Satu Dahl examines the air freight market between Europe and Africa, with a special focus on cargo between Europe and two of the fastest-growing economies in the world: Rwanda and Ethiopia

Last year was not a great one for air cargo globally, with demand falling to levels not seen since the financial crisis in 2009. When looking at market performance on a regional volume level, one market is a clear winner though: Africa. It was the only region that didn’t witness a decline. And when it comes to year-on-year figures, the continent saw a strong 2019 full-year performance, with freight volumes expanding 7.4 per cent and capacity increasing by 13.3 per cent in total, according to IATA.

Economic growth is a key contributor for rising demand for aviation services and Africa certainly seems to be growing at an impressive pace. According to Nasdaq, two of the top five fastest-growing countries in the world are from the continent – Ethiopia and Rwanda.

In its most recent world air cargo forecast, which includes estimates for 2018-2037, Boeing notes that air cargo flows between Africa and Europe resumed growth in 2017. Overall, Boeing forecasts that air cargo trade between Africa and Europe will grow 3.7 per cent annually, with the Africa-to-Europe market expected to average 3.2 per cent growth per year and Europe-to-Africa market 4.2 per cent, reflecting both the buying power  of African consumers for goods shipped by air and increased investment in time-critical shipments that depend
on air freight.

The Rwandan connection

Looking at Rwanda, one of the fastest-growing economies in the world, as a case study, it is evident the country’s demand for air freight is growing. RwandAir’s senior manager of cargo services, Gakwaya Bosco explains the airline is seeing high demand on its relatively new Brussels route, which opened in 2017.

“Demand on our new Brussels route has outperformed our expectations. In spite of fluctuating market conditions and a downward trend globally in freight capacity in 2019, exports from Africa continue to buck this trend.” Bosco notes that load factors remain very strong on the airline’s flights to the Belgian capital; the European cargo hub has quickly become an important part of the carrier’s global network as it strives to deliver  the highest standards of air cargo services and connectivity.

Regarding what commodities are mostly shipped from Rwanda to Europe, Bosco shares details of the country’s popular exports. “Known as the land of a thousand hills, Rwanda has long been famous for its coffee and this is a huge export for us. Rwandan blends are becoming increasingly popular across Europe, along with other fresh produce such as flowers.”

Another key market for the country is textiles. “We also ship significant quantities of garments and fabrics, which are in high demand from Rwanda’s thriving textile industry.” Bosco says the import of second-hand clothing has been phased out in Rwanda over the last few years, something that has led to the creation of new local businesses and increased global export opportunities.

Bosco continues: “Pharmaceuticals are one of the biggest imports, including antibiotics, injectable medicines and painkillers for use in the medical sector. Our cargo operations are therefore essential to the supply of high-quality medicine in Rwanda and beyond.” The airline also imports large quantities of construction goods, including building materials, as well as machinery and equipment to support a range of infrastructure projects across the country.

Key markets between the continents

In Europe, destinations seeing the most demand for air cargo from Rwanda are Belgium, UK and the Netherlands. “We are seeing high demand for Rwandan exports in Brussels further to the launch of RwandAir flights and the legacy of strong trading links between Rwanda and Belgium. The UK and Amsterdam are also major import destinations, with strong demand for predominantly fresh produce and goods out of Rwanda,” Bosco explains.

With Rwanda being a landlocked country, no freight operations by sea are possible, resulting in RwandAir’s cargo capacity having a major importance for both the country and the airline. “Given the historical connection between Rwanda and Europe, it is clear that Europe is far and away the largest market for African cargo globally, and demand continues to rise.

“As an airline, we’re always reviewing capacity across our network in line with growth opportunities. The launch of our route to Brussels in 2017 has already added valuable extra capacity between Africa and Europe, and we remain confident in the trading market.”

African ambition

Ethiopia, another fast-growing country in Africa, is the home of the largest aviation group in the continent. Ethiopian Airlines has been operating since 1946 and the airline’s cargo operation, Ethiopian Cargo & Logistics, has an extensive network in Europe, with destinations such as Liège, Brussels, Zaragoza, Milan
and Istanbul.

The airline is eyeing further growth in the cargo market and announced in September that its joint venture with DHL Global Forwarding is scaling its operations in Ethiopia at a time when the country is focused on growing its economy by building industrial parks in key locations to accelerate growth of exports from Ethiopia. The joint venture, DHL-Ethiopian Airlines Logistics Services, offers air, ocean and road freight services as well as value-added services such as customs brokerage.

Ethiopia is one of the key competence centres for DHL’s Industrial Projects – a unit of DHL Global Forwarding that manages complex logistics projects including deep sea chartering activity and heavy-lift cargo. Pramod Bagalwadi, DHL Global Forwarding CEO for Sub-Saharan Africa, explains the reasons for this.

“Since the government aims to achieve an 11% rise in GDP annually under its growth plan, Ethiopia’s focus on export-led industrialisation in sectors like energy, transport, and manufacturing, plus the expansion of physical infrastructure, will see its industrial sector expand by 20 per cent. In order for Ethiopian businesses to seize this opportunity and expand globally,  they need fast, reliable logistics connectivity to overseas markets, backed by industry expertise and high-quality transport infrastructure.”

DHL-Ethiopian Airlines Logistics Services’s general manager Berhanu Kassa sheds light on the company’s current investment. “Over the past 12 months, we have invested in growing the team to full strength and have established three stations in Addis Ababa airport and in the major manufacturing hubs of Hawassa Industrial Park and Bole Lemi Industrial Park.

“Our stations are strategically located for us to be close to where our customers operate, allowing us to achieve time and cost efficiency in our processes. We are also planning to launch a fourth station at the Modjo Dry Port by early 2020 where 95 per cent of the country’s imports and exports pass through.”

Ethiopian Airlines says its cargo and logistics services is seeing increasing export demand out of Ethiopia to Europe, transporting perishable flowers and vegetables through its cargo hubs in Belgium.

Outlook for the years ahead

So, how does RwandAir’s Gakwaya Bosco see the air freight market developing in the next few years? There are a number of factors contributing to the growth of trade in Africa, he explains. Specifically in Rwanda, low labour costs and the development of growth industries and e-commerce, combined with Rwandan government policies to encourage trade and overseas investment, is making it easier than ever before for foreign governments, corporations and investors to do business there.

“The country has seen an increase in investment from overseas in recent years, bringing new technologies and expertise to Rwanda’s thriving economy,” he states. “RwandAir is playing a key role in supporting this growth. Our cargo network provides easy access to the African market with the capacity offered by both our passenger jets and cargo freighters, while the adoption of standard practices has increased the exportation of fresh produce to Europe.”

“Our expanding route network is also opening up new markets all the time, with new destinations to Guangzhou in China and Tel Aviv in Israel last year demonstrating RwandAir’s ongoing commitment to inward investment and fostering improved relations with business partners.”

Restructuring SAA

Other market developments between Africa and Europe include the restructuring of South African Airways. The airline’s cargo division uses belly space of SAA’s passenger flights for cargo carriage and also runs a fleet of cargo aircraft.

South African Airways’ joint business rescue practitioners Les Matuson and Siviwe Dongwana say they have worked closely with key stakeholders to develop a comprehensive restructuring programme. At the time of this issue going to press, a business rescue plan was due to be published in late February. Key measures to be implemented include changes to the route network, including closing the South African Airways Johannesburg to Munich service, scheduled to happen at the end of February.

The business rescue practitioners say that to improve the airline’s liquidity, rationalisation programmes are under consideration for SAA’s subsidiaries, as well as the sale of selected assets.