BRICS Business: ACSA Invests 500 million ZAR in Brazilian Airport

The Airports Company SA will commit an investment of R500m to Guaralhos International Airport in São Paulo under a strategy by the South African state-owned airports operator to diversify its earnings.

OVER the next 20 years Airports Company SA (Acsa) would commit R500m to Guaralhos International Airport (GIA) in São Paulo, the busiest airport in Brazil, under a strategy by the state-owned airports operator to diversify its earnings and make inroads into emerging markets.

This week, Acsa, in partnership with Brazilian companies Invepar and OAS, won the bid to manage GIA, less than two-and-a-half years away from the 2014 Soccer World Cup which Brazil is hosting.

The country’s National Civil Aviation Agency concluded a concession auction for three major airports, two in São Paulo and one in Brasilia, which together handle 30% of Brazil’s passenger traffic.

"Brazil was a natural fit for us and they have a massive infrastructure programme," Acsa’s acting MD Bongani Maseko said.

He said after the 2010 Soccer World Cup Acsa "did a scan on where we could start offering consulting services that were not just based on our World Cup experience in SA but also the experience we have gained from managing the Mumbai airport in India and our track record of growing nonaeronautical revenue domestically."

The company was looking to grow new revenue streams away from the local market. Last October Acsa implemented a 70% tariff increase in SA, much less than it had sought to cover airport upgrades.

Yet the Brazilian contract is a deal that almost did not happen. Last November, when the bid documents were made available, ACSA struggled to find a partner. Many of the Brazilian companies did not take ACSA seriously or believed that they could win the bid without ACSA’s skills, said Mr Maseko.

However, on December 15 the Brazilian government amended the conditions for the bidding companies by stipulating that bidders must have an airports operator as part of any consortium hoping to secure a contract.

"We were still looking for a partner and then on the 15th we became somebody everybody wanted to speak to," Mr Maseko said.

"There are 68 airports in Brazil. We don’t know how many will be concessioned (in future) but we are told that most of them will be. It was very important to get in front and pay our school fees, so if there is a future opportunity we will decide what we want to do and if we want to do it," he said.

Martyn Davis, the CEO of emerging markets advisory firm Frontier Advisory, said the investment by ACSA was the type of transaction that would boost commercial ties between BRICS countries —-Brazil, Russia, India, China and SA — where such opportunities have been few. Mr Maseko said South African corporates were looking away from developed countries, where there were high levels of saturation and competition, towards economies that offered growth.

Over the next three months ACSA would finalise the structure of the special purpose vehicle due to be set up in Brazil that would hold its 10% stake in the airport project. This would be used if in future ACSA was required to borrow money to meet its obligations for investment in GIA, Mr Maseko said.

Most of the funds to be invested in the upgrading of the airport would be generated by the airport itself. The Brazilian investment would be ring-fenced from ACSA’s local operations and no money would be taken from SA for this deal, he said.

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  1. The whole object of travel is not to set foot on foreign land; it is at last to set foot on one’s own country as a foreign land.


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