Blocked Funds In­creas­ing Prob­lem for Air­line in Africa

Nomad Africa Magazine - - Inside Issue11 -

the In­ter­na­tional Air Trans­port As­so­ci­a­tion (IATA) fore­casts a tre­bling in the size of An­gola’s air trans­port mar­ket to 7.1 mil­lion pas­sen­gers a year by 2036 at the present fore­cast an­nual growth rate of 6.7%.

How­ever, even faster growth with greater so­cio-eco­nomic ben­e­fits for An­gola could be achieved, if the coun­try opens up its mar­ket and pri­ori­tises its par­tic­i­pa­tion in the con­ti­nent-wide con­nec­tiv­ity ef­forts, un­blocks funds, con­sults with in­dus­try to im­prove in­fra­struc­ture and main­tains world-class safety stan­dards, in the view of IATA.

The sec­ond pri­or­ity is im­prov­ing con­nec­tiv­ity. En­hanced con­nec­tiv­ity will stim­u­late de­mand and com­pe­ti­tion, mak­ing air travel more af­ford­able and in do­ing so, en­able higher vol­umes of trade, tourism and com­merce be­tween An­gola, its sis­ter na­tions and the rest of the world.

Mod­ern in­fra­struc­ture is also amongst the crit­i­cal as­pects for avi­a­tion to de­liver its eco­nomic and so­cial ben­e­fits. Lu­anda’s new in­ter­na­tional air­port will play a ma­jor role. How­ever, con­sul­ta­tion is needed to en­sure that it is aligned with air­line re­quire­ments. Fi­nally, safety is crit­i­cal and has al­ways been a chal­lenge for Africa. With gov­ern­ments and in­dus­try work­ing to­gether, sig­nif­i­cant im­prove­ments have been achieved.

In 2016, for ex­am­ple, there were no fa­tal ac­ci­dents or hull losses in­volv­ing sub-Sa­hara African sched­uled air­line ser­vices. To sus­tain and fur­ther im­prove this safety per­for­mance, con­tin­u­ous ef­fort based on global stan­dards and best prac­tices is needed.

IATA’s re­cent study found that, if 12 key African mar­kets, in­clud­ing An­gola, were opened up, an ex­tra 155 000 jobs and $1.3bn in an­nual GDP would be cre­ated in those coun­tries.

“Avi­a­tion is vi­tally im­por­tant to Africa. It cur­rently sup­ports 6.8 mil­lion jobs and con­trib­utes $73bn in gross do­mes­tic prod­uct (GDP) across the con­ti­nent. It con­nects peo­ple and busi­nesses, en­ables trade and tourism, re­unites fam­i­lies and friends, car­ries prod­ucts to mar­kets and vi­tal medicines and aid to com­mu­ni­ties where they are needed,” said Alexan­dre De Ju­niac, IATA’s di­rec­tor gen­eral and CEO, at the in­dus­try body’s avi­a­tion day in Lu­anda, An­gola. De Ju­niac iden­ti­fied four press­ing con­cerns in An­gola and Africa, which gov­ern­ments and in­dus­try stake­hold­ers must ad­dress for a healthy and strong avi­a­tion sys­tem.

Blocked funds and de­nied ac­cess to for­eign ex­change in Africa is an in­creas­ing prob­lem. In nine African coun­tries, in­ter­na­tional car­ri­ers are un­able to repa­tri­ate their for­eign cur­rency earn­ings, while lo­cally-based air­lines ex­pe­ri­ence dif­fi­cul­ties mak­ing on-time for­eign cur­rency pay­ments to their sup­pli­ers and busi­ness part­ners.

“An­gola and other coun­tries block­ing funds are un­der­go­ing sig­nif­i­cant eco­nomic chal­lenges. But block­ing air­lines’ funds is not the an­swer. It is in every­body’s in­ter­est to en­sure that air­lines are paid on-time, at fair ex­change rates and in full. An­gola needs to work with in­dus­try to en­sure that it is pre­pared to reap the fu­ture ben­e­fits of in­creased air con­nec­tiv­ity.” ex­plained De Ju­niac.

Avi­a­tion stands to be an eco­nomic boost for Africa be­cause there are great 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 1% 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. Ac­cord­ing to 2014 data from ATAG, the spill-over ef­fect from avi­a­tion can be enor­mous for African economies. For in­stance, a vi­brant avi­a­tion in­dus­try can even­tu­ally sup­port the devel­op­ment of the tourism in­dus­try, as well as other re­lated in­dus­tries like freight and lo­gis­tics. For ev­ery dol­lar in­vested and con­trib­uted by avi­a­tion to the lo­cal econ­omy, there is a mul­ti­plier ef­fect of six times more on the wider econ­omy.

In ad­di­tion, for ev­ery job di­rectly cre­ated by the air­lines, an­other 50 jobs are cre­ated in other in­dus­tries. The tourism sec­tor is the great­est ben­e­fi­ciary with 44 po­ten­tial jobs cre­ated. This means that if the African gov­ern­ments, in­clud­ing those in the 29 African coun­tries where avi­a­tion is prac­ti­cally nonex­is­tent, in­vest in their own air­lines and air­ports, the ben­e­fits can be sig­nif­i­cant for the con­ti­nent.

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