Speaking at the Aviation Africa conference in Kigali a few months ago, Rwanda’s President, Paul Kagame, and the secretary general and CEO of the Kenya-based African Airlines Association (AFRAA), Elijah Chingosho, spoke out in favour of more African nations signing up to the Single African Air Transport Market (SAATM) initiative.
They both argued passionately that, without these reforms, Africa is restricting the trade and tourism that is so vital for the continent’s prosperity and its role in a global economy.
While Kagame’s and Chingosho’s support for air transport liberalisation was encouraging, we must be realistic about the expected pace of reforms. For, the truth is, it’s now almost 20 years since 44 African nations adopted the Yamoussoukro Decision calling for an Open Skies air transport policy. And from the time it’s already taken, it is clear we are in for the long-haul when it comes to these much-needed reforms.
However, an announcement by the African Civil Aviation Commission stating that the majority of the 28 countries to have joined the SAATM programme have now implemented the provisions of the agreement, shows some refreshing progress.
Liberalisation of air traffic is only part of a much-needed shift in mindset away from the protectionism that still characterises air transport in Africa. Such a shift in thinking is a pre-requisite if we are to stimulate greater intra-continental air traffic and create fertile grounds for investment in the sector.
One of the most pressing issues is the current condition of the continent’s airports, many of which were constructed in the 1960s and 1970s and are now showing their age.
Problems with these airports are not just confined to restricted capacity, service delivery and ageing buildings; there are safety and security issues that need immediate attention.
IATA produced research last year that found that African governments urgently have to accelerate the implementation of ICAO’s safety-related standards and recommended practices (SARPS).
As of year-end 2017, IATA said that only 26 African countries had at least 60% SARPS implementation.
New investment in airport infrastructure will be essential for compliance with vital safety-related standards and to accommodate Africa’s expected traffic growth, which both Boeing and Airbus forecast to reach nearly 6% per annum between now and 2036.
Since debt levels across many African countries are increasing at an alarming rate, private capital and know-how will be pivotal in implementing essential improvements and raising African airports to the desired level of service and safety standards.
African Infrastructure Investment Managers (AIIM) estimates that the continent needs to raise around $22 billon across 60 identified projects to make Africa’s airport infrastructure fit for modern aviation.
The private sector can provide an attractive alternative for funding and managing airport infrastructure on the continent and the potential is enormous.
Currently, only 11% of African airports by traffic volume involve private investors, compared to Europe where it has contributed 75%, and globally 43%.
This is surprising, as the private sector can evidently bring many benefits to all airport stakeholders. Besides the obvious benefits such as broadening financing sources and increased investment capacity, private investors can also bring technical and operational skills through transfer of know-how and best industry practices.
Operational aspects such as safety, security and customer service are key focus areas for investors, as demonstrated in 2018 when Libreville International Airport, under the ownership of Société d’Exploitation et de Gestion Aéroportuaires (SEGAP), became the first gateway in Central Africa to be awarded an ICAO aerodrome certificate.
While most African airports are still government owned and struggle to fund new investment, there have been examples of successful private-public partnerships that have enabled airports to modernise and grow, gradually, over time.
One of these is SEGAP, a pan-African airport operator with interests in the airports of Abidjan, Pointe-Noire and Brazzaville that AIIM has recently invested in through our African Infrastructure Investment Fund 3 (AIIF3).
AIIF3 is AIIM’s third pan-African infrastructure fund and is designed to invest long-term institutional equity in a diversified portfolio of infrastructure assets across the continent, such as power, renewable energy, roads, airports, telecommunications, rail, ports, water and social infrastructure.
Our co-shareholder and technical partner in SEGAP, the Egis Group, has worked successfully with African governments to develop their airports.
It is currently a stakeholder in 17 airports worldwide that together handle over 28 million passengers and 366,000 tonnes of freight.
Egis takes an integrated approach, bringing together multi-disciplinary and complementary skills to provide expertise in management, operation and development on the air and land sides of airports, as well as addressing sustainable development issues.
SEGAP and Egis successfully structured the concession of Abidjan’s Félix Houphouet-Boigny International Airport with the government of the Ivory Coast in the mid-nineties, and were founding shareholders of the concessionaire, AERIA.
Since AERIA took over its operation, the airport has received over €120 million in investment, enabling passenger traffic to more than double, rising from 900,000 travellers in 1996 to 2.2 million in 2018.
It’s worth bearing in mind that during this time span the country experienced a prolonged period of political instability, including a coup d’état in 1999.
Based on the success of the initial 15-year partnership, AERIA’s concession was renewed for another 20 years in 2010.
A further testament to Abidjan’s success is its performance in customer surveys. Indeed, Abidjan won the ‘Most Improved’ airport in Africa prize in ACI’s 2018 Airport Service Quality (ASQ) customer excellence awards.
And it currently holds the Routes Africa Marketing Award in the Under 4mppa category. This award recognises “outstanding marketing services that have supported the launch of new air routes or the development of existing services”.
As a result of AERIA’s marketing strategy, Abidjan has delivered annual compound traffic growth of 17% per annum since the Ivory Coast’s post-election crisis, and established 16 new routes including flights to Lisbon, Newark-New York, Algiers and Paris Orly. A total of 20 airlines serve around 40 destinations from the airport today.
One thing we are particularly proud of is the airport’s recent carbon neutral status (Level 3+) in ACI’s Airport Carbon Accreditation. It is the first African airport to achieve this distinction and the award is in keeping with AIIM’s support for environmentally sustainable developments. As operational standards rose, the airport also received TSA certification in 2015 for security, ISO 9001 in 2016 for quality, and ICAO certification in 2017 for safety.
Although we are naturally pleased with the developments made by airports that have involved private funding, we still see a high degree of protectionism in the sector and government stakeholders remain sceptical of private public partnerships.
What the continent needs is more success stories of private equity investment in airport infrastructure that show tangible benefits to all stakeholders.
Africa is currently the fastest growing continent in the world, with a population set to double by 2050. While this is a challenge in some respects, it also means that Africa’s young and increasingly well-educated people share an international outlook and a desire to travel for work or leisure, like their peers, in a global economy.
If Africa is to boost regional and international trade, it is absolutely essential for it to have adequate airport infrastructure. This is even more essential for the many landlocked African countries, particularly where existing road and rail infrastructure are in a poor condition or geography makes air transport the only feasible mode of transport.
Ultimately, what Africa needs are airports that are functional, safe and affordable. They don’t have to win architecture prizes for cutting-edge designs, and they may well be smaller than some of their international counterparts.
It all comes down to structuring airport investments in economically-viable and sustainable ways, which we believe is where the private sector can offer attractive solutions.