Is the Single African Air Transport Market a viable business venture for Uganda?

The issue!

The National Development Plan (NDP) III stresses that Uganda’s air transport potential has not been adequately tapped, particularly to unlock the tourism opportunity. Uganda is rapidly developing, and aviation has the potential to play an important role in this journey by connecting the citizens to the rest of the world. In the process, tourism and business opportunities would emerge, fostering job creation and revenue generation.

The aviation industry in Uganda has seen tremendous growth in recent years due to new investments made by the government, including funding for infrastructure upgrades, such as upgrading Entebbe International Airport which begun in FY 2015/16, construction of Kabaale airport and air traffic control centers, and reviving Uganda Airlines, the national carrier, which saw the subsequent purchase of four new aircrafts. However, the industry still faces challenges due to high air transport costs, limiting its usage.

Uganda, like many other African countries, has started exploring the possibility of tapping into the potential benefits of the Single African Air Transport Market (SAATM) initiative. But the question remains, is the SAATM a viable business venture for Uganda? In this blog, I will explore the pros and cons of the SAATM for Uganda, among other things, and examine whether this initiative can truly deliver its promised benefits to the country.

What is the SAATM?

The Single African Air Transport Market (SAATM) is a project launched by the African Union (AU) Agenda 2063 to create a single aviation market in the continent. Its goal is to boost economic growth, create jobs, improve connectivity between African countries, and boost tourism. SAATM was formally established and launched on 29 January 2018 by African Heads of State and Governments as one of the flagship projects of Agenda 2063. This followed the Declaration on establishing a SAATM adopted by the AU Assembly in 2015. The idea of a SAATM started from the Yamoussoukro Declaration (adopted in 1988) and the Yamoussoukro Decision 2[1] (adopted in 1999). Figure 1 highlights the SAATM pillars.

Figure 1: SAATM Pillars

Currently, 80% (35) AU member countries of the inter-Africa transport market are part of the SAATM (Figure 2). However, Uganda is not among the 35 AU member states signed up for SAATM.

The SAATM in practice!

Out of the 35 AU member states that have signed up for the SAATM, 17 have been selected to pilot the initiative. In November 2022, 17 countries: Kenya, Ethiopia, Rwanda, South Africa, Cape Verde, Côte d’Ivoire, Cameroon, Ghana, Morocco, Mozambique, Namibia, Nigeria, Senegal, Togo, Zambia, Niger, and Gabon started to pilot the Single African Air Transport Market (SAATM).

All the 17 countries piloting the SAATM are expected to start aligning their respective air service agreements to the SAATM. The SAATM essentially eliminates the need for separate bilateral air service agreements (BASAs) between individual countries. According to the SAATM handbook, the SAATM supports the free exercise of the first, second, third, fourth and fifth Freedoms of the Air, under which an eligible airline or air carrier from one African State can fly into another African state’s airspace and land on its territory using only a prior notification procedure.

It is important to note that Kenya and Rwanda who are members of the EAC are among the countries piloting the SAATM. These are emulating countries such as UAE, Ethiopia and Singapore that have used aviation as a foundation for a prosperous and more secure future.

In the pilot phase, Kenyan Airways is set to start flying into the capitals of Ghana and Senegal under a “Fifth Freedom of The Air” agreement. The Fifth Freedom [2]flights help an airline fly to more international cities economically. This will give wider options to passengers flying between Nairobi and Accra. The Fifth Freedom flights help an airline fly to more international cities economically. For example, Kenya Airways will make a round trip and cover a route not economically viable for another airline in the region. Strategically, the bigger picture is supporting the SAATM and the African Continental Free Trade Area (AfCFTA), which are critical for Africa’s growth.

Opportunities that joining SAATM present for Uganda

SAATM presented several opportunities that Uganda can tap into, and these include.

• Reduction in air transport fees: Because of more direct flights and creation of alliances with other couriers, the initiative is expected to yield a 25% reduction in fares, increasing traffic (cargo and passenger) for the Uganda tourism NDPIII programme. Additionally, with the expansion of Entebbe Airport and the growing number of airports and aerodrome projects, the reduction in fares will boost the industry’s revenue and contribute to the creation of jobs and thus help achieve the NDP III target of 2.5M jobs by 2025.
• The SAATM is expected to reduce air traffic rights- which cause countries to pay to fly over another country’s air space. The more spaces one covers, the more expensive the airfares. SAATM will help remove such costs.
• Increasing flight routes: Joining SAATM will increase routes for Uganda Airlines and make launching other routes without reciprocal services easy. Uganda Airlines recently reported expanding its route network, now serving 9 countries, 12 destinations, and 13 routes. Under the SAATM, eligible African airline carriers can operate routes based on their economic considerations and without hindrance.
• SAATM will improve connectivity. Connectivity is essential in Africa, where several counties are largely landlocked. Given Africa’s poor infrastructure (road, rail, and port facilities), which continues to hinder economic growth, air transport would be ideal. However, this remains expensive because the continent needs to be more connected regarding air services. This lack of connectivity is causing Africa to lose out immensely on socioeconomic benefits and growth opportunities.
• Boost in Uganda’s trade: Joining SAATM will lower the cost of doing business, thus fostering trade development in Uganda. The cost of transportation of goods is estimated to add about 30-40 to the cost of traded goods in Africa[3].
• SAATM will lead to civil aviation liberalisation thus complementing Government efforts including the development of five regional aerodromes (Arua, Gulu, Pakuba,Kidepo and Kasese) and rehabilitate Entebbe International Airport to promote trade and tourism as part of the NDP III.
• Uganda should consider joining the SAATM as one of the ways of enabling the national carrier “Uganda Airlines”, which is still in its infancy, to achieve its full potential. Joining the SAATM is also a major avenue for revitalizing the tourism sector that was hit and is still recovering after COVID. SAATM will improve the Air transport industry performance and ensure long-term sustainability

  

Potential challenges SAATM poses to Uganda’s budding aviation industry

1. Increased competition: The SAATM will increase competition in Uganda’s air transport market, potentially reducing pricing power and profit margins for the already struggling Ugandan airlines.
2. Regulatory challenges: The SAATM will require Uganda’s aviation industry to comply with new regulatory standards and procedures, which can be challenging and costly to implement. This can create barriers to entry for new players and put pressure on smaller airlines.
3. Infrastructure constraint: The SAATM requires adequate infrastructure to support the growth of African aviation, including airports, air traffic control systems, and ground handling services. Uganda’s aviation industry may face infrastructure constraints that limit its ability to participate in the SAATM fully.

Takeaway

Connectivity is a global reality that Uganda needs to come terms with. Joining the SAATM is a step towards the full liberalization of the continent’s air transport market. It is also evident that as a country we need to advance measures that reduce the currently high transport air charges as these significantly impact on our cost of doing business, inhibit the growth of the air transport sector, which are among the priority programs in the NDP III.

However, we must also be cognizant of the challenges joining the SAATM poses on our aviation industry and the National Courier, including reduced pricing power and potential security risks. Uganda thus needs to have a preparatory process and take necessary steps to counter the likely challenges before joining the SAATM to maximize its benefits of the SAATM.

In conclusion, the SAATM is a viable business venture for Uganda’s aviation industry. However, it requires careful planning, collaboration, and investment from all stakeholders to ensure its success.

 

[1] The Yamoussoukro Decision is a treaty adopted by most members of the African Union establishing a framework for the liberalization of air transport services on the continent.

[2] The fifth freedom, however, is an airline’s “right to fly between two foreign countries on a flight originating or ending in one’s own country.”

[3] Working Paper no. 72: Connecting Africa, Role of Transport Infrastructure.