By Femi Adefope – Head HRG & GSA for Delta Airlines in Nigeria
Africa today has the fastest growing global population in the world and therefore needs more resources and cross-border cooperation if we are ever to meet our ever-increasing needs. Africa is home to some of the most dynamic economies on earth. Even with the level of poverty and underdevelopment, the middle class in nearly every country continues to swell, thus driving unprecedented levels of demand and production.
This phenomenon is most pronounced in the Aviation industry in Africa which has seen significant growth in the past twenty years or so. Africa is massive – 11.6 million square miles or over 30 million square kilometers. The vast distances between countries become quite real for those who travel regularly from one region to another. Road infrastructure is generally poor, many are either unpaved or crumbling.
travel is not only unavailable but uncomfortable for the average business traveler.
With the aforementioned facts, travel by air is the only realistic option for Africa except that in our continent, aviation is a deeply troubled industry. A recent World Bank report has it that “Africa has less than 1% of the global air service market despite having more than 12% of the world population”. I do see opportunities for growth in this assessment!
Expressed differently, Africa’s12% share of world population is serviced by only 3.9% of all scheduled air service seats in the world. By contrast, the population of North America and Europe combined, which is roughly equal to that of Africa, has access to approximately 54.6% of global seat capacity.
Cross-border/Trans-border cooperation and investment therefore is imperative if Africa must meet the immense challenges within the Air travel industry and thus benefit from the huge gains and tremendous opportunities offered by our population and economic growth potentials.
In 1994 there were 1,088 routes flown within Africa. By May 2013 this had actually gone down to 719. Clearly, there has been a lot of consolidation on the African route network, as low-frequency, small aircraft routes have been abandoned. In 1994 on average a route served only every other day, with an average capacity of 91 seats per flight. Today the average frequency has gone up to 1.3 flights per day and 103 seats per aircraft. In the process the total number of seats offered on intra-African routes has more than doubled from 35.4 million on 1994 to 71.8 million in 2012 – an average annual increase of 4.0%.
Cross-border/Trans-border cooperation and investment therefore is imperative if Africa must meet the immense challenges within the Air travel industry and thus benefit from the huge gains and tremendous opportunities offered by our population and economic growth potentials.
In 1994 there were 1,088 routes flown within Africa. By May 2013 this had actually gone down to 719. Clearly, there has been a lot of consolidation on the African route network, as low-frequency, small aircraft routes have been abandoned. In 1994 on average a route served only every other day, with an average capacity of 91 seats per flight. Today the average frequency has gone up to 1.3 flights per day and 103 seats per aircraft. In the process the total number of seats offered on intra-African routes has more than doubled from 35.4 million on 1994 to 71.8 million in 2012 – an average annual increase of 4.0%.
- Is business viable enough to sustain the levels of expected costs?
- Finding credible and trust-worthy partners – men and women of integrity who honour obligations
- Sourcing investors/partners with good track record and are knowledgeable in the Aviation business
- Issue of shared Vision, common appetite for risk among shareholders
- Issue of Country Risk (Political stability, socio – economic factors)
- Surmounting applicable laws and statutes in cooperating states
- Applicable Tax/Accounting regimes
- Travel/Visa & Work Permit requirements: how stringent or flexible are the laws in allowing free movement of people, goods and services
- Issue of Equity – Are there any equity restrictions?
- Issue of Business barriers – Culture and language
- Issue of Arbitration;
- Issues /policies governing Repatriation of funds / profits
- Repayment for technical services provided;
- Sourcing qualified and trained professionals.
- Management of the business to desired business plans and projection
CONCLUSION
The irony or reality in doing business in Africa is that experience and empirical facts/ results have consistently shown that return on investment (ROI) are significantly higher in those countries that present higher barriers or impediments/constraints to easy business transactions.
In other words, hard-nosed and serious minded investors who stick it out in spite of the daunting difficulties/ challenges in the African environment, usually “smile to the banks”. Examples include Coca Cola, MTN, Delta Air Lines etc.
Africa, with its huge population and ever growing demand for goods and services, presents and will always present tremendous investment opportunities for discerning investors, especially in the Aviation sphere.
