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June 12, 2023

Aviation in Africa Takes Flight

In today’s highly connected world, Africa’s future depends more than ever on aviation. In fact, the African aviation industry is poised to become a major driver of Africa’s social and economic development, and is estimated to contribute more than 20 million jobs and US$180 billion in economic activity over the next two decades.

Both cargo and passenger travel continue to expand, outpacing not only other developing regions, but also Europe. Since 2016, African countries have boosted their aviation investments, largely in partnership with development finance institutions (DFI). Between 2016–2022, DFIs committed around US$2.82 billion(bn) across 47 African aviation projects, according to data collected by Delphos. 72% of projects have targeted aviation infrastructure, with another 17% targeting especially air cargo and logistics, with a focus on West Africa.

Cargo volumes for African carriers grew 7.7% in 2019, and since 2021 have surpassed their pre-Covid levels. The cargo-ton kilometer of Africa’s cargo carriers in February 2023 was 31% above 2019 levels. In contrast, volumes for Asia Pacific, Europe, Latin America, and the Middle East have dipped below their pre-crisis levels and continue to lag behind the rest of the industry.

Africa’s air cargo market operates along three modes of implementation: belly cargo within passenger aircraft; dedicated cargo flights from carriers with passenger and cargo services, or only cargo; and informal charters or industry-specific flights, like for the export of mineral products or perishables. So far, the third variety has tended to dominate, propelled by a strong perishables trade with Europe.

Trade with Europe continues to account for 53% of African air cargo, largely due to the region’s proximity and its long-standing historical and investment ties. 83% of northbound traffic (Africa to Europe) is perishables, of which the fresh-cut flower industry makes up 48%. Yet as Africa’s trade linkages become increasingly diversified –– notably eastward, to Asia –– so does the makeup of its air cargo sector.

Chinese investment in Africa’s extractive and manufacturing industries, as well as a growing African middle class that demands more consumer goods, have boosted the Africa-East Asia air cargo market 3.9% per year on average between 2012-2022. This market is projected to expand 5.4% annually over the next two decades –– with Central Africa representing much of outbound trade, and West Africa much of inbound.

These shifting dynamics have, in turn, prompted a flurry of recent air cargo activity. In June 2021, Cainiao Smart Logistics Network, the logistics arm of Alibaba Group, launched its first air cargo route to Africa with door-to-door service between Hong Kong and Laos, Nigeria. The Nigerian government has since embarked on efforts to modernize its air cargo industry, including the construction of dedicated cargo airports.

In West Africa, Côte d’Ivoire and Senegal have also taken to investing in their air freight and logistics capabilities, according to Delphos’ data. In 2020, the Africa Finance Corporation disbursed US$130 million(mn) for the upgrade of air freight and logistics in Senegal, while the International Finance Corporation in May 2021 committed $US37.5mn to the sector in Côte d’Ivoire.

Elsewhere, Kenya’s Astral Aviation last year added three Boeing B757-200Fs and two Airbus A320-P2Fs to its cargo fleet. It plans to double its cargo fleet size and standardize flight schedules over the next three years as it pushes into European and Asian markets. Ethiopian Cargo & Logistics Services, currently Africa’s largest cargo network operator, has similarly added new aircraft and new routes to China and Brazil. The company aims to become a fully-fledged air cargo logistics center by 2035 with annual revenue approaching US$2.87bn.

Yet for all these initiatives, infrastructure and financing remain key.  Nigerian officials estimate that more than US$5bn is needed to remedy these challenges in Nigeria alone –– with more than US$30bn needed to close the country’s overall aviation infrastructure gap.

The African Development Bank (AfDB), in particular, has assumed a pivotal role in supporting aviation infrastructure across the continent. Between December 2016 and May 2022, it accounted for more than 30% of all air infrastructure financing in Africa with a total commitment of US$1.1bn, according to Delphos’ data. AfDB financing targeted especially the upgrade and construction of airport services and passenger airlines.

Though its recovery lags behind the air cargo sector, Africa’s air passenger sector is steadily rebounding, buoyed by intercontinental traffic which accounts for 60-80% of all African passenger traffic. As of February, passenger traffic was within 7% of 2019 levels. It is expected to recover fully by next year, with the International Air Transport Association (IATA) projecting it could double to 2035. That would mean that, in just 12 years, 260 million people could be taking to the African skies.

Africa’s intercontinental traffic is comprised of a mix of tourism and business travel. Together with the Middle East, business travel to Africa last year reached 86% of its 2019 levels. In South Africa, air business travel figures in 2022 surpassed their 2019 levels, propelled by the country’s finance, mining, and manufacturing sectors, as well as its continued investment ties to Asia. The southern Africa region is the continent’s second largest in terms of air passenger traffic –– second only to North Africa.

Africa’s air passenger traffic is likely to recover in line with expanding commercial opportunities across the continent. This also implicates the expansion of Africa’s air cargo capabilities. Qatar Airways’ newly launched cargo hub in Rwanda, for instance –– the first African cargo hub for any Middle Eastern airline –– is expected to pave the way for new intercontinental passenger routes between Rwanda, Qatar, and select European markets. Where the cargo flows, so the dealmakers go.

Yet the going across much of Africa remains hampered by a lack of intra-African connectivity and restrictive policies. Data from the IATA suggests that if just 12 African countries opened their markets and increased connectivity, they would likely see an additional 155,000 jobs and US$1.3bn in annual GDP.

Steady progress is being made. To date, 34 African countries –– 80% of the African market –– have adopted the African Union’s Single African Air Transport Market initiative. Forty-four have adopted the Yamoussoukro Decision. Still, in the near-term, the growth of Africa’s air passenger segment is likely to come on the back of intercontinental traffic. Within Africa, regulatory hurdles will likely continue to compound existing infrastructure and connectivity challenges.

As the African aviation sector continues to rebuild itself post-Covid, infrastructure, connectivity, and financing must be top priority. For this, DFIs are uniquely positioned, and private capital is actively stepping into this role. This is good news, for no region has more to gain from the skies than Africa.

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