Africa opens door to the world
The African continent holds a sky of opportunities for the aviation stakeholders both regional as well as foreign players. The potential is huge because of the burgeoning middle class, which is estimated to be around 300 million people, resulting in an increase in consumer spending and e-commerce opportunities. But a greater push is needed to open the skies of the continent.
“If you go to the West and ask, where one African country is, no one will be able to tell you where it is, but if you say Africa, then they know Africa is one. So we are trying to answer affirmatively that yes it should be one,” this is what Fitsum Abadi, MD, Ethiopian Airlines Cargo and Logistics, had to say about an integrated Africa, when he was asked about his vision for the continent in 2025.
Abadi and an informed lot of panellists from the air cargo industry had recently gathered to discuss “liberalisation and modernisation – the way to push frontiers of excellence in air freight industry in Africa,” which was also the theme at the fifth edition of Air Cargo Africa conference and exhibition, recently held in Johannesburg, South Africa.
Glyn Hughes of IATA (Moderator); Fitsum Abadi of Ethiopian Airlines Cargo and Logistics; Turhan Ozen of Turkish Airlines; Omar Hariri of Saudia Cargo; Jan de Vegt of Kenya Airways; David Logan of South African Association of Freight Forwarders; Adrien Thominet of ECS Group; Steven Polmans of Brussels Airport Company; Sanjeev Gadhia of Astral Aviation
The African continent harbours (owns/ holds) a sky of opportunities for the aviation stakeholders both regional as well as foreign players, especially in wake of the growing ecommerce trend, young population and increasing purchasing power, but a greater push is needed to open the skies of the continent, voiced all participants.
“It is a known fact that there are weak outbound air freight loads and we are of the view that opening the air cargo bilateral will strengthen these outbound roads, while enhancing movements of goods with regional partners,” Charles Shilowa, group executive for business development at Airports Company South Africa stressed in his keynote address.
Shilowa further said, “Liberalisation of the air cargo market has the potential to double the current export figures on the continent in the near future.”
Speaking about his country South Africa, Shilowa said, “The theme of this year’s conference is befitting for us as Airports Company South Africa. Why, because, we are about to see some of the exciting development in our business. We are about to precipice upscaling and modernising of our own cargo capability and offering with the O R Tambo International Airport, which is poised to receive its brand new state-of-the-art mid-field cargo terminal with a capacity of 2 million tonnes per annum. We strongly believe that our investment, in this mid-field terminal is well timed, as it will allow us to take advantage of the opportunities that I expected, in the next two decades. Furthermore, we believe that the industrial development zones and the special economic zones will play a critical role in promoting and stimulating the growth of freight in South Africa and the continent. A conversation is soon to be started with our government on this point.”
Meanwhile, Vuyani Jarana, CEO, South African Airways, iterated that Africa has to adopt the fourth industrial revolution now that the continent has everything that enables it to do it. “If we are to leapfrog the development path that the developed world undertook to get where they are, we have to adopt digital, we have to take advantage of the power of mobile,” he said in his inaugural address.
Drawing attention towards the two major developments happening at the policy level led by the African Union, namely the African Continental Free Trade Agreement (AfCFTA) and the Single African Air Transport Market (SAATM), Jarana however, added that policy development alone will not be enough, it needs to be supported by a deliberate investment, systems and processes and businesses need to take a lead in doing those.
“Policy development alone is not enough while it still remains in the right direction. It is important that investments in associated infrastructure such as airports that will carry the demands of the growing intra Africa trade are made. Reviewing cost structures including the taxes charged for fuel and other landing and navigation rights, which tends to be higher in the continent than the rest of the world makes the routes that would otherwise be profitable, less profitable. It’s important that we cut this. Adopting modern ways of clearing cargo goods in customs, leveraging technologies such as Electronic Cargo Manifest systems, etc is critical step to make this a reality,” said Jarana. “Governments cannot do everything. They set policy framework, we need to take the opportunity to influence and drive the investment in the underlying capability.”
South Africa was not among the countries that signed the AfCFTA when it was launched in March 2018 at the African Union Extraordinary Summit in the Rwandan capital city of Kigali. South Africa officially ratified the AfCFTA in February this year.
Indeed, at one point of time, Africa was driving on a slow lane as far as ecommerce was concerned, but the smartphones have changed the equation by providing instant access to internet, allowing Africa to leapfrog to do online transactions. The ensuing panel discussed whether the logistics industry was prepared enough to deal with this sudden change in pace.
“Young people are much easy to adopt themselves to ecommerce practices. So, this makes Africa a huge potential in the future but in the long run, because in the short run the current infrastructural issues and challenges makes a huge barrier, for at least the cross-border ecommerce part to grow,” said Turhan Ozen, chief cargo officer, Turkish Airlines.
Taking the discussion further, Abadi stressed on the need to develop infrastructure in ICT (Information and Communication Technology), connectivity and information along with the development of an integrated multimodal services, where door to door connectivity can be easy.
“Air connectivity is very important but the crucial thing is that we also have to connect it with the land and sea. The information flow needs to be easily accessible to all youngsters and middle-class societies so that they can buy and get whatever they want to buy easily. So, I can see, for drones, for example, or our own investment in Addis Ababa – a big cargo hub with latest technology fitted warehouse or a joint venture with a global leading logistics provider DHL. We have entered into a JV to provide door to door services, integrated from a shipper or production houses to a super market or a consignee. So, this type of set ups or arrangements will facilitate the ecommerce in Africa,” he said.
Abadi also highlighted the lack of skilled manpower and the issue of knowledgeable young workforce leaving their countries in search of better jobs. “Ecommerce business in Africa with knowledgeable young force will make it easier but our young and knowledgeable workforce is migrating somewhere else where they could get job easily. So, we have to create jobs for this type of services, so that they have hopes and they can stay here to fit the breaking linkages of the services for ecommerce.”
As Africa gathers its strength to improve its infrastructure, investment from the global participants will remain a vital contribution. Steven Polmans, head of cargo and logistics, Brussels Airport Company pointed out, “There are so many countries and you see so many different things happening in different countries. I think there are countries in Africa who are really doing a good job. They are probably investing more than in some other places in the world like in Europe, and then you see other countries who are really lagging behind, where you don’t see anything happening. There, that’s an important role for the government, which should create a climate for investment rather than being very active in doing it themselves.”
“A stable good political environment is crucial in order to allow those companies to do investment,” he added.
Africa is primarily a mobile ecommerce market and while logistics infrastructure needs to be strengthened, there are other challenges typical to the continent. Some of the impediments to ecommerce remain the lack of a national street address system and a large segment of unbanked African population.
“In Europe, US or China you have old established postal systems. The postal systems usually give the base for express carriers like UPS, FedEx, etc for their infrastructure and that infrastructure in a lot of African countries are lacking. I have my address but nobody else will find my house expect for my friends, because I tell them where it is. That’s one of the stoppers for the real ecommerce. In Kenya, we have delivery points where you can drop but also these have no address. So, you have to know them. But these problems are not specific to Kenya. In a broader sense, I think 75 percent of people in Africa have no address,” stated Jan de Vegt, chief operating officer, Kenya Airways.
Meanwhile, ECS Group’s CEO Adrien Thominet said, “When you see that individuals want to purchase through ecommerce, then comes the issue that how you get paid for that and how you collect the money for that in Africa. Individuals having a bank account in Africa are very limited, it is 20 percent in one country, or sometimes the connection of internet in some countries is a problem, so there is an appetite but there are some structural issues, especially in terms of banks and payments that need to be sorted.”
Even as experiments like drones and innovations like delivery points for ecommerce in absence of proper addresses are being explored, the world has just seen Africa touching the tip of the iceberg. In presence of barriers “only 10 percent of Africa is ready for ecommerce and 90 percent of it is not ready,” points out Sanjeev Gadhia, CEO & founder, Astral Aviation. He also pointed out that customs remained a major challenge for ecommerce to work well.
“The biggest problem is customs, because when you make online transactions, for example, in my country in Kenya, it could take two to three weeks to get the delivery, so then it doesn’t work when it comes to ecommerce. When you talk to visionaries like Jack Ma, he feels that ecommerce deliveries should be finished by five days, from origin to destinations. Now with that taking three to four weeks, it just shows there are a lot of barriers, which are delaying it but I am an optimist so I believe that in a matter of few years, we will be able to bring it down to fourteen, seven and eventually into five days.”
Expressing similar sentiments, de Vegt said, “Europe, US, China are big landmasses which have little or no customs trouble, so anything you can crossover over China or US and here you have 51 countries all with their own roofs, which is very difficult because you have different import and export rules everywhere.”
The panel members also discussed that not only the different import and export rules, but the limited skies are restricting the growth of the continent. Last year the African Union officially launched the SAATM, the continent’s major move towards a single aviation market to spur more opportunities to promote trade and cross-border investments. However, there is a long road ahead to be covered. The agreement that has till now been signed by 28 countries, will need political will and implementation will be key, stated David Logan, CEO, South African Association of Freight Forwarders (SAAF).
“I also think it needs a push from business, in terms of associations like International Federation of Freight Forwarders Associations (FIATA), to push for agreements and get them implemented,” he said.
Meanwhile, Gadhia said, “We have a lot of walls in Africa, the walls are not only in the land but also in the sky. Sometime these walls are open only to foreign carriers, so if I am an African carrier and I want to fly within Africa, I am restricted. The second challenge is the high cost of flying within Africa for a lot of foreign carriers. The cost of flying into Africa marks the highest in the world. So, what we need to do as a continent is to try and bring down these barriers but this is not going to happen overnight.”
Gadhia further highlighted the current complexities to stress how the AfCFTA could be a gamechanger in the days to come. “Flowers in Kenya are flown into France and then they go into Abidjan (Côte d'Ivoire), which is ridiculous. We should have flowers from Kenya, flying directly to Abidjan,” he said.
“I as an African would really like to see the day when African consumers can consume more from each other and also fly some of this cargo on African airlines,” he concluded.
The three-day event, dubbed as the biggest congregation of global air cargo supply chain professionals, saw few more thought-provoking debates ranging from air cargo in the digital era; trade barriers and populist agendas; future of ecommerce and its strength and opportunities; China’s belt and road initiative and investments in Africa etc. It was organised by Messe München, in partnership with STAT Media Group.