Business

African Airport Development Takes Off

By Jane Grieve, Airport World

posted: January 23, 2008 12:16 p.m. ET

: People stand around the entrance of Roberts International Airport, situated on the outskirts of Monrovia, Liberia. Large-scale new investment in the development of African airports and in the continent's aviation safety system has become a much greater economic priority as developed countries seek greater access to Africa's natural resources. Credit: AP Photo/Pewee Flomoku
: People stand around the entrance of Roberts International Airport, situated on the outskirts of Monrovia, Liberia. Large-scale new investment in the development of African airports and in the continent's aviation safety system has become a much greater economic priority as developed countries seek greater access to Africa's natural resources. Credit: AP Photo/Pewee Flomoku
: People stand around the entrance of Roberts International Airport, situated on the outskirts of Monrovia, Liberia. Large-scale new investment in the development of African airports and in the continent's aviation safety system has become a much greater economic priority as developed countries seek greater access to Africa's natural resources. Credit: AP Photo/Pewee Flomoku

It seems there is a new sun rising on Africa’s horizon. The world’s second largest and second most populated continent is finally seeing economic growth on a par with global rates.

The continent, which stretches 30 million square kilometres over savannah plains, jungles and sub-arctic climates, has seen enough economic growth for The World Bank to concede it’s on track for faster and steadier growth going forward.

Figures released in November by The World Bank show average growth in the Sub-Saharan economies was 5.4 percent in 2005 and 2006, and the consensus projections are that growth will remain strong. However, its latest report, Africa Development Indicators 2007 (ADI), does stipulate the need for ongoing investment in order to sustain long-term development on the continent.

And for a continent opening up further to tourism and laden with resources such as oil, iron ore, diamonds, copper and gold, one area where investment is increasingly evident is Africa’s airports and the African aviation industry.

The forgotten continent

The change is welcome, as Africa has traditionally been the forgotten continent in terms of investment in infrastructure, world attention being more focused on the negatives such as conflicts, corruption and poverty. Indeed, it is home to some of the poorest countries in the world, such as The Democratic Republic of Congo, Burundi and Ethiopia.

However, high growth rates, more accountable and transparent governments, better democratic rule across the continent and substantial global demand for Africa’s resources is encouraging international investment in Africa.

Indeed China is playing a mammoth role in African investment, purely due to its currently insatiable demand for raw materials.

Barclays Bank’s South African affiliate, ABSA Capital, says it is definitely seeing an upturn in infrastructure investment, in the airport and mobile phone sector in particular.

Michael Bagguley, head of trading at ABSA’s investment banking arm, claims that economic growth is encouraging foreign investment throughout the continent with infrastructure enhancements being funded both publicly and via banks and financial institutions.

“There has been a tremendous rise in international investment in Africa over the past three years or so," said Bagguley. "It’s led to a broad development in the airport business, which has helped facilitate better transport around the continent. It’s an investment climate I do see continuing.”

ABSA -- which provides banking and finance services in South Africa and Sub-Saharan regions -- is itself is an investor in the Africa Infrastructure Fund, which was set up to raise funds for infrastructure projects in Africa, including airport development.

Investment in airports throughout Africa

African airports are seeing investment right across the continent. In Egypt, Aéroports de Paris Management (ADPM) -- a wholly owned subsidiary of Paris airport operator ADP -- recently took over the management of Sharm El Sheikh-Ophira Airport’s new 4.5mppa capacity terminal. ADPM also manages Egypt’s Hurghada, Luxor, Aswan and nearby Abu Simbel airports and has a 29 percent stake in an airport in Guinea.

Last August the Canada-based SNC-Lavalin Group won a $600 million contract to build a new airport in the city of Benghazi in Libya. It should take two years to build and when complete, will handle up to 5 million passengers and 45 aircraft movements per hour.

A new airport is also under construction in Libya’s capital Tripoli. A six–company consortium which includes France’s Vinci, Brazil’s Oderbrecht and Turkey’s Tepe Akfen Vie (TAV) is involved in the airport construction. When complete the gateway will be able to handle 20 million passengers a year.

Earlier in 2007, TAV won a long-running battle for the contract to build and operate a new airport in Enfidha, near to Tunisia. The 5.5 million passengers-per-year capacity gateway is scheduled to open in 2009. It is estimated, TAV will invest $588 million (€400 million) in that project, together with a second contract to upgrade the nearby Monastir airport.

Elsewhere on the continent, Fraport manages Cairo International Airport in Egypt and spearheads the consortium which recently won the 25-year operating contract for the planned new 5 million passengers-per-year capacity airport in Dakar, Senegal.

Nigeria and South Africa

And in Nigeria, the Bi-Courtney Consortium is responsible for building and operating the newly opened $200 million domestic terminal at Lagos-Mohammed International Airport. The development, made possible with funding from the Oceanic Bank International, is the first example of a Build-Operate-Transfer (BOT) project in Nigeria.

The Nigerian Government has also just announced plans to further develop the gateway to cope with rising traffic demand.

ACSA, which owns and operates nine South African airports and manages another one on a concession basis, is investing a massive $3.1 billion on airport development between now and 2012.

In Johannesburg, ACSA is upgrading OR Tambo International Airport to handle 50 million passengers a year, spending nearly $400 million on a new Central Terminal Building and International Pier. In addition it is investing $40 million on upgrading on the airport’s aircraft-to-terminal links and a further $70 million on car park enhancements.

A total of $190 million is being pumped into Cape Town International Airport, which will turn it into an 18 million passengers-per-year-capacity gateway. ACSA’s projections have the total number of passengers at Cape Town increasing from 5 million in 2003 to 14 million by 2015.

It is also investing millions on upgrading Durban International Airport’s terminal building to allow the gateway to handle 7.5 million passengers a year.

Initiatives to improve African aviation safety

Making Africa’s airports and airlines safe is a big issue and there are many initiatives now in place to improve its track record and safety statistics. In 2006, the European Union announced an aircraft ‘black list.’ It banned 92 airlines from landing at European airports, the vast majority of them from Africa after declaring them unsafe against international standards.

However, it’s something that is improving, according to Captain Harry Eggerschwiler, CEO for the African Civil Aviation Agency -- a body set up specifically to improve safety in the industry -- although he does concede it has impeded investment in the industry in the past. He says increasing interest in investment is turning things around.

“The international community has realized Africa has some of the most useful resources in the world. Now we’re seeing international countries like the US, China and India starting to invest in Africa,” said Eggerschwiler. “This is, for Africa, a good thing to improve the economy infrastructure around the continent.”

Eggerschwiler says he hopes there’s a lot more investment in the aviation industry -- regarding investment as the key to improving safety in the future and to help bodies like ACAA.

“Our major challenge will be to talk in one voice and harmonize regulation on the continent. We will control the safety in the aviation industry to reduce accidents for the safety of all passengers flying in and around Africa,” commented Eggerschwiler.

Africa may not yet have earned itself the accolade of being an investor ‘hotspot’ for airport development, but it is clearly no longer the forgotten continent.