DailySun
One of the most peculiar elements of the recent ‘announcement’ about a new R200 billion airport in the Sedibeng area near the Vaal is the lack of an official declaration from Gauteng MEC for Finance and Economic Development, Lebogang Maile.
There is no reference to this project, even indirectly, in the written Medium-Term Budget Policy Statement speech. Interestingly, the only reference to airports mentions “the establishment of one of Africa’s first aerotropolis cities, which includes the expansion of the OR Tambo Airport precinct”.
ADVERTISEMENT
CONTINUE READING BELOW
Read: Multi-billion-rand Cape Town and OR Tambo airport expansions to proceed
After that speech, Maile did discuss the project in various interviews.
He reportedly told the SABC: “We’ve got a new airport coming in Sedibeng which will require, I believe, an investment ranging from R20 billion to R200 billion from the private sector. In fact, it’s about R200 billion, and we will collaborate with DTIC [Department of Trade, Industry and Competition] to invest in bulk for that project.”
The airport is intended to be part of the Vaal Special Economic Zone (SEZ), aimed at “reigniting the birthplace of industrialization in South Africa”.
The goal is for the SEZ to emerge as “South Africa’s leading hub for the hydrogen economy”. Sure.
R200bn cost impractical
It seems highly unlikely that establishing a new airport would approach R200 billion (this is likely to include the entire SEZ initiative). Even R20 billion could be overly ambitious. The total cost of constructing King Shaka International Airport was R6.8 billion from 2007 to 2009, which equates to R17 billion in today’s money.
The Airports Company South Africa’s plan for a new midfield terminal at OR Tambo International Airport, incorporating phase one of a new cargo terminal and a passenger terminal, is projected to cost R21 billion from 2025 to 2032.
Read: Acsa finally starts renovating dark, dingy, fading OR Tambo
Why would Gauteng push for the development of an aerotropolis city in Ekurhuleni while simultaneously establishing a new airport in the Vaal, just 70km apart? Currently, Gauteng can barely maintain two airports (OR Tambo and Lanseria), and Wonderboom remains unused.
The Sedibeng region, which surrounds Vereeniging and includes Emfuleni, Midvaal, and Lesedi, doesn’t necessarily require another airport. Even if the center for the hydrogen economy were to somehow develop in the next two decades, that still does not warrant a new airport. Hydrogen is not typically transported by air.
Read/listen:
SA hydrogen economy receives a boost
Green hydrogen: An ‘opportunity to completely reindustrialize SA’
Last year, the total expenditure for the entire Gauteng Department of Roads and Transport was less than R10 billion. Furthermore, the province plans to allocate R120 billion for the expansion of the Gautrain network in the coming years.
Maile vaguely suggested that funding for the new airport would stem from private investors. It is abundantly clear that the government does not possess the financial means for this. Even our allies in China and Russia are unlikely to support such an initiative. What would be the justification?
High capacity, for whom?
Nevertheless, the projects appear to be advancing.
Phase one of the Vaal Aerotropolis involves constructing a 4.2km runway, a terminal designed for seven million passengers annually, and a cargo terminal with a capacity of 150,000 tonnes per year. This initial phase is estimated to cost R32 billion, which seems excessive. The ultimate intention is to accommodate 27 million passengers and 500,000 tonnes of freight.
The total population of Sedibeng is just over one million. Where will all these passengers come from?
In comparison, Lanseria currently manages about 4.5 million passengers per year and is not even close to its capacity (FlySafair operates there, with nearly nine flights daily).
ADVERTISEMENT:
CONTINUE READING BELOW
Moreover, the first phase of OR Tambo International’s new midfield cargo terminal is expected to handle roughly 650,000 tonnes annually.
Who’s leading this effort?
The Vaal Aerotropolis initiative is headed by MTP Aviation Solutions, under the leadership of Petko Atanassov (formerly involved with Dube TradePort). He provided a thorough interview to RSG Geldsake met Moneyweb last year, which was one of the few he has given.
It is assumed that Atanassov is permanently connected to MTP, having received some funding from the R1.4 billion ‘seed capital’ pledged by Citibank for the entire project. A trip to the US was even sponsored by the US Trade and Development Agency to market this concept with Citibank’s support.
Read: Citigroup collaborates with SA to fund new Mega River City and airport
Besides the aerotropolis, the Vaal SEZ has a dedicated team of six staff members, including a CEO (and office). Presumably, all of them are receiving high salaries, funded either through the seed capital or governmental assistance.
In addition to the core team pursuing this ambitious project, there are likely numerous consultants who have been generously compensated – potentially totaling hundreds of millions of rands – for various reports, plans, and budgets filled with complex language and highly detailed projections for six years in the future.
These consultants are routinely hired to continuously update these plans to illustrate ‘progress’.
Puzzling strategy from a confused provincial government
As a nation, we should indeed be formulating various plans for special economic zones that foster and facilitate industrial development. Infrastructure investments are essential for this.
However, a confusing approach from a disoriented provincial government trying to establish two aerotropolis cities (‘aerotropoli’?)—one of which is clearly superfluous—is an enormous waste of resources and time.
Listen/read: Inside the Infrastructure Fund’s R102bn investment vision
At least President Cyril Ramaphosa’s new smart city at Lanseria has yet to establish an office and a full-time staff!
(However, it does have a master plan, which will inevitably require near-constant revisions and updates in the coming years – at the potential expense of millions, maybe even hundreds of millions of rands).
Read: Lanseria International aims for ‘airport city’ development [Oct 2019]
Stay updated with Moneyweb’s comprehensive finance and business news on WhatsApp here.
