Is Africa ready for Open Skies?

It is a rainy Wednesday in January — roughly 10:15am, I’m at the Lagos domestic airport — MM2 on a business flight to Abuja. My usual weekly or every other week 2 day visit to Abuja for business meetings. I had bought two tickets from our domestic carriers, who will be unnamed here. I have a habit of getting two different tickets, so that I have primary, and secondary — because there is a 60%+ chance that the flight will be delayed. And as a business traveler, I don’t have the luxury. I had 2 meetings to complete that morning, before joining another one at 12 noon in Abuja. So, everything has to work like clock work. But no, this is Nigeria, and Murphy’s law of “anything that can go wrong will go wrong”….was a phrase that was coined specifically for Nigeria!

Anyway, as Murphy’s law kicked in, both flights were delayed….and my well laid out plan started to fall apart. I asked my team at AviTech, to see if there is any way we can use Azure machine language ‘starter kit’, and our ADSB device that we use to track all aircraft movement on the Airspace of Nigeria and neighboring countries (uses IoT, and transponders that talk to the aircrafts real-time — pretty cool stuff), in partnership with FlightAware — Can’t we predict the likelyhood that my flight will be delayed? My team asked, do I want them to work on billable, revenue generating work, or non-cash-generating-cool-app-for-the-boss? Well, I’ve learnt to just keep quiet these days. With all the things Nigeria throws at you, there is no luxury to experiment. The morale of the story, is Murphy’s law got me…and I was frustrated, again. #fail. Rescheduled meetings, and reduction of my ambition of things I can get done in one day.

This story leads me to the feeling I got since I got the supposed exciting news that Nigeria and other African countries, have finally signed on to Open Skies agreement — i.e. liberalising your airspace, so that any Airline can operate to and from any of these African countries (to put it in simple terms). On one hand, I was so excited — Kigame, arguably one of the model Presidents of African countries, taking the helm of the AU (Africa Union) as Chairman, has gotten to work already — with a progressive, bold move! But then, on another hand, Murphy slapped me, and reminded me, that, ‘Bunmi, this is Africa, this is Nigeria, we are not ready! wake up’. So, is Africa really ready for the Single Air Transport Market Initiative?

2018 January heralded, a sexy headline….”Single African Air Transport Market approved by Africa Union”….This would seem like a great announcement for the continent. This seems to make sense, after all, the inward-looking rhetoric of the European Union, BREXIT, America first, etc. Shouldn’t we take care of our home, and work with each other, as African countries? This should make a lot of sense, considering Uncle Trumpman. Time is right!

Why wouldn’t Africa want to unite itself more, build active trade corridors, and expand the opportunity to improve intra-continent transactions that could help the 54-country continent achieve more, together. African companies like ours can be encouraged to generate foreign currency earnings outside of pure domestic currency, making our companies more resilient. This makes so much sense! Our local firms will make diversified earnings! Go public on the stock exchange, and consumers can by stock, everyone wins.

This headline seems like it could be the early headlines to validate the hope that Africa is the next Asia…the last continent with massive, untapped, economic powers, with 1.1 billion consumers….will be one fifth of the world’s population by 2025. Open skies could be the stepping stone to ensuring that the freedom of movement of people and goods will feed this consumer market that is about to be unlocked. Economic opportunities, unlocked! Good stuff.

It does appear like a well laid out plan; things are finally falling in place, in a Sector that as far as Nigeria is concerned, has been struggling to survive, since the glorious days of Nigeria Airways! This well laid out plan, thanks to our leader, Kigame, will finally advance the continent agenda of economic transformation. But Murphy keeps pinching me still. So, I was forced to dig further, and deeper.

The SAATM is an initiative of the African Union, with support from IATA, and it seeks to create a liberalized air transport market across Africa, thus increasing access to African countries, increasing competition, thus lowering costs as a result — thus supporting Africa’s economic integration agenda. Let the best man win, whether it’s a Chinese airline (aggressive world domination mode), Qatar (with cash like money), or Ethopian air (already one of the most successful African airlines), or Kenyan, or South Africa…the hungry wolves are all over, ready to come and capture the profit in those countries that have the consumers, and weak local players. In any case, it’s all about the consumers, serve them better, and everyone presumably wins. Only issue here is all of that profit, could be going to some other countries. Afterall, there is the story that MTN global, made $28b profit from founding, to-date from Nigeria. Why not do it all over again? Well, yes, Nigerians were unhappy. And MTN is now listing on the Nigeria stock exchange, so they can partake in the moolah earned from Nigerian consumers. Okay, so we are saying, Open skies, then ensure the policies are in place, so that we don’t export $28b before we realize we need the right policy upfront?

SAATM is being touted as a tool to help grow the Aviation sector across Africa, provide sustainable development, catalyze job creation, and encourage intra-africa travel — which would improve tourism and trade. This makes sense, considering globally, the Aviation sector is seen as a catalyst for economic growth. To underscore this, data from IATA and AFCAC — shows that with SAATM is implemented in 12 countries….300,000 direct jobs, two million indirect and US $1.3b in annual GDP. Of course, for you to actually make the 300,000 jobs happen, there must be the proper Education, preparedness of resources to train those people, so that they will be available, and fit for purpose, when these new entrant airlines come in? The biggest issue in Nigeria today is employers can’t find the right talent….and the so called talent, who are not well trained, can not find jobs. Dilemma. Because we are not ready yet to create world class talent, and we are not ready to confront this. So, it means that these 300,000 direct jobs may actually be from Expatriate quotas, hmmmm.

Why is there a 65%+ chance that my domestic flight will be late…even if I buy two tickets, maybe I reduce the percentage by 20%, making it 45% chance that my flight will be late. Okay, so I haven’t done the actual statistics, but this is the feeling I have. Because many African airlines, or specifically Nigerian airlines have a LOT of issues. That’s a topic for another article another day. But their challenges range from (1) there is no sizeable domestic airline that is well capitalized (impressed that Air Peace seems to be coming up gradually) (2) many airlines have corporate governance challenges (impressed that MedView went public, that’s a good sign they are taking corporate governance seriously) . (3) Airlines have a huge cost of capital; a major part of their expenses is in Dollars, but revenue is in Naira . (4) Aircraft maintenance costs are high, because there are no local aircraft maintenance company (5) Airlines struggle with fees and charges that they say are too high — and this issue is not being discussed. Many more. Needless to say, most of these airlines are losing money, not well capitalized and are not structured for JVs, foreign capitalization, and other tools to make them ready for prime time, to compete with the beasts that are coming in soon, if SAATM works. So, what the government should have done, is to prepare the policies, prepare these airlines, to take advantage of the new Open Skies agreement. Lack of preparation is one of our challenges on the continent.

In Nigeria, as an example, the association of airlines are crying foul and vehemently opposing the implementation of this “Open skies” initiative. They feel that this will create an unfair advantage for the foreign firms, and crush completely the local carriers….the issue here? They weren’t carried along on the journey.

The issues raised in this short article here is simply a microcosm of what is wrong with our country, and our continent. The strategy is brilliant. The blueprint is impeccable. The vision is incredibly awesome. Execution — fail#

The fundamental challenges in Africa, I break down into three challenges:

(1) Leadership — imbibing the spirit of Servant Leadership. Where the leadership is not about self-serving. But about serving the people. With humility. The government personnel negotiating these deals, are here to serve these Airlines. They are here to serve the country consumers. They are here to unlock economic opportunities of Africa.

(2) Long term data driven planning/preparedness ; Data driven governance/decision making — let’s stop taking action based on gut feeling. Let’s put in the work. We are too lazy to put in the work. All we want is the glory. And our decisions are not based on facts, and data…but based on sentiment and our need to be showcased in the newspapers…to be written about. And to be the boss. The Messiah. The Savior. The Leader. Not the Servant. We all want to Lead. We must realize that to lead is to serve…and the Leader is actually the Servant — that must do more of the work, and take more of the shit — to serve the people. Also, embracing data, digital, is the only way to serve effectively.

(3) Sophisticated data driven financial markets and access to credit — Africa must remember that the sophisticated first world countries were created using financial instruments; leveraging their assets; financial engineering; that has its foundation in transparency, financial acumen, strong institutions, rule of law, globally minded policies, and ‘brand image’. These are the things that allow you to unlock global capital. Capital doesn’t care about who you are, it follows returns and profit, good brand, strong institutions, and transparency.

In summary, I love the idea of “Open Skies”. I am divided on the effectiveness, timing, and implementation approach for SAATM in African countries. I question our readiness. If I had my way, I will suspend the policy for 1 year. And will get to work, to carry people along, and create the engine to ensure it benefits each African country participating. I think it can be salvaged.