Many African governments investing millions in vanity projects
ACCORDING to professional airline executive and aviation consultant, Sean Mendis, African governments are investing millions of dollars and 5-10% of their Gross Domestic Products (GDP) to finance vanity projects like airline establishment at the cost of true economic development.
This is just as he said corporate governance as regards to African airlines is determined by the entities who set up airlines in the continent and the major source of their funding with no regard for expertise and almost always conflicting priorities from their investment.
Mendis made these known at the just concluded Aviation Leadership CEOs Forum/ Tower Awards themed: Corporate Governance Structure: A pathway to sustainability in African Aviation where he said governments, high net-worth individuals, conglomerates and others not well versed on how airlines should run or what stands as best practices are those who call the shots in the industry.
He explained that a lot of African airlines are looking for immediate success citing Ethiopian Airlines as example but hardly recognize the fact that it took Ethiopian airlines over 40 years to be seen as a successful airline after the carrier invested a tremendous amount and had support to operate independently from influence.
According to him, it is better left to private sector investors who have a mind set to build sustainable and successful airlines and not government who have a lot of unsuccessful attempts but are looking for immediate gratification and ego stroking.
He said,”Too many African airlines are looking for immediate successes and even half of the airlines I have spoken to who are planning to start national airlines point to Ethiopian Airlines as a reference point, Ethiopian Airlines shows that a national airline can be successful, but at the same time, they don’t realize that it has taken Ethiopian Airline 40 years before they could be considered as a success.
“There were tremendous amounts of investment, there was tremendous amount of support for the independence of the airline to train staff for best practices, to create a generational mindset and skill set that would properly enable that airline become what everyone now considers to be a success story.
“You look at other African airlines, you look at countries investing millions and millions of dollars they probably don’t have to spare given the situation of their economy but these countries are spending 5-10% of the GDP subsidizing what is a vanity project and they are adding external debt, bonds, loans they are getting from abroad and in reality having shining,” he said.
Speaking on corporate governance Mendis said,”Corporate governance especially in Africa, stops at a basic level that is actually; who are the people that are setting up this airlines and where are they getting their funding from? I think the big question, the biggest challenge that African entities that are setting up airlines face is that there is a lack of access to local capital on reasonable terms. That means that most African airlines are funded by entities that lack expertise in aviation and offer conflicting priorities from their investment.
“And some examples are government which has a wide range of priorities and even though they may be owners and operators of national airlines they aren’t always able to take action that are in the interest of the national airline itself when they have so many industries they want to serve. Multi-industry conglomerates, high net-worth individuals who have made money in other industries and have chosen to extend their expertise in the airline sector. Again, these people are not always fully versed on how airlines should run, what best practices are.”
