This article first appeared in Noseweek.
First costed at R3.15 billion, by the time Durban’s King Shaka International Airport was completed in 2010, it had cost anything between R7.6bn and R9bn. This kind of cost overrun is chicken feed when stacked against Eskom’s Medupi and Kusile power stations, but it set in motion a chain of events that helps explain some of the bizarre decisions coming out of Airports Company of SA (ACSA). King Shaka is one of the nine airports managed by ACSA. In February, Minister of Transport Dipuo Peters fired half the board of ACSA, ostensibly to strengthen it, but left in place CEO Bongani Maseko who was fingered last year in a forensic report that detailed several instances of procurement irregularities.
This is just one instance of political interference in the running of ACSA. A far graver interference was the decision in 2006 to force ACSA to build the King Shaka International Airport without a feasibility study having been carried out and in defiance of all commercial logic. This decision lumbered ACSA with crippling debt which it has been forced to service ever since.
In March this year, minority BEE (Black Economic Empowerment) shareholders in ACSA brought an application before the High Court in Pretoria challenging the “commercially illogical” decision by the airports regulator to lower tariffs by 35.5%, which would cut revenue by R1.8 billion by 2018 and remove all prospect of the company’s being able to declare a dividend to shareholders.
The tariffs went into effect on 1 April, but the matter has now been placed under judicial review. These tariffs benefit airline operators and passengers, but not ACSA shareholders, who long ago gave up hoping for a decent return on their investment.
Just a few years ago, in 2011, when ACSA had completed a massive airport upgrade programme, it was granted a staggering 133% increase in tariffs by the regulator. Why would ACSA now apply for a reduction in tariffs? None of this makes much sense unless, as minority shareholders have argued, one understands that ACSA has abandoned its commercial mandate due to political meddling. Minorities want nothing more than to sell their shares back to the state and have been trying for years to do so at something approaching fair value. Instead they have been offered 40% of net asset value.
The only buyer for these shares is the government which, nearly 20 years ago, lured investors into ACSA with promises of privatisation and an eventual listing on the stock exchange. Based on these promises, it got Aeroporti di Roma (ADR) to purchase 20% of the company for about R890m in 1998, or R8.19 a share. This valued ACSA at about R4bn at the time. When it became clear the government had no intention of listing ACSA, ADR sold its shares to the Public Investment Corporation (PIC) for R16.75 a share, making a decent return on its investment. No such luck for the minorities, who have now turned to the courts for relief.