Reforms in policy and legislation are gradually opening Africa’s airspace to increased commercial activity from both local and international aviation players. January 2018 and January 2021 mark significant policy milestones for the African continent following the implementation of the Single African Air Transport Market (SAATM) and the African Continental Free Trade Area (AfCFTA), respectively.   

These flagship projects align with the priorities of industrialization and economic enhancement established by the African Union’s (AU) Agenda 2063. The agenda has been dubbed “Africa’s blueprint and masterplan to transforming Africa into the global powerhouse of the future” by the AU.   

With projections that the continent’s population is estimated to reach 2.6 billion by 2050, and accounting for 26% of the world’s global workforce by that time, it has never been more important for the continent to consolidate its markets in preparation for this growth.   

For the African aviation sector, the SAATM and AfCFTA agreements are a step forward in harmonising regulations for a more coherent atmosphere that liberalizes air services for aviation businesses and airlines. It is envisaged that the air services offered by different African states will no longer experience any restrictions. Indeed, increased intra-Africa operations will be made possible due to the full implementation of the Yamoussoukro Decision.  International players will continue to operate into and out of Africa and are free to incorporate commercial agreements and or arrangements with their African counterparts in line with their corporate objectives.    

SAATM and AfCFTA  

Launched on January 28, 2018, the SAATM was commissioned as a flagship project of the African Union aimed at liberalizing scheduled and non-scheduled intra-Africa air transport services. This involves stepping away from state-to-state Bilateral Air Service Agreements (BASA) that are incompatible with the regulations of the 1999 Yamoussoukro Decision. The SAATM’s regulations allow state parties to grant eligible airlines the freedom to exercise the first, second, third, fourth and fifth freedom traffic rights for scheduled and non-scheduled passenger, cargo, and mail flights. Additionally, African countries who have signed onto the SAATM shall not impose limitations on the number of frequencies and capacity offered on air services linking any city pair combination between and amongst all signatory countries.   

To date, a total of 35 states have signed up to the agreement representing over 80% of the existing aviation market across the continent. Of these signatory states, 18 of them have signed and submitted the required Memorandum of Implementation (MoI) to deregulate their state-to-state Bilateral Air Service Agreements (BASAs), a very significant step towards the full implementation of the YD.  

The overall objective of SAATM is to transform the African aviation industry by enhancing the travel experience for customers thereby improving the operation and financial performance of African airlines. The agreement aims to increase flight availability and efficiency, while meeting the demand for intra-African traffic growth by creating higher inter-regional connectivity between main, secondary and tertiary cities and commercial hubs. The increase in operations will lead to the reduction in airfares on the continent, an issue that has been a major challenge for African airlines and their customers for a very long time.

The AfCFTA agreement came into effect on January 1, 2021, covering all 55 countries of the AU members, with an estimated gross domestic product of $3.4 trillion and a market of 1.3 billion people. It's aim to enhance the trade of intra-African goods and services has effectively established the largest trade area in the world by the number of country participants.  

One of AfCFTA’s primary objectives is to accelerate industrial developments on the continent and reduce dependence on exporting primary commodities. This involves diversifying Africa’s trade imports and exports and consolidating to one trade area for businesses, enterprises and consumers.  

Before the implementation of the AfCFTA, intra-African exports between states faced trade tariffs of up to 6.1%. However, tariffs on goods exports outside the continent were cheaper. With the AfCFTA in place, intra-African trade is expected to increase by up to 52% through the gradual elimination of tariffs and import duties on an estimated 90% of goods produced in Africa.   

To support the AfCFTA‘s implementation, tools will be put in place to help progress the trade agreement’s agenda and objectives while addressing trade challenges on the continent. These tools include a rules-based trading system that allows for dispute settlements and follows international practice to attract local and global investor confidence. In addition, there will be online platforms for tariff negotiations and instruments to monitor, report and eliminate non-tariff barriers (NTBs).  

According to Secretary-General of the African Continental Free Trade Area (AfCFTA) Secretariat, Wamkele Mene, African states lose up to $5 billion annually in currency convertibility costs, which are dependent on conversions against the United States dollar.   

In 2022, new additional tools will go live to support the AfCFTA‘s implementation. During a Chatham House panel discussion on November 24, 2021, Mene detailed the tools, one of which includes the establishment of a pan-African payment and settlement system with the aim of streamlining transactions. In turn, this will allow business entities to trade and import goods between states using their local currency.  

The AU’s SAATM and AfCFTA projects complement each other. As the SAATM aims to increase intra-African connectivity for African airlines, the AfCFTA focuses on enhancing intra-Africa trade and regional integration between African countries for the ease of movement of resources, capital and passengers.    

Aaron Munetsi, CEO of the Airlines Association of Southern Africa (AASA), supports how the projects work well in tandem but emphasizes that they must result in enhanced trade among African states as well as an increase in intra-Africa travel.  

“African trade will become more attractive and competitive to the extent that there will be an increase in international trade and travel to and from and within Africa,” Munetsi told AeroTime.  

So, how have these changes impacted upon the African aviation sector today?

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Local and international investments and opportunities   

2021 saw increased interest and activity in developing African aviation infrastructure as well as personnel and regional capacities. Air cargo was experiencing a global boom and nowhere was this more evident than in Africa, which, despite shortfalls in maritime operations, belly cargo decline and supply chain congestion, was experiencing a significant increase in cargo volume. Primarily, the African cargo sector has been at the forefront of the growth, recording the largest monthly percentage increase in international cargo volumes for 2021 across all cargo sectors.  

According to reports from the IATA, Africa’s air cargo market accounts for 2% of the global market share. However, IATA data showing the sector’s air cargo year-to-date development levels from January to October 2021, were 31% higher compared to the same period in 2019. This suggests that the sector’s global share will increase in the coming years. Interest in establishing business ventures and partnerships has seen an increase during the pandemic period, attracting attention from both local and international freight forwarders and cargo businesses. 

CEVA Logistics, an active player in freight management and global logistics and supply chains, expanded its freight footprint in Northern, Western, Eastern and Southern Africa. In July 2020, the forwarder acquired a majority stake in AMI Worldwide, a third-party logistics provider with operations in 12 states in southern and eastern Africa. In addition, CEVA acquired a shareholding in freight companies in North Africa in late 2020 and early 2021. This included the acquisition of a majority stake in the Egypt-based IBA Freight Services in December 2020, as well as acquiring Morocco-based customs clearance specialist ASTI Group in January 2021. At the port in Abidjan, Ivory Coast, CEVA acquired two fish loaders to help improve exports from the West African country. In East Africa, CEVA took on a minority stake in the Addis Ababa-based freight forwarder MACCFA Freight Logistics in December 2020, and in May 2021, opened a new container facility and container freight station in Modjo Dry Port, 70 kilometers from Addis Ababa, as part of a joint venture partnership with MACCFA.  

Another global forwarder that took an interest in Africa cargo ventures is DSV Panalpina, which acquired South Africa-based courier Globeflight Worldwide Express in May 2021. In September 2021, DSV also opened a 130,000 square meter logistics hub in the Gauteng province in South Africa in close proximity to OR Tambo International Airport (JNB) and has plans to expand its South African operations by establishing a logistics center in Cape Town.  

Similarly, DHL further established its presence on the continent by investing in a 10,000 square meter pharma facility close to OR Tambo International Airport in Johannesburg. In addition, the global forwarder expanded its operations in central Africa after partnering with Angola-based cargo carrier Unicargas in a five-year partnership. This is set to enhance Angolan goods exports while augmenting its domestic logistics transport.   

Following a boom in e-commerce trade volumes and bilateral trade growth between Africa and China, valued at $52.1 billion, Alibaba’s logistics arm, Cainiao Network, launched its first air cargo route in June 2021 between China and Africa. This route will effectively operate six weekly flights between Hong Kong and Lagos, Nigeria, and reduce transit and delivery times.  

African airlines have also shown enthusiasm to establish partnerships across the continent. DHL-Ethiopian Airlines Logistics Services and African E-Trade Group (AeTrade Group) partnered in January 2021 to transport cargo under the AfCTFA and support the growth of e-commerce on the continent. Ethiopian Airlines Group will open a Boeing 767-300ER conversion site at its MRO facility located at Bole International Airport, Addis Ababa in partnership with Israel Aerospace Industries (IAI). The airline has also partnered with Boeing to collaborate on Aviation Training and Educational partnerships, as well as Leadership and Industrial Developments on the continent over the next three years.  

Nairobi-based cargo airline Astral Aviation partnered with Azerbaijan’s Silk Way West Airlines in August 2021 after signing an interline agreement that will expand both carriers’ cargo destinations. The deal allows Astral to connect its Nairobi hub to Dubai, and grants Silk Way West Airlines access to the African cargo market, something that was previously not available to the Azerbaijani cargo airline.  

Astral also plans to enhance airfreight and logistic services to Southern and Sub-Sahara Africa in partnership with Airlink Cargo South Africa after signing an interline agreement that will widen both airlines’ cargo networks in Nairobi and Johannesburg.   

Airlink has also focused its attention on expanding local and international partnerships. This will give the airline favorable positioning as one of the top regional carriers on the continent in the coming years. With rising demand for intra-African traffic growth following projections of a growing middle class, which is expected to double by 2050, the Johannesburg-based carrier has been partnering with leading companies in Africa, Europe, Asia & South-East Asia, and the United States.  

A liberalized future or pending conflict?  

The implementation of SAATM in conjunction with the AfCFTA creates a range of venture opportunities and investment possibilities in Africa’s airspace for local and international airlines and aviation businesses. While still in its early stages, the industry’s response to these policies has been positive despite challenges caused by the pandemic.   

As new partnerships enter the market, concerns about the distorted competition dynamics between African airlines and non-African airlines have increased. 

This has been fueled by the growing concern that a large part of the benefits to come as a result of the sector's transformation will inevitably accrue to the non-African businesses and airlines who have teamed up with African airlines with fewer resources. 

“Liberalization entails that the market forces should be at play and the African carriers must be able to compete effectively against each other but more so against non-African airlines,” Munesti reveals.  

He adds: “If liberalization is misconstrued as protectionism by the non-African carriers, it is possible that other barriers will be imposed for African airlines that will be operating on intercontinental routes as a way of either retaliating or forcing the hand of the regulators to open up the market to non-African carriers.”  

The developments, investments and market activity in Africa’s aviation sector are in line with the desire to achieve an open and lucrative African airspace. But who will benefit the most from these partnerships and deals? Only time will tell. 

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