Growth in the African Skies

With air traffic between the United States and Africa growing at more than 5 percent annually, the US based carrier Delta Airlines has increased flights to the continent in response to strong customer demand. Africa is home to 12% of the world’s people, but it accounts for less than 1% of the global air service market. Part of the reason for Africa’s under-served status, according to a just-published World Bank study, Open Skies for Africa – Implementing the Yamoussoukro Decision, is that many African countries restrict their air services markets to protect the share held by state-owned air carriers. 

According to Delta Airlines as well, there has been an underserved U.S.-Africa demand for many years that historically did not have many options for service other than circuitous routings through Europe. Delta began to fill that void in 2006 by introducing the  service to Johannesburg from Atlanta via Dakar- a flight that operates nonstop and has been very successful. Since then Delta has been expanding its footprint in the region.

In the EAC Region, players in the aviation sector have also witnessed growing business opportunities especially with the coming into force of the East African Common Market. The East African region initiated an open skies agreement in 2006 when the EAC Partner States undertook the implementation of Yamoussoukro Decision on the liberalization of air transport in the region. The framework for liberalization is progressing, however, despite slow liberalization of the regional airspace, airlines have been pushing their governments to negotiate for landing rights. Meanwhile, the region has discussed and passed the Civil Aviation Safety Standards Oversight Agency (CASSOA) Bill, which will harmonize aviation safety and training standards- thereby seeing to safer EAC skies.

For local cargo carriers operating in the region, Tanzania has been a major destination mainly driven by the mining industry since a substantial amount of mining cargo is moved by air from the country.  With commodity prices on the rise, demand for minerals has increased leading to more demand for air services. In addition, the boom in tourism has seen a rise in business on the Zanzibar route and to Juba which relies heavily on imports, thus creating an opportunity for cargo services. Additionally, as the capital city of Southern Sudan emerges from 21 years of civil unrest, it has become an attractive investment destination, making it new ground for business in the region. 

Delta Airlines has also attributed the growth in Africa's aviation industry to three key factors: strong economic growth across the African continent, the large number of African-born American citizens who are now traveling back and forth to Africa on personal and business travel, and increased investment in the continent’s oil and natural resource industries. Despite restrictions in Africa's aviation market, in July 2007, Delta had 97 departures to Africa from the U.S but by July 2010, they had 320 flights, hence they tripled in size in three years. 

The Yamoussoukro Decision of 1999, named after the Ivorian city in which it was agreed, commits its 44 signatory African countries to deregulate air services, and promote regional air markets open to transnational competition. In 2000, the Decision was endorsed by head of states and governments at the Organization of African Unity, and became fully binding in 2002.  In general terms, the Yamoussoukro Decision calls for:

• Full liberalization of intra-African air transport services in terms of access, capacity, frequency, and tariffs
• Free exercise of first, second, third, fourth and fifth freedom rights for passenger and freight air services by eligible airlines (These rights, granted by most international air service agreements, enable, among others, non-national carriers to land in a state and take on traffic coming from or destined for a third state.)
• Liberalized tariffs and fair competition
• Compliance with established ICAO safety standards and recommended practices

Open Skies for Africa’s recommendation is for African states to implement the Yamoussoukro Decision which applies to all its signatories, but especially mentions those that have not signed or properly ratified it, namely: Djibouti, Equatorial Guinea, Eritrea, Gabon, Madagascar, Mauritania, Morocco, Somalia, South Africa, and Swaziland.

Meanwhile at the WTO level, the General Agreement on Trade in Services (GATS) Annex on Air Transport Services, excludes the liberalization of traffic rights and services directly related to the exercise of traffic rights. However the GATS addresses measures affecting aircraft repair and maintenance services; selling and marketing of air services and computer reservation services. 

The EC EPA Text (2009 version) includes the later elements as well however the EPA Text also extends the scope of air services covered by the Agreement, to include: other ancillary services that facilitate operation of air carriers such as ground handling services, rental services of aircrafts with crew and airport management services.

Shipping Connectivity in Africa

According to the International Maritime Organization (see list of IMO conventions), 90% of the world's trade is transported by sea and shipping is truly the lynchpin of the global economy. Without shipping, intercontinental trade, the bulk transport of raw materials and the import/export of affordable food and manufactured goods would simply not be possible.  Efficiency of shipping is also closely interlinked with ports and land transport services.  The world's major ports are located close to the main international shipping routes that transverse the east-west global axis and Africa's intra-regional liner shipping connections are largely determined by the shipping liner routes, connecting African countries with Europe, Asia and to a lesser extent the Americas. 

The main or busiest shipping route in Africa transits the Red Sea into the Suez Canal through the Mediterranean and out through the Strait of Gibraltar. Vessels along this route deliver goods mainly to and from Europe and Asia although in recent year intra-regional African trade in this region has been increasing. Generally however the connections within the continent are few and for example North Africa is not connected to East or Southern Africa and there are no shipping lines for instance between Kenya and Cote d' Ivoire.

By the same token, according to a Study by USITC titled Sub-Saharan Africa: Effects ofInfrastructure Conditions on ExportCompetitiveness, Third Annual Report about 12 shipping companies provide services between Mombasa and Dar-es-Salaam but neither has services to the Northern seabed of Africa.  Thus maritime trade between African countries on opposite coasts of the continent depends on transshipment services via Europe or South Africa.

Normally a transshipment operation to a third country means higher costs compared to direct port to services between two trading economies hence increasing the cost of intra-regional trade. Nonetheless, transshipment centers such as Djibouti, Senegal, Morocco promote south-south trade especially on routes where trade volumes are currently not large enough to justify direct port to port shipping service. 

Private Sector Management of Ports in SSA

Although most SSA ports are state owned, the majority of shipping firms serving the region’s ports are private-sector entities. While private-sector management of SSA ports, as well as investment in physical infrastructure, has led to modest improvements in port productivity, problems remain. In particular, the region’s maritime operations continue to be adversely affected by burdensome customs procedures, inadequate access to land transport networks and governance. 

However the primary constraints facing SSA ports—inefficient operations and lack of sufficient capacity—have yet to be fully resolved. As a result, freight rates to and from SSA remain substantially higher than in other parts of the world, reducing the region’s export competitiveness. As an example, a small container ship may potentially incur an operating cost of $43,000 for each day that it is delayed from docking at a port and to mitigate such costs, some shipping firms impose ‘vessel delay surcharges which in turn are passed on to importers.

However certain ports in the region have been successful in addressing capacity issues for containerized traffic by attracting outside investment in infrastructure and improving port management. For example, at the port of Mombasa, the Kenya Ports Authority has established dedicated berths for one of the area’s largest shipping firms and now permits cargo to be processed on a 24-hour basis. Ultimately, Mombasa and other SSA ports are increasingly serving as regional hubs or transshipment ports and are investing in infrastructure and managerial expertise to handle the growing containerized trade in the continent.  Trade in services WTO negotiations in maritime services to liberalize the sector include  three main areas: access to and use of port facilities; auxiliary services; and ocean transport. Under the WTO/W120 list of services sectors, maritime services negotiations include the following sub-sectors: 

a. Passenger transportation
b. Freight transportation
c. Rental of vessels with crew
d. Maintenance and repair of vessels
e. Pushing and towing services 

f. Supporting services for maritime transport

Maritime Transport in Africa and European Shipping Lines

Over 90 percent of international trade between Sub Saharan Africa and foreign countries is conducted via maritime transport and most shipping companies operating in the region are European.   The region accounts for 2–3 percent of global  merchandise trade by value, and slightly more than 2 percent of worldwide maritime cargo originates in or is destined for an SSA port.  

Approximately 87 percent of the total volume of cargo exported from SSA ports is crude petroleum, with the remaining 13 percent divided evenly between minerals and metals (primarily bauxite and iron ore) and general cargo (including agricultural goods and textiles and apparel). By contrast, 90 percent of maritime cargo destined for SSA ports consists of general cargo. Crude petroleum is transported by tankers, minerals and metals are transported by break bulk carriers, and general cargo is transported by both break bulk carriers and container ships.

Large international shipping firms such as Danish-based Maersk and French-based CMACGM account for the bulk of maritime transport service between SSA and non-SSA markets.    In particular, these two firms transport the majority of containerized cargo between SSA and Europe, the largest market for SSA exports.  Other foreign-based shipping firms that have a substantial presence in the region include the German firm Hapag-Lloyd, the Italian firm Grimaldi Lines, and the Swiss firm Mediterranean Shipping Co.

In recent years, the maritime transport market in SSA has become more concentrated, as many large shipping firms have been absorbed through corporate consolidations. For example, in 2005, Maersk purchased the liner shipping business of British-based P&O Nedlloyd, and Hapag-Lloyd merged its operations with the Canadian firm CP Ships. Earlier, in 1999, Maersk also purchased the South African shipping firm Safmarine, one of the largest regional shipping lines providing service between SSA and foreign countries.

For a recent review of maritime transport see here.