Johannesburg - Synergy should be sought between international banks and development finance institutions in Africa in order to leverage the billions of dollars required to turbo-charge the continent’s long-haul aviation industry, Airbus customer finance manager Matthew Saks said this week.
He was speaking to South African journalists in the French city of Toulouse, the headquarters of Airbus.
Saks, who was born in South Africa, said “everyone is keen on Africa”, including investment banks in the EU and North America. They had billions of dollars available to invest on the continent but did not know the regulatory terrain and the pitfalls of local investment markets.
He had been in discussions with many of the international banks. “They are all asking… are you [Airbus] formulating a strategy for Africa?”
He said that in order to kick-start a major investment drive on the continent, these banks should partner with institutions such as the Bank Ouest Africaine de Development, the Africa Finance Corporation and Cairo-based Afreximbank.
Pressed on whether he had considered the Industrial Development Corporation and the Development Bank of Southern African, he said these too should be considered for partnering and leveraging with bigger commercial banks.
South African-based commercial banks Rand Merchant Bank, Nedbank and Investec were already involved in financing the aircraft industry, in Africa and internationally.
Natural growth of African-based aviation would see the number of aircraft needed to serve the markets for flights to, from and within the continent rising from 618 at the start of 2012 to a projected 1 453 by 2031.
It was projected that 122 aircraft of the existing 618 would have to be replaced, while 823 would have to be brought on stream. This meant nearly 1 000 new aircraft would be needed in the next 20 years.
Michael Bausor, who is the marketing director for Airbus’s wide-bodied A350, pointed to the tremendous potential growth of the African aviation economy, with the ripple effect that it would have on the continental economy as a whole.
Airbus’s Global Market Forecast 2013-2032 paper, entitled “Future Journeys”, pointed out that movement of people seeking to improve their economic situations and to help provide for their families was nothing new, but this phenomenon was particularly strong in Africa.
Africa’s tourism growth was faster than the average for emerging economies.
More than half of Africa’s tourists arrived by air. International tourist arrivals in Africa had grown almost fivefold since 1990 at a rate of 6.3 percent a year. International tourist arrivals rose from 15 million a year in 1990 to 50 million in 2011.
The growth rate in sub-Saharan African tourism arrivals was nearly 8 percent a year between 1990 and 2011. It is estimated that tourism injects more than $30 billion (R296bn) into the continent a year.
Airbus said there had been some positive improvements across the region despite continued impediments to growth.
Impediments included some protectionist regulatory regimes, high taxes on air tickets, statutory charges on departures, high fuel prices and, in some markets, high air fares.
Domestic African markets were a key growth area for the continent but would require bigger short-haul fleets.
Airbus estimated that less than 40 percent of passenger traffic last year was carried by African airlines, indicating that “a significant portion of this is flown by airlines from outside of the region”.
Saks pointed out that modern jetliners with a capacity range of between 120 and 500 seats cost between $80 million and $400m each.
As a result, Saks said, it was critical to find the right financing arrangements. - Business Report
* The writer was in France as a guest of Airbus.