Africa, last frontier for air service development

The aviation landscape continues to change across the globe, but one thing has remained constant and that is the undeniable potential to develop new air connectivity across the vast African continent. WOLE SHADARE writes

Weakness

While Africa has one of the biggest populations in the world with about a billion people, its aviation industry is considered small, weak and fragmented, representing only about five per cent of the global market.

The continent is rich with breath-taking tourist sites and natural resources, ranging from minerals to oil and water. It is undoubtedly easier to travel and explore the African continent today than 20 years ago and infrastructure is improving in many regions enabling more visitors and a better business environment for corporations.

But, significant efforts still have to be achieved in specific regions where infrastructure, protectionism, high taxes, safety or regulatory issues continues to undermine commercially aviation and possibilities for efficient intra-African travel.

Potential

Despite all the major challenges ahead, this is an industry that has very big potential for future growth in Africa.

One of the reasons why African countries seem unable to attract a large amount of foreign investments is that there is no direct airline connection to reach them.

Consequently, business travel and costs of doing business become prohibitive. Foreign investors are less likely to travel to distant and not easily accessible places, even if there are great opportunities. As a result, aviation in Africa should be considered a priority sector by the respective African governments so that it can boost the economic development of their countries.

Being the biggest pan-African airline, Ethiopian Airlines has greatly contributed in making the Addis Ababa Bole Airport an aviation hub and a gateway to Africa. Similarly, for Kenya Airways, the Jomo Kenyatta International Airport in Nairobi is a springboard to access not only the east African region, but also the central and western part of Africa. As for South African Airways, from its Johannesburg base at OR Tambo International Airport, it covers most of the southern African region.

Growth

Except for South Africa and Nigeria, where their economic growth stagnated in 2015 and eventually fell into recession in the first quarter of 2016, Ethiopia and Kenya grew at a very fast rate of 7.5 per cent and 5.8 per cent in 2016 respectively. In the north, Casablanca, Algiers and Tunis are the major gateways for Europe to access both the Maghreb region and the western African region.

As for the Middle East countries, Cairo is the major gateway to access the major African cities in the northern, eastern and western regions.

All these aviation hubs in Morocco, Algeria, Tunisia and Egypt have contributed to the high growth rate of passenger traffic, increasing by 94 per cent, 95 per cent, 75 per cent and 108 per cent respectively from 2005 until 2015, according to data from the World Bank.

Fastest growing economies

Aviation is the critical link that not only connects Africa to the world, but also builds bridges among the various African countries. It is only when there are better airline connections, enabling the movement of goods and people, those business activities can flourish. With lower business travel costs, countries can then better attract foreign investors and create better business opportunities.

According to the United Nations Conference on Trade and Development (UNCTAD), the top-five African countries that had the biggest stock of foreign direct investment (FDI) in 2016, are South Africa, Egypt, Nigeria, Morocco and Angola, with $136.8bn, $102.3bn, $94.2bn, $54.8bn and $49.5bn respectively. Of the five countries, only South Africa, Egypt and Morocco have a major national carrier. Nigeria is at the verge of establishing a national airline by December 2019.

From the 2016 World Bank statistics, among the top-10 fastest-growing economies in the world, there are three African countries – Cote D’ Ivoire, Ethiopia and Tanzania at third, fourth and 10th position respectively. Moreover, the top-10 fastest-growing African countries grew by at least five per cent in 2016, with Ivory Coast the highest at 7.8 per cent. Among these 10 countries, only Ethiopia and Kenya have a major national carrier, while Ivory Coast, Senegal, Djibouti, Mali, Burkina Faso and Togo have mainly small regional and domestic carriers.

Massive investment

As for Rwanda and Tanzania, they are investing massively to build their national carriers and support their economic growth.

In 2016, RwandAir took delivery of two new Airbus A330s, enabling it to reach London and other major European cities in the future, whereas Air Tanzania is investing in a new Boeing B787-8 Dreamliner, as well as two Bombardier CS300 aircraft.

For 2016, those fast-growing countries – Ethiopia, Kenya, Rwanda and Tanzania – that have or are in the process of further developing their national carriers, have been able to attract significant Foreign Direct Investment (FDI) of $3.2bn, $1.4bn, $410m and $394m respectively.

As for the others without a major national carrier connecting them globally – Ivory Coast, Senegal, Burkina Faso, Togo, Djibouti, and Mali – they attracted significantly less FDI with $481m, $393m, $309m, $255m, $160m and $126m received respectively. Hence, if these countries are able to boost their national carrier and aviation sector, there may be a greater possibility of attracting bigger FDI.

Besides developing the aviation industry, the increasing passenger traffic not only helps to support its growth with increasing connectivity, but it also brings about economic spill overs like the creation of jobs in hospitality, tourism, logistics and other industries. According to the Air Transport Action Group (ATAG), the aviation sector supports about 6.8 million jobs and generated $72.5bn to the African economies in 2014.

There are tremendous opportunities that Africa can tap into in the aviation industry. At the moment, the passenger traffic is mainly from 10 African countries, representing a population of about 600 million. If there is a one per cent traffic increase from the other half of the African population, there will be an increase of about six to seven million passengers every year. Besides, with the rising middle class in Africa, there will be higher demand for travel. As a result, the increasing passenger traffic will easily justify the heavy investments needed in airlines and airport infrastructure.

There are tremendous opportunities that Africa can tap into in the aviation industry. At the moment, the passenger traffic is mainly from 10 African countries, representing a population of about 600 million. If there is a one per cent traffic increase from the other half of the African population, there will be an increase of about six to seven million passengers every year.

Last word

Besides, with the rising middle class in Africa, there will be higher demand for travel. As a result, the increasing passenger traffic will easily justify the heavy investments needed in airlines and airport infrastructure.

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Wole Shadare