Lanseria lifts off to next level

2012-11-24 14:20

Harith chief executive Tshepo Mahloele believes that Africa is on the cusp of an infrastructure explosion and sees the airport playing a pivotal role

Tshepo Mahloele is pinning his and his firm’s hopes on the unfolding rapid urbanisation in Africa.

They believe that migration is turning small towns into megacities that need improvement in infrastructure, particularly roads, railways and airports.

Mahloele is the chief executive of Harith Fund Managers, one of the new owners of Lanseria Airport just outside Joburg.

He says: “There is a need for airports in Africa because of urbanisation. The growth on the continent is driving growth in the aviation sector.”

Harith acquired ownership of the airport along with its other consortium partners, a black female-owned firm called Nozala Investments and the Government Employees Pension Fund, which is managed by the Public Investment Corporation.

According to Mahloele, the previous owners “had owned the asset for 20 years and they wanted to sell it to people who can take it to the next level”.

This will require that the new investors seek new airlines to use the airport while also upgrading the runways, parking facilities and main terminal.

Mohloele would not disclose how much the consortium paid for the airport, how ownership is split between the partners in the consortium or how much it will invest in upgrades.

According to him, they are in “discussion with an airline that wants to fly out of Lanseria to Gaborone”, and there are “also airlines that are looking to fly from Lanseria to regional and neighbouring countries”.

He further says: “The truth of the matter is it is cheaper to fly out of Lanseria than from OR Tambo International Airport.”

He also says the consortium bought a piece of prime land near the airport, as part of the airport deal, which it plans to develop for cargo, logistics and retail purposes.

Harith is optimistic the investment is going to deliver the goods despite the airline industry taking a huge battering globally because of rocketing oil prices.

The crushing demise of budget airlines 1time and Velvet Sky did very little to discourage the consortium from buying Lanseria, which is still the only privately owned airport in South Africa.

High fuel prices and airport tax hikes imposed by the Airports Company SA (Acsa) have been blamed by airline operators for triggering the downfall of budget airlines, beginning with the collapse of Nationwide in 2008.

But aviation experts argue that Lanseria – which caters for private jet owners, and budget airlines kulula.com and its rival Mango – is not much of a competitor to Acsa, the state-owned operator of nine airports across South Africa.

Aviation expert Linden Birns says that despite this, Lanseria is still an attractive alternative for budget airlines thanks to its lower tariffs compared to those at airports controlled by Acsa.

According to Birns, in Europe, “alternative airports played a role in the growth of low-cost airlines”.

These airports “paid the airlines to bring in passengers to the restaurants and shops at the airports. They paid them cash incentives or discounts on airport charges for every client they brought in to their airports”.

Prospects for budget airlines, according to him, are bright owing to an increase in intra-African trade and tourism, but new entrants into this market needed to come in with well-considered business plans and fuel-efficient fleets.

“Air travel is the cheapest mode to get people around, because Africa has no good roads or navigable rivers. It is cheaper to build a 5km-runway than to build a 5 000km road. An airport can take you to the rest of the world,” he says.

But others have questioned whether Lanseria will be able to keep its tariffs low, given that it will have to recover the costs incurred on upgrades to the airport.

Acsa spokesperson Solomon Makgale says: “We don’t see them as a competitor, they are complementary to what we do.”

Harith appears to have a taste for acquiring airports. It has used some of the cash from the $630 million (R5.6 billion) Pan African Infrastructure Development Fund it manages to buy two airports in Tunisia in partnership with the TAV Group, a Turkish firm that operates 12 airports in north Africa, Europe and the Middle East.

Mahloele says Harith had invested about 75% of the $630 million and was aiming to raise another $1.2 billion to invest in other infrastructure opportunities in Africa.

Harith has also invested in a power plant in Kenya, a west African broadband undersea cable, a toll bridge in Ivory Coast, a cellphone company in Kenya, an oil-rig company in Nigeria and a firm that manages the headquarters of the Southern African Development Community in Gaborone, Botswana.

Mahloele says: “We are sitting on $11.5 billion in deals in the pipeline that require funding, which is testimony that Africa does have bankable deals.

“All you need is patience, credible sponsors, excellent asset managers and good financial partners.”

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