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 (SOE) 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.
“The board is considering the range of projects that would be involved before finalising the capital expenditure reductions,” he said.
“It is therefore not possible to say with certainty at this stage which projects will be affected.”
However, Raubex CEO 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.
“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.
Mlu Manci, chair of Grinaker-LTA, which was acquired by the black-owned Laula Consortium from JSE-listed Aveng December, told Moneyweb in April that Acsa had issued tenders valued at about R6 billion in the fourth quarter of last year.
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.
Construction market intelligence firm Industry Insight said last month the impact of Covid-19 on the construction sector will be catastrophic, unlike any economic shock the sector has previously had to endure, and result in it shedding an estimated 120 000 to 140 000 formal jobs.
The presidency will this week host the inaugural Sustainable Infrastructure Development Symposium of South Africa (SIDSSA) to drive the growth of the South African economy and post Covid-19 recovery plan.
The symposium is a culmination of a vigorous stakeholder consultative process over the past few weeks to mobilise support and cooperation on the revised Infrastructure Investment Plan.
The government said the revised plan focuses on partnerships between the public and private sector for the delivery of sustainable, fit-for-purpose infrastructure.
The SIDSSA projects that will be gazetted after the symposium have been selected from an initial 177 that underwent a rigorous due diligence process.
Government has affirmed that catalytic infrastructure investment can contribute to higher long-term growth, address spatial disparities, transform the economy and create much-needed jobs.
Network industries in focus
It said the infrastructure projects earmarked to revive the economy will focus on the network industries of water, transport, energy and digital infrastructure as well as sectors with high job absorption capacity such human settlements, agriculture and agro-processing.
SA Forum of Civil Engineering Contractors CEO Webster Mfebe said the industry is waiting with baited breath for details about the infrastructure programme that will be announced by President Cyril Ramaphosa.
Mfebe expressed hope that the programme will reflect the partnership approach between government and business, adding that all economic sectors put forward projects to the Public-Private Growth Initiative, a sector-based collaboration between government and business.