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African Business 2021

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The 2021 edition of African Business is the second issue of this useful guide to business and investment on the continent. The positive reception accorded the inaugural edition in 2020 was encouraging and we are optimistic that this publication and future issues will continue to meet the need for timely and relevant information in an exciting time for African business. African Business 2021 has articles on recent trends plus overviews of the key economic sectors on the continent and regional and country profiles. There is an in-depth analysis of the implications for trade on the continent of the introduction of the African Continental Free Trade Area agreement (AfCFTA) and an article on the growth and importance of exploration for minerals, gas and oil. Namibia and Botswana feature in an article on how cooperation can drive economic growth and an opinion piece focusses on the role that digital technology can play not only in the financial sector, but in the driving progress in a broader sense. Global African Network is a proudly African company which has been producing region-specific business and investment guides since 2004, including South African Business and Nigerian Business, in addition to its online investment promotion platform: https://www.globalafricanetwork.com

OVERVIEW Aviation

OVERVIEW Aviation Consolidation is likely post Covid-19. SECTOR INSIGHT Airlink has signed deals with Qatar Airways and Emirates. Kenya Airways won three awards at the 27th World Travel Awards in 2020, Africa’s leading Airline Brand 2020, Africa’s Leading Airline for Business Class and Economy Class. Credit: Kenya Airways A virtual event was held in December 2020 to share ideas on the state of African aviation. Hosted by the African Development Bank (AfDB), participants at the African Aviation Recovery Conference debated whether African airlines needed to consolidate to stay in business. Various solutions were discussed, including aircraft leasing, taking the opportunities presented by the airlifting of vaccines and finding ways to reduce costs. In the context of wanting to achieve a more liberalised and freer air market in Africa, more than one speaker noted that the sector had its deficiencies before Covid-19 hit, citing high prices, poor safety and market restrictions. The Director for Infrastructure and Urban Development of the AfDB, Amadou Oumarou, was quoted by Infrastructure News as saying that the pandemic’s effects were felt sharpest in Africa. As much as .5-billion in revenue had been lost by African airlines. The International Air Transport Association (IATA) estimates that globally, the industry saw revenues shrink by 60%, with passenger traffic worst affected. Cargo fared less badly, with essential supplies and protective equipment having to be flown around the world and the drive to deliver vaccines will support another uptick in volumes in 2021. Africa has not seen massive state support for its airlines during the crisis. Elsewhere, 3-billion was forthcoming to keep airlines operating. Ethiopian Airlines, one of the continent’s most successful carriers, quickly converted 45 passenger planes to enable them to carry cargo. The decision by the African Union (AU) in 2018 to sign the Single African Air Transport Market is a sign that there is movement towards an “open skies” policy. The agreement was signed by 22 countries, representing about 75% of the intra-African air transport market and 600-million people. The AfDB cites Morocco as a success story in liberalising the aviation sector. Competition led to increased flights into the country and yet the state airline managed to keep going. Many state-owned airlines in Africa are too small and fly too few routes to be profitable. Even South Africa’s large state-owned airline is failing, although there are complex reasons behind that story. A related issue is the ease of entering a country. Rwanda and Seychelles have achieved positive results in tourist numbers and trade by introducing a much more relaxed visa regime, essentially allowing African travellers to get a visa on arrival. Strategies needed An article titled “Coronavirus: a unique opportunity for African aviation?” on The Africa Report suggested that the crisis will have the effect of forcing airline strategists and governments to come up with AFRICAN BUSINESS 2021 40

OVERVIEW African air industry pre-Covid 19 According to the Geneva-based Air Transport Action Group, ATAG, the air transport sector in Africa before Covid-19 supported 7.7-million jobs and -billion in continental economic activity. This was 2.2% of all employment and 2.7% of all GDP in African countries in 2018. Also, the aviation sector: • Employed more than 500 000 people directly in 2018, 57% of whom were employed by airlines or handling agents as flight crew, check-in staff, maintenance crew, or head office staff. • Employed more than 500 000 people directly in 2018, 57% of whom were employed by airlines or handling agents as flight crew, check-in staff, maintenance crew or head office staff. • Airlines, airport operators, retailers and other on-site businesses, air navigation services and civil aircraft manufacturers generated -billion directly to GDP in 2018. • The sector’s spending with suppliers is estimated to have supported a further 500 000 jobs and a .5-billion contribution to GDP. • For every created by the air transport sector, of economic activity was supported elsewhere in Africa. realistic solutions to long-standing problems. The article summed up the historical approach as being based on one of three models: • Intercontinental mega-hub strategy. With huge state support, this has been successful for Ethiopian Airlines. This also requires the geography to be right. • Domestic low-cost strategy, which is predicated on a prosperous middle-class and long distances between popular destinations, as in South Africa where kulula followed this tactic. • The regional premium strategy followed by Airlink (South Africa) and Air Côte d’Ivoire. In 2020 Airlink signed connectivity agreements with Emirates and Qatar Airways, giving its customers a chance to book through to overseas airports and the foreign carriers access to regional markets. The report’s author noted that the worst possible scenario was to try to combine all three strategies, and this is unfortunately what has been done in the past. The international scenario is likely to contain fewer and more powerful competitors in the years that follow Covid-19, and the African aviation sector will have to consolidate and focus on its strengths if it is to thrive. Airports Company South Africa (ACSA) is planning to cut capital ONLINE RESOURCES African Airlines Association: www.afraa.org African Civil Aviation Commission: afcac.org Air Transport Action Group: www.atag.org International Air Transport Association: www.iata.org International Civil Aviation Organisation: www.icao.org expenditure to R1-billion a year, down from the projected R17-billion that was planned before the global epidemic hit. But cost-cutting is not the only option for airline-related businesses. ACSA for example, runs airports in other parts of the continent (Ghana) and elsewhere (India and Brazil) and is branching out into a range of other incomegenerating activities. These include promoting the development of an aerotropolis around the OR Tambo International Airport near Johannesburg through land and business development. A similar project has been mooted for Cape Town International Airport. Revenue from hotels, accommodation, offices and other sectors would complement the existing revenue streams of logistics and warehousing traditionally associated with airports. ■ 41 AFRICAN BUSINESS 2021

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