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BBT July/August 2018
July/August 2018
For Business, Corporate Travel & Meeting Buyers & Arrangers

Destination report: Africa

The African economic outlook report for 2014, produced by the African Development Bank, OECD Development Centre and United Nations Development Programme, showed notably healthy economic growth on the continent. The report projects growth of 4.8 per cent in 2014, and 5-6 per cent in 2015 – this reaches the levels not seen since before the recent global economic crisis.

It predicts foreign investment to be more than US$80 billion in 2014, and notes the Human Development Index – reflecting income levels, health and education – shows 1.5 per cent annual growth, with 15 countries now rated as “medium to very high human development”.

The factors driving economic growth in Africa are varied. Ethiopian Airlines CEO Tewolde Gebremariam cites Africa’s untapped natural resources as attracting foreign investment, including “42 per cent per of the world’s gold, 20 per cent of global oil reserves, 90 per cent of global diamonds and 60 per cent of uncultivated arable land”. Other factors include foreign and internal investment in infrastructure, technological advances and social progress.

Paul East is chief operating officer at Wings Travel Management, which was founded in Johannesburg and specialises in the energy sector. He says: “Africa is undergoing a transformation right now, and the world is definitely putting more focus on the continent – both in terms of private equity investment and natural resource exploration. According to the World Bank, 11 out of the 20 fastest growing countries globally are in sub-Saharan Africa.”

Major growth in flights

So how and where are these changes impacting on travel? John Grant, executive vice-president at leading aviation data specialist OAG, says the number of scheduled flights operated to, from and within Africa has increased by more than 50 per cent over the last decade, with just over one million flights due to operate in 2014.

He adds: “Interestingly, the airports showing major growth in flights are the more central African hubs of Nairobi, Accra and Addis Ababa, where a combination of well-operated locally-based airlines, geographic position and increasing economic wealth are all contributing to an increase in market confidence, and a greater range of destinations and scheduled flights.”

Gary Kershaw, general manager, UK and Ireland, for South African Airways, is also seeing growing demand for business travel. “According to UK Trade and Investment figures, the bilateral trading relationship between the UK and South Africa is worth around £9.5 billion per year – FDI [foreign direct investment] stock shows the UK is the largest single investor in South Africa,”  he says.

Over in west African powerhouse Nigeria, leading carrier Arik Air is also seeing change. “Business travel is increasing rapidly, alongside the growth of the majority of African economies,” says chief operating officer Conor Prendergast. He says this is being driven by “political stabilisation, liberal economic trade access between African member states, and a greater number of airlines popping up offering multiple weekly, or in some cases multiple daily, flights – in turn stimulating demand and creating a more competitive market place.”

Arik has ambitious growth plans that reflect the country’s dynamic economy. Prendergast says the airline’s five-year strategy includes developing Lagos and Abuja as major west African hubs, opening new routes to Asia and doubling its fleet.

Ethiopian Airlines has a similarly dynamic vision. It was the first airline in Africa – and the first country after Japan – to fly a B787, and this year took delivery of its seventh Dreamliner. The International Air Transport Association’s latest airline ranking shows Ethiopian as Africa’s largest carrier by revenue – over $2.3 billion – and profit. The airline’s growth strategy includes building a four-hub network in Africa: the home hub in capital Addis Ababa; a second in Togo in west Africa; a third in partnership with the Malawi government, launched earlier this year; and a fourth in the Democratic Republic of the Congo (DRC). Ethiopia has seen double-digit GDP growth in the last decade, and is attracting a lot of foreign investment, particularly from India and China.

Despite all this aviation growth, flights are an issue for travel managers. Pieter Rieder, global head of energy and shipping sales for ATPI, says: “Prices are high, because of supply and demand. And there’s often no choice – that’s fundamentally the issue. We’ll route people through South Africa, and often do charters up from there.

He adds: “You’re limited in what airlines you can use. Many energy companies, rightfully so, are very strict in terms of embargoed carriers. Another issue is booking seats that are not on the GDSs [global distribution systems] – you can book, but that doesn’t necessarily guarantee you’ve got a seat. This requires relationships with those airlines to ensure your people get on board.”

Development also continues apace in the hotel sector. STR Global’s latest figures show 151 new properties in the pipeline, with a total of just under 30,000 rooms. In northern Africa, Egypt tops the chart, with more than 7,300 rooms, while in the south, Nigeria heads the list with over 4,600 rooms in 26 properties. In April this year, hotel giant Marriott completed the acquisition of South Africa’s Protea hotel group, adding 116 African properties in seven countries to its portfolio, making it the largest hotel group on the continent. Marriott CEO Arne Sorenson said he looked forward to “new opportunities for growth and advancement” across the region.

Don’t go It alone

So what should you bear in mind when managing travel in Africa? Monique Swart, founder of the African Business Travel Association, advises:  “Partner, partner, partner – don’t try to go it alone. Partner with a TMC [travel management company] that totally understands the region, knows what the limitations are, and can find ways around those limitations.

‘Normal’ travel management principles don’t apply in many of these regions, so trying to copy and paste what works elsewhere is a sure-fire way to failure. We see that companies trying to mandate a policy created in the US or UK don’t understand why strategies that work in more developed markets don’t work in many of the African regions.” She adds: “A perfect example is companies that mandate that all payments happen on cards: in Nigeria for instance, they will find this very hard, if not impossible, to make happen.”

Swart has been working with Chris Pouney, founder of Severnside Consulting, on his African research paper, Project Neema, which will be launched at ABTA’s inaugural business travel conference in Pretoria, South Africa, this November. Pouney also cites the challenges around payments. “One of the areas highlighted in the study is that fraud, or fear of fraud drives many organisations when considering payment processes. Many companies issue cash to travellers, or rely on supplier invoicing – there are some markets where issuing credit cards is virtually impossible.”

Wings’ East agrees payments are a key issue. “Credit policies are problematic and, to ensure you remain cash flush, it’s often better not to grant credit. Lack of lodged cards make this very difficult to administer. Lack of technology makes it hard for local travel agents to compete with larger TMCs – hence franchises don't report on clients’ performance. This lack of reporting means corporates do not have line of sight on their travel spend. Lack of BSP [Billing and Settlement Plan] in all markets is also a challenge."

Duty-of-care issues

ATPI’s Rieder says another key factor for travel buyers and their TMCs is health and safety. He says preparation is key, not only to ensure flights, but for medical requirements, such as inoculations and malaria tablets, and duty-of-care arrangements. “The energy companies are very good on the support side, because they typically work with companies like International SOS, and they have their own medical facilities on the ground.”

He says the challenge is with smaller companies that are new to Africa, who may be doing contract work for the big energy firms. “The thing is to get people briefed and prepared,” he says. “We say if you’re going to work for one of those energy companies, make absolutely sure you’re plugging into their resources – for example, their meeting facilities at the airport, so you’re not relying on local transportation.”

ABTA’s Swart says balance is needed on duty-of-care. “We see a lot of companies that are either a bit ostrich-like, and don’t give safety and health risks much thought; or you have those that send eight men armed with AK47s to collect their traveller from the airport. These are extremes – the happy medium is somewhere in between. Obviously for very high-profile travellers, ensuring armed escorts in high-risk regions like Nigeria is important, but for an average business traveller, having this level of security is overkill and ends up just drawing unnecessary attention to yourself. The biggest threat to any traveller in Africa is catching a stomach bug.” 

Paul East at Wings advises: “Insist on a reputable TMC with true local presence – if it’s a franchise, look thoroughly into the capabilities of that partner. Equally important is to listen to your in-country managers. Not only are they key stakeholders but they’re your local subject-matter experts. They will know when it’s beneficial to use someone that operates locally versus trying to overlay a programme created for other regions, such as the US or UK.” And nothing beats personal experience: “One of the best things a travel manager can do is travel to Africa, to better understand the complexities and challenges their own travellers face, and see how a local solution provider can often provide more efficiency in their programme.”

So, a large and complex range of challenges for those responsible for managing travel in a large and complex continent. But avoiding these challenges is not an option. The last word goes to Severnside’s Pouney, who sums up the situation by quoting another expert in the field, Dianna Games, an author and commentator on African economic issues: “‘The risk for many companies now is not being in Africa’”.

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