Lead story

Africa Rising
Indian industry is aggressively seeking for business opportunities in Africa. For Indias share of Africas global trade to increase, there is a need to push higher-end manufactures into African markets.

frica is the worlds second-largest continent with abundant reserves of natural resources, and plenty of untapped investment opportunities. The continent is hence being hailed as the New Frontier. A decade ago, The Economist ran a cover with the title Africa: The Hopeless Continent. Today, this has been replaced by Africa Risinga sure reflection of the changes that the continent has experienced over a decade. What has engineered Africas rise through difficult times? A lesser known fact is Africas prospects have changed radically over the past decade or so. Across the continent, economic growth rates (in per capita terms) have been positive since the late 1990s. Even though Africas economic growth rates still fall far short of Asias higher growth rates, the steady progress that most African countries have experienced has come as welcome news after decades of despair. Indo-Africa trade has increased 20 fold over the past decadefrom USD 3 billion in 2000 to USD 60 Bilt lion in 2011. The IndiaAfrica trade is set to rise to t USD 100 Billion by 2014 -15. To attain this growth and sustain it over a longer period of time, all concerned, Indian and African governments and industry have to broaden the trade basket. The Current, IndiaAfrica bilateral trade is concentrated on commodities and low-end manufactures. Also, Indias two-way trade several African economies is way below potential. driven bywith continued Asian investment According to data available, India has been able to demand. driven bystep continued Asian investment up exports of manufactures like machinery and demand. transport equipment, petroleum products, paper and Asia air cargo market has increased 32% wood products, textiles, iron and steel, plastic and lice 2001. Growth has has slowed in recent Asia air cargo increased noleum market products, rubber manufactured 32% products, agro ed2001. to the tremendous expansion in products. At ce Growth has slowed in recent products, chemicals and pharmaceutical ecade. Air cargo are significantly the same timeflows Indias expansion import basket includes ed to the tremendous in petroleum, metallurgical goods, raw cotton, fruit, vegetables and seven times as much cargo entering ecade. Air cargo flowsair are significantly preparations, chemicals, non-metallic mineral manuseven times as much air cargo entering factures precious stones, textile yarn, gold, nickel, and ferro-alloys from Africa. between Africa and Asia grew at an India has emerged as Africas fourth largest trade rbetween year between 2001 and grew 2006. The Africa and at an and the US. partner, after the Asia European Union, China o 5.8%between between 2006and and 2011. Capital r year 2001 2006. The In 2011, India-Africa trade accounted for a mere 5.2 tractive industries (e.g., oil from Sudan per cent of Africas global trade. Compare o 5.8% between 2006 and 2011. Capital this with Chinas share of 16.9 per cent. a) and growing demand for consumer tractive industries (e.g., oil from Sudan Owing to the fast paced growth in Africa, e fromdemand Chinawill continue to the past a)imported and growing for consumer two to three years has witnessed a significant boost

Girish V S

AfricaAsia air trade has grown 32% per year AfricaAsia air trade has grown 32% per year
Tonnes in thousands Tonnes 300 in thousands 300 200 200 100 100 0 0 2001 2003 2005 2007 2007 2009 2009

in air cargo traffic between Asia and Africa primarily driven by investment in African infrastructure. At the same time, global demand for Africas oil/gas resources, minerals, and other commodities has soared, generating more wealth in various parts of the African continent. The result has been an increase in African consumer spending on imported goods from Asian countries. What does this entail for the movement of cargo between India and Africa? Do we have the required capacity to handle this increased trade. Or will we see a large part of this trade be diverted to other countries and hubs. Some of the major imports from Africa are gold, diamonds, platinum, copper, manganese and uranium. Diamond, gold and platinum are high value commodities which require special handling. The picture that is emerging is not so reassuring. According to a report from Air Cargo Africa 2013, air cargo from Asia to Africa has seen double-digit growth in recent years. The report goes on to state The growth of exports from Asia towards Africa has been a reality for the past few years. Carriers remain confident that air cargo from Asia to Africa will continue to offer good prospects in the long-term, especially if the recent improved political stability seen in many African countries continues. Chinese investment in parts of Africa has also generated more project-type air cargo such as

2011 2011

Average annual growth, 20012011 2001 2003 2005 Asia to Africa 33.4% Average annual growth, 20012011 Asia to Africa 33.4%

e imported from Chinawill continue to

Africa to Asia 25.6% Africa to Asia 25.6%

both directions machinery and March 2013 26 SCMPrare anufactured goods, and chemicals both directions are machinery and and

Machinery and transport-related goods lead

lead story
telecoms equipment. Demand for air cargo capacity between China and Africa has also provided opportunities for some carriers in the Middle East to exploit their geographical location and win transshipment traffic in the market. A number of major European carriers have also secured a share of the Asia-Africa air cargo market. Rich in natural resources, Africa is emerging as the new destination for investment by the Air Cargo industry. A cursory look at the attention paid to Arica by the worlds airlines is an eye opener. Etihad has taken a stake in Air Seychelles to get a foothold in the Africa-Asia market. Turkish Airlines is bullish on Africa and is creating capacity there. United Airlines is creating capacity for US Africa trade lane. India and Indian carriers seem to be absent from this action.

Trade Imbalance in the African skies for air-freight

n  West

Africa is strong in imports of oil and gas equipment but marginally weak in exports. Africa is strong in imports of all types of cargo and specialized re-export of automotive parts and components. Africa is weak in imports but strong in perishable exports into Europe. is the largest trade partner with Africa (66%) with perishable imports and exports of oil and gas equipment, mining cargo, telecom cargoes, relief shipments, automotive spares and industrial cargoes. East (13%) is an important hub for consolidations from China & South East Asia and imports meat, vegetables and fruits. Intra-African network exists within the hubs of South Africa, Egypt, Ethiopia and Kenya with lack of inter-connectivity between hubs. ntra-African airfreight is based on one-way load factors with I low yields due to the presence of belly-capacity and is based on network traffic.

n  Southern n  East

n  Europe

n  Middle

n  Regional

The African Challenge

According to World Air Cargo Forecast, AfricaAsia air trade is driven by continued Asian investment AfricaAsia air trade has grown 32% per year and African consumer demand. The developing Africa Asia air cargo market has increased 32% per year on average since 2001. Growth has slowed in recent years, Tonnes in thousands however, compared to the tremendous expansion in the first half of the last decade. Air cargo flows are sig300 nificantly imbalanced, with about seven times as much air cargo entering as leaving Africa. 200 Total air cargo tonnage between Africa and Asia grew at an average rate of 65 per cent per year between 2001 100 and 2006. The average rate declined to 5.8 per cent between 2006 and 2011. Capital investment in Afri0 can extractive industries (e.g., oil from Sudan and cop2001 2003 2005 2007 2009 2011 per from Zambia) and growing demand for consumer Average annual growth, 20012011 goodsespecially those imported from Chinawill 33.4% Asia to Africa Africa to Asia 25.6% continue to drive imports to Asia. Major commodities for both directions are machinery and transport equipment, manufactured goods, and
Machinery and transport-related goods lead Africa air trade with Asia
Asia to Africa 207,000 tonnes 5.2% 0.5% 38.6% 55.7% 10.0% Africa to Asia 30,000 tonnes 8.0% 1.3% 48.8%

rs, ar s

31.9%

Machinery and transport equipment Manufactured goods Chemicals and related products

Food and live animals Other

chemicals and related products. Food and live animals account for about 10 per cent of African exports to Asia. Estimation of the size of the AfricaAsia market is complicated by two shipping practices. First, a large portion of Asia-to-Africa freight is transported to the Middle East by containership before being shipped by air to its final destination in Africa. While such sea-air cargo transport combines the advantages of low-cost containership transport with the reliability of air cargo for shippers, it can cause a significant percentage of Asian air cargo to appear to originate from the Middle East. Second, small-scale importers carry significant amounts of Asian goods into Africa in their baggage. While Africa does provide quite a few opportunities for trade lane, it presents quite a number of challenges. A major challenge of the Africa air cargo industry is the trade imbalance. Trade imbalance exists between ChinaAfrica, IndiaAfrica and Middle EastAfrica with air imports exceeding air exports. African airimports are dependent on high commodity prices especially for the oil and mining sector while air-exports of perishables are dependent on the economies of the importing countries. (E.g Euro zone crisis). Moreover, high Fuel Prices combined with overcapacity to and from Africa is driving down yields and profitability. Market Barriers exist in many African countries such as traffic rights, royalties, cargo taxes, customs and excessive handling charges are some of the biggest challenges in Africa. Airport Infrastructure needs to be upgraded for handling cargo. Indian air cargo industry cannot afford to miss the bus. Time we saw some investments into the New Frontier.
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Africa-to-Europe air trade will grow 3.9% per year