Will it be enough?
Even if the best-case scenario happens and all 26 countries sign the TFTA, there is still no guarantee the accord will make much of a difference in the African air cargo market. “TFTA will increase regional trade and should benefit African carriers,” said Astral’s Gadhia. “But the sad reality is that there are only a handful of African carriers who operate dedicated freighter services.”
Alessandro Saponaro, chairman of the Europe-based Africa Logistics Network, created his organization on the principle that a common market will eventually form across Africa, but he remains pessimistic.
“The African continent is suffering for a lot of problems that prevent a regular development of its economies,” he said. “Certainly, the TFTA signed last June will help partially and could become very important, but, in my opinion, it will not be sufficient.”
It also doesn’t help that the world’s financial markets are being uncooperative right before the rest of the TFTA nations are considering ratification. By mid-January, with the Dow and China’s stock market fluctuating wildly, South Africa’s rand had fallen by 30 percent over the previous six months to a record low and Nigeria, the largest economy on the continent, saw its currency stabilize, but only because of the government’s effort to prop up its value.
The slowdown in the growth of the economy in China, one of the largest importers of minerals and oil from Africa, has deflated markets is several countries, such as Angola, Nigeria and Zambia, that rely on this trade. As a result, some investors have been fleeing from assets in many developing African nations, due to China’s strong influence in the region.
Of all the stumbling points that the TFTA must avoid, the most nagging one remains the fact that the African airfreight community has almost reached this goal before, but came away disappointed.
About 17 years ago, a group of 44 African countries banded together and agreed on a plan to gradually liberalize all intra-Africa air transport services under a strict timetable. Despite this pledge to untangle the web of air restrictions, known as the Yamoussoukro Decision of 1999, the document languished amid arguments over implementations, and was never ratified.
To jump-start those moribund talks again, another meeting between delegates from 11 African countries met in January 2015 to commit to the establishment of a single African Air Transport Market by 2017. The pledge calls for the “immediate implementation of the Yamoussoukro Decision,” and a regulatory framework to implement the single market via the African Union.
Another significant barrier to intra-African trade has been the stiff tariffs many countries impose on their neighbors. The problem has become especially acute in Nigeria, where Segun Musa, the chairman of Nigeria’s National Association of Government Freight Forwarders (NAGAFF), has warned that the high tariffs charges by the Nigerian Customs Service may cause the airfreight business to collapse in that country by the end of this year.
The high tariffs, Musa said in the local press, are driving away imports and causing air cargo traffic to become unprofitable. Customs officers, he said, “have not brought to table any meaningful policy that will actually drive the industry. Because they are saddled with the responsibility of checking revenue being collected by the freight forwarders, they actually mismanaged the ports.”
The loss of revenue due to the high tariffs will turn Nigeria’s freight terminals “into football fields, where there will be no activities going on in the shed,” Musa added. “So, you can imagine how the labor market will look like when about 3 million people will be thrown out of the market.”
Still, Gadhia remains hopeful that the TFTA will not find the same dead ends. He currently has an “ambitious, yet cautious,” five-year strategy that will include the purchase of six 737 freighters, which will enable the carrier to fly to more than 25 scheduled destinations within Africa. This process, he said, began in 2015, so the first 737-300F may arrive later this year, “along with the opening of several key routes in Africa,” he added.
By 2021,Gadhia also plans on operating out of three hubs, adding Lagos and Johannesburg to his current base in Nairobi. If all goes well on the regulatory front, he said he may even experiment with unmanned aerial vehicles by operating a support service for drone manufacturers and service providers.
But to make these exciting plans work, Africa must make TFTA work. “This will require the political goodwill and co-operation between all 26 member states,” Gadhia said. Other smaller African FTA’s, such as COMESA, EAC and SADC, he added, have “had their fair share of implementation challenges, but they have been successful in promoting regional trade.”