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The Importance of Air Connectivity in Africa

July 21, 2017

The economic value of aviation reaches far beyond the aviation industry. In June this year, the International Air Transport Association (IATA) released new data showing that the air transport sector in South Africa provides immense value to the people and economy of the country as a whole.

 

 

 

 

 

The data comes from an Oxford Economics study commissioned by IATA, which examined 2014 figures to determine ‘The Importance of Air Transport to South Africa’. The study found that air transport supports some 490,000 jobs including tourism-related employment and contributes US$12.5 billion or 3.5% to the country’s GDP. US$7.4 billion of this is the gross value added contribution of air travel, while spending by foreign tourists supports the remaining US$5.1 billion. Furthermore, air transport was found to facilitate over US$110 billion in exports and around US$140 billion in foreign direct investment.

The 490,000 jobs are divided as follows:

Airlines, airport operators, airport on-site enterprises (restaurants and retail), aircraft manufacturers, and air navigation service providers employed 70,000 people in South Africa in 2014.

Peripheral services from local suppliers and the buying of goods supported another 130,000 jobs.

On top of this, the sector is estimated to have supported a further 57,000 jobs by paying wages to its employees, some or all of which are subsequently spent on consumer goods and services.

Foreign tourists arriving by air to South Africa, who spend their money in the local economy, are estimated to have supported an additional 230,000 jobs.

“The study confirms the vital role of air transport for South Africa. With the country now in a recession it’s time to re-double efforts to promote South Africa as a destination for business, trade and tourism,” said Muhammad Ali Albakri, IATA’s Regional Vice President for the Middle East and Africa.

Albakri went on to say that it is imperative that decision makers – the government and aviation authority – internalise these findings and help the aviation sector in its role as an economic growth enabler, rather than implementing regulation, policies, taxes and charges that will hinder the development of air transport. It is to this end that, during his visit to Johannesburg, Albakri met with key industry stakeholders from South Africa’s government, the South African Civil Aviation Authority, Airports Company South Africa, Air Traffic Navigation Services, IATA member airlines in the country and IATA’s sub-regional sister organisation, the Airlines’ Association of Southern Africa.

In terms of air traffic movements and passenger numbers, around 390,000 aircraft land and take off from one of South Africa’s main airports every year. 23.6 million passengers travelled to, from and within South Africa (i.e. bi-directional basis) in 2016, representing an increase of around 1.2 million passenger journeys (or 5.3%) on 2015 passenger numbers.

Domestic air travel (within South Africa) accounted for a little more than half (54%) of the total number of passenger journeys in 2016, at 12.7 million, and of the remaining 10.9 million, the UK, Zimbabwe and the US were the largest markets.

Looking forward, despite the current recession, passenger numbers for 2017 look to be on the rise. Initial data indicates that almost six million passenger journeys were undertaken in the first quarter of this year, up 3.5% on Q1 2016. The exchange rate related relative drop in costs to tourists entering the country makes South Africa an attractive tourist destination. Promotion of air transport is therefore imperative as a means of sustaining the economy during the recession.

Infrastructure, ease of travel and cost competitiveness are vital, and according to executives surveyed by the World Economic Forum for the study, South Africa’s transport infrastructure quality score places the country first out of 37 African countries surveyed and 48th globally. Yet, South Africa ranks only 19th in Africa for visa openness, and 17th for cost competitiveness, based on air ticket taxes, airport charges and VAT.

“Affordable, safe and reliable air transport is crucial to economic growth. It promotes skills development and is a catalyst for jobs. We urge the South African Government to remove any impediments, including unnecessary red-tape and policies that hinder air connectivity and the trade, investment, tourism and job opportunities it facilitates and stimulates,” added Albakri.

IATA’s 20-year outlook for South Africa, nevertheless, shows robust passenger growth. Performance came despite a subdued economic backdrop in 2016, when GDP grew by a modest 0.3%. However, the forecast for the next five years shows steady improvement, returning to above 2% per annum, as the improvement in economic activity, together with the growth in household incomes and population, is expected to support air transport demand in South Africa going forward.

By 2026, the number of passenger journeys to, from and within South Africa is expected to more than double to over 54 million. That’s an additional 31 million annual passenger journeys compared with the 2016 total, and equates to an average annual growth rate of 4.3% per year over the next 20 years, well outpacing the 3.5% rate for the global industry aggregate.

SAA has repeatedly referred to a study done on SAA by Oxford Economics in 2013 to justify its poor financial position. The airline has argued that by connecting South Africa with trade partners SAA is growing the economy, and this contribution offsets the losses incurred by the airline.

IATA is neutral when it comes to flag carriers receiving state subsidies to operate potentially loss-making routes in the interest of the greater economy, saying that it is up to the airline to evaluate how a route ultimately affects its bottom line when determining its route network. The association does, however, urge countries to adopt ‘open skies’ policies, which it says will greatly improve connectivity on the continent, and to and from South Africa.

From South Africa there are currently direct flights to four of the ten fastest growing countries in the world, as measured by GDP growth, and eight of the 20 fastest growing countries. There are 20 direct weekly flights among the world’s ten fastest growing cities and 43 direct weekly flights among the 100 fastest growing cities.

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