Blocked Funds: Increasing Problem for Airlines In Africa

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The International Air Transport Association (IATA) forecasts a trebling in the size of Angola’s air transport market to 7.1 million passengers a year by 2036 at the present forecast annual growth rate of 6.7%.
However, even faster growth with greater socio-economic benefits for Angola could be achieved, if the country opens up its market and prioritises its participation in the continent-wide connectivity efforts, unblocks funds, consults with industry to improve infrastructure and maintains world-class safety standards, in the view of IATA.

The second priority is improving connectivity. Enhanced connectivity will stimulate demand and competition, making air travel more affordable and in doing so, enable higher volumes of trade, tourism and commerce between Angola, its sister nations and the rest of the world.

Modern infrastructure is also amongst the critical aspects for aviation to deliver its economic and social benefits. Luanda’s new international airport will play a major role. However, consultation is needed to ensure that it is aligned with airline requirements.

Finally, safety is critical and has always been a challenge for Africa. With governments and industry working together, significant improvements have been achieved.

In 2016, for example, there were no fatal accidents or hull losses involving sub-Sahara African scheduled airline services. To sustain and further improve this safety performance, continuous effort based on global standards and best practices is needed.

IATA’s recent study found that, if 12 key African markets, including Angola, were opened up, an extra 155 000 jobs and $1.3bn in annual GDP would be created in those countries.

“Aviation is vitally important to Africa. It currently supports 6.8 million jobs and contributes $73bn in gross domestic product (GDP) across the continent. It connects people and businesses, enables trade and tourism, reunites families and friends, carries products to markets and vital medicines and aid to communities where they are needed,” said Alexandre De Juniac, IATA’s director general and CEO, at the industry body’s aviation day in Luanda, Angola. De Juniac identified four pressing concerns in Angola and Africa, which governments and industry stakeholders must address for a healthy and strong aviation system.

Blocked funds and denied access to foreign exchange in Africa is an increasing problem. In nine African countries, international carriers are unable to repatriate their foreign currency earnings, while locally-based airlines experience difficulties making on-time foreign currency payments to their suppliers and business partners.

“Angola and other countries blocking funds are undergoing significant economic challenges. But blocking airlines’ funds is not the answer. It is in everybody’s interest to ensure that airlines are paid on-time, at fair exchange rates and in full. Angola needs to work with industry to ensure that it is prepared to reap the future benefits of increased air connectivity.” explained De Juniac.

Aviation stands to be an economic boost for Africa because there are great opportunities that Africa can tap into in the aviation industry. At the moment, the passenger traffic is mainly from 10 African countries, representing a population of about 600 million. If there is a 1% traffic increase from the other half of the African population, there will be an increase of about six to seven million passengers every year. Besides, with the rising middle class in Africa, there will be higher demand for travel. As a result, the increasing passenger traffic will easily justify the heavy investments needed in airlines and airport infrastructure. According to 2014 data from ATAG, the spill-over effect from aviation can be enormous for African economies. For instance, a vibrant aviation industry can eventually support the development of the tourism industry, as well as other related industries like freight and logistics. For every dollar invested and contributed by aviation to the local economy, there is a multiplier effect of six times more on the wider economy.

In addition, for every job directly created by the airlines, another 50 jobs are created in other industries. The tourism sector is the greatest beneficiary with 44 potential jobs created. This means that if the African governments, including those in the 29 African countries where aviation is practically non-existent, invest in their own airlines and airports, the benefits can be significant for the continent.

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