The growth in air traffic in emerging markets and the need to upgrade, expand and modernize the infrastructure at the majority of the world’s airports over the next decade offers a challenge to Governments in sub-Saharan Africa. Despite most sub-Saharan countries rank airport projects fairly down the lists of priorities, it holds the potential for economic growth. With seven of the world’s fastest growing economies in Africa this decade (IMF), sub-Saharan Africa is looking at how to upgrade its airport operations and infrastructure. Unlike emerging markets in Latin America and Asia where governments have turned to the private sector to develop or expand airports whiles conserving scarce government capital, governments in Africa face challenges in attracting investors in developing its airports infrastructure. The aviation industry is one of the most competitive and risky industries to operate in. This was further heightened after the terrorists’ incidents of 11 September since passenger growth declined in many regions and is beginning to witness some growth. One of the major challenges investors face is that airport projects are public-purpose projects and strategic national assets, hence user fee increases are subject to government approval. However with most airports in Africa, there is the risk of operation cost rising higher than revenues. This is because there is often a currency mismatch due to revenues paid in local currencies and that of debt-service obligations, paid in US dollars, thereby raising currency risk issues. For example some form of revenue generation for airports come from public parking, passenger tariffs, office rentals, outdoor advertising, warehouse rentals, cargo handling and facilities such as hotels. Another major factor investors in airport project consider has to do with passenger volume. This is because passenger volumes or traffic grows with countries GDP growth. This is because in satisfying financiers, the base-case model uses airport traffic in making all the assumptions on satisfying debt-service. A growth in a country’s per capita income often witnesses a growth in airport traffic. Hence a principal risk in financing airport projects in Africa is to do with uncertainties related to the forecasts of passenger growth. Investors in greenfield projects hence seek for exclusivity agreement under which no other airport can function within an area during the concession period. In Latin America and other emerging markets, one of the major challenges that has been witnessed is that all the forecasted growth in passenger traffic failed to meet the minimum forecasted growth rate required to service debt for these new airport infrastructure projects. The three major airport operators British Airport Authority (BAA) plc., Aéroports of Paris and Vancouver Airport Services point out that operation risks of airports are significant because of the interdependence of electricity, security, baggage handling, information display and other systems. Operation risk is greater for new airports than for expansion projects because of the integrated nature, the systems have to be tried and tested to handle the time constraints once the airport starts operations. In sub-Saharan Africa the challenge here is often with interrupted energy supply and contingencies with energy disruptions. Major airport operators hence shy away from engaging in airport operation in Africa because any disruption further affects the cost and increases the risk of delay of passengers and baggage handling. To further add to the worries of some of the airport operators is the low standards of safety and security concerns that they have to deal with in Africa. Country risk affects the attractiveness of these projects in the view of financiers. Despite the strengthening of democratic dispensations in sub-Saharan Africa, recent political happenings in the West African sub region increases the fears of private investors. Most often than not the first infrastructure facility seized by coup plotters are airports and any political insurrection disrupts airport operations thereby increasing the riskiness in airport financing. These shock events affects concession agreements with private operators. A key issue that Public-Private Partnership in financing airport infrastructure projects contends with is the lack of legal provision in concession law in sub-Saharan Africa especially that which has to do with airport concessions. Since financiers critically look at securing cash flow from concessions, the weak regulatory and legal structure hampers the entrance of private participants in this engagement. In emerging markets in Latin America and Europe, many state of the art airports have been constructed and operated by private entities and are some of the airports major airlines compete in gaining advantage over their competitors. Today some airlines have sort for Single Terminal Occupancy in world class airports due to how efficient airport operators handle these airports. Today most travellers in sub-Saharan Africa complain about the high cost in travelling internally or across the continent. This is largely to do with the risks airlines have to deal with in using the available airports and the lack of diversity in air carriers. Domestic airlines do not have enough competition from other players hence the high charges. There is also limited competition from other airports and few internal flights. By improving the airport infrastructure it is expected that internal travels by road and rail which is relatively time consuming and dangerous will be lessened and increase in economic activities within the region. Conclusion With the expected passenger growth and standards needed in the airport industry, there is the need to critically assess the approach to financing to be used and understanding its long term consequences. While Governments remain at the heart of infrastructure service delivery; there is a wide infrastructure investment gap due to budgetary constraints. Hence there is the need in attracting private investors in airport financing to build efficient airports. Airlines will not be interested in operating in such airports on account of low traffic, aviation standards and high fuel costs. Aviation industry has a key contribution to the economic growth of countries in sub-Saharan Africa hence government must set the tone in attracting green investors in this sector. The availability of efficient airports in one’s country is the key in influencing an investor’s decision on whether or not to invest in a particular country since direct flight links helps business leaders in commuting. Ishmael Abeyie is a Project Analyst

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