, with many employees opting to take voluntary retrenchment packages. Our remaining employees did, however, experience increased work pressure in the wake of this and we are now working to normalise this situation.

Strategic objectives
  • Secure business and financial sustainability
  • Fill critical vacancies with suitably qualified people as rapidly as possible
  • Manage human resources ethically and effectively
  • Continue to provide educational, training and personal development opportunities
  • Ensure that ACSA is recognised as an employee of choice within the aviation industry

Risk areas

  • Business sustainability
  • Financial sustainability
  • Safety and Security
  • Brand and Reputation
  • Business Integration
  • Operational Planning
Immediate considerations and/or outcomes

As a result of the organisational realignment necessitated by the Covid-19 pandemic, the nature of some roles has changed and we foresee that others will cease to exist as the environment in which we operate changes. We are therefore focusing on continuous training and re-skilling, not only to retain our employees and the institutional knowledge they have, but also to reduce the need to acquire skills at significant cost.

Material matter Natural environment

Description

We consistently strive to reduce the impact of our operations on the environment through the effective management of aircraft noise, emissions, bird and wildlife strikes, land, water, electricity, fuel and waste but our environmental impact is nevertheless linked to operational intensity. In times of growth, our impact increases and in times of reduced operations – such as during the Covid-19 pandemic and in the immediate post-pandemic period – our impact decreases.

Our response

We are proactive in the management of our impact through our environmental management system, which is ISO 14001 accredited. We also participate in the ACI’s Airport Carbon Accreditation programme to ensure that we manage our carbon emissions optimally. We are aiming to reach zero Scope 1 and Scope 2 emissions by 2030.

We generate our own power at four of our airports, where we have fully operational solar farms. These are currently being extended and enhanced, while a fifth is in development. We have also invested in instituting extensive energy management measure at all of our airports and are investing in research to explore long-term green energy and even green fuel options. We aim to be carbon neutral by 2050.

Despite ongoing financial constraints, we have remained compliant with all legislative and regulatory requirements and continue to implement measures to manage our impact on the environment.

Impact on stakeholders

ACSA’s environmental impact was significantly reduced during the Covid-19 pandemic due to reduced operations, but this is naturally increasing as operational levels recover.

Strategic objectives
  • Maintain compliance with legislation, regulation and international best practice in environmental management
  • Maintain the power generating capacity at our current solar farms and work towards commissioning the one currently under development
  • Maintain existing ACI accreditation and continue to reduce emissions in a phased manner
  • Maintain and consistently improve our skills capabilities in environmental management
  • Explore innovations in green energy and green fuel

Risk areas

  • Business Sustainability
  • Financial Sustainability
  • Safety and Security
  • Regulatory Compliance
  • Brand and Reputation
  • Business Integration and Operational Planning
  • People Strategy
Immediate considerations and/or outcomes

While our negative impact on the environment was significantly reduced in the 2021 and 2022 financial years, we recognise that it is increasing again as operations recover. We therefore continue to strengthen our strategies, systems and procedures to mitigate this impact, which we are doing in partnership with various stakeholders.