03 March 2015
Special Report
SA State of the nation address - in full

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Special Report

SA State of the nation address - in full


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Copy of IOL zuma SONA DoC President Jacob Zuma delivers his State of the Nation Address to a joint sitting of Parliament. Pic: Kopano Tlape/DoC.

State of the Nation Address by His Excellency Jacob G Zuma, President of the Republic of South Africa on the occasion of the Joint Sitting Of Parliament

Cape Town,

12 February 2015

The Speaker of the National Assembly,

The Chairperson of the National Council of Provinces,

Deputy Speaker of the National Assembly and Deputy Chairperson of the NCOP,

Deputy President Cyril Ramaphosa,

Former President Thabo Mbeki,

Former President FW de Klerk,

Chief Justice Mogoeng Mogoeng and all esteemed members of the judiciary,

The Vice President of the Pan African Parliament, HE Mr Roger Nkondo Dang,

The Speaker of the National Assembly of the United Republic of Tanzania and Chairperson of the SADC Parliamentary Forum, the Hon Anne Makinda,

Ministers and Deputy Ministers,

Premiers and Speakers of Provincial Legislatures,

Chairperson of SALGA,

The Heads of Chapter 9 Institutions,

Chairperson of the National House of Traditional Leaders,

The former Speaker of the National Assembly, Dr Frene Ginwala,

Their Majesties Kgosi Keru Molotlegi, King Toni Peter Mphephu (Ramabulana),

Kumkani Mpendulo Zwelonke Sigcawu,

Invited guests, members of the diplomatic corps, Honourable members, fellow South Africans,

Good evening, sanibonani, molweni, riperile, dumelang, lotshani, goeie naand, ndimadekwana, !gai//goes.

I would like to thank the Presiding Officers for the opportunity to address the nation this evening.

The year 2015 marks 60 years of a historic moment in our history, when South Africans from all walks of life adopted the Freedom Charter in 1955, in Kliptown, Soweto.

They declared amongst other things, that South Africa belongs to all who live in it, black and white, and that no government can justly claim authority unless it is based on the will of all the people.

That was a powerful, visionary and reconciliatory statement which set the tone for the non-racial democracy we have established.

This week we also mark 25 years since the release of President Nelson Mandela from prison, and since the unbanning of liberation movements.

The release of Madiba marked a giant leap in the long walk to freedom for the people of South Africa as a whole and dealt a fatal blow to apartheid colonialism.

We continue to be inspired by Madiba and draw lessons from his legacy as we build our country.

Compatriots, the year 2015 is the Year of the Freedom Charter and Unity in Action to Advance Economic Freedom.

It is the year of going the extra mile in building a united, democratic, non-racial, non-sexist and prosperous South Africa.

It is also the year of rededicating ourselves to eradicate racism and all related intolerances in our country.

It is also the year of investing more in our future, by educating our children and the youth about the rich heritage of this country.

We are already inculcating a new national identity through promoting national symbols such as the national flag, the national anthem and the preamble of the Constitution in every school.

From this year, schools must also practise the African Union anthem, in preparation for the celebration of Africa month in May, as we implement the African Union decision in this regard.

Honourable Members, distinguished guests, our youth is our future and their success fills us with immense pride.

I would like you to join me in congratulating my special guest, our ace Olympic swimmer Chad Le Clos.

Chad received swimming's highest honour in December after he was crowned the world's best swimmer for 2014, by the International Swimming Federation, amongst many other outstanding achievements.

I am also hosting three special girls from Moletsane High School in Soweto.

They are Ofentse Mahasha, Hlengiwe Moletsane and Tiisetso Mashiloane. Ofentse and Hlengiwe attended the last G20 summit in Australia and performed exceptionally well, making us truly proud.

Allow me also Madam Speaker and Chairperson to congratulate in absentia, another star performer who has brought glory to our country, Miss World, Ms Rolene Strauss.

I would also like to introduce another special guest, the country's Sports Star of the Year and Banyana Banyana striker, Miss Portia Modise. Congratulations Portia.

Honourable Members, distinguished guests, I would like to thank all who took their time to contribute to SONA 2015. In terms of the inputs, our people are concerned about amongst others crime, roads, access to education, youth internship schemes, water, electricity and support for small businesses.

Contributions requiring feedback are being referred to government departments for action.

Honourable Members, distinguished guests, we meet yet again during a difficult economic climate.

This week the IMF revised down to 3.5%, the GDP growth forecasts for global economic growth in 2015.

Our ambition of achieving a growth target of 5 per cent by 2019 is at risk, because of the slow global growth as well as domestic constraints in energy, skills, transport and logistics amongst others.

However, the situation is more promising on the jobs front. Two days ago, StatsSA released the employment figures for the last quarter of 2014.

The report shows that there are now 15.3 million people who are employed in South Africa. Jobs grew by two hundred and three thousand.

Our investment in youth employment is also paying off. The Employment Tax Incentive which was introduced last year directed mainly at the youth, is progressing very well.

Two billion rand has been claimed to date by some twenty nine thousand employers, who have claimed for at least two hundred and seventy thousand young people.

I announced a target of six million work opportunities over five years last year for the programme.

We have thus far created more than eight hundred and fifty thousand (850 000) work opportunities. This means that we are poised to meet the annual target of one million job opportunities.

In addition, our environmental programmes such as Working on Waste, Working for Wetlands, Working for Water and Working on Fire have created more than 30 thousand work opportunities and aim to create more than 60 000 during the next financial year.

Compatriots,

Our economy needs a major push forward. We would like to share with you our nine point plan to ignite growth and create jobs.

These are:

1. Resolving the energy challenge.

2. Revitalizing agriculture and the agro-processing value chain.

3. Advancing beneficiation or adding value to our mineral wealth.

4. More effective implementation of a higher impact Industrial Policy Action Plan.

5. Encouraging private sector investment.

6. Moderating workplace conflict.

7. Unlocking the potential of SMMEs, cooperatives, township and rural enterprises.

8. State reform and boosting the role of state owned companies, ICT infrastructure or broadband roll out, water, sanitation and transport infrastructure as well as

9. Operation Phakisa aimed growing the ocean economy and other sectors.

Compatriots,

The country is currently experiencing serious energy constraints which are an impediment to economic growth and is a major inconvenience to everyone in the country.

Overcoming the challenge is uppermost in our programme. We are doing everything we can to resolve the energy challenge.

Bakwethu,

Uhulumeni wenza konke okusemandleni akhe ukubhekana nesimo sokuncipha kukagesi ezweni.

Siyazi ukuthi lesi isikhathi esinzima, kodwa sizodlula, ngoba sinezindlela yokusebenza loludaba.

We have developed a plan which involves both short, medium term and long term responses.

The short and medium term plan involves improved maintenance of Eskom power stations, enhancing the electricity generation capacity and managing the electricity demand.

The long term plan involves finalising our long term energy security master plan.

As a priority we are going to stabilize Eskom's finances to enable the utility to manage the current period. In this regard, Government will honour its commitment to give Eskom around 23 billion rand in the next fiscal year.

The “War Room” established by Cabinet in December is working diligently around the clock with Eskom, to stabilize the electricity supply system and contain the load shedding.

During this period, we have to work together to find solutions.

We urge all individuals, households, industries and government departments to save electricity in order to reduce the need for load shedding.

The Department of Public Works has been instructed to ensure that all government owned buildings are energy efficient.

Given the high cost of diesel, Eskom has been directed to switch from diesel to gas as a source of energy for the utility's generators.

Households are also being encouraged to switch from electricity to gas for cooking, heating and other uses.

The construction of the three new power stations Kusile, Medupi and Ingula, will add ten thousand megawatts of capacity to the national grid.

The quest for alternative energy sources is also ongoing.

To date government has procured four thousand megawatts from Independent Power Producers, using renewable sources.

The first three bid windows of the renewable energy procurement process attracted more than 140 billion rand from private investors.

A total of 3900 megawatts of renewable energy has also been sourced, with 32 projects with a capacity of just over 1500 megawatts completed and connected to the grid.

Eskom itself has completed the construction of the Sere Wind Farm, which is already delivering 100 megawatts to the grid, well ahead of its intended launch in March this year.

Government also began procurement in December 2014, of 2400 megawatts of new coal fired power generation capacity, from Independent Power Producers.

The procurement process for 2400 megawatts of new gas fired generation will commence in the first quarter of the new financial year.

A total of 2 600 megawatts of hydro-electric capacity will be sourced from the SADC region.

With regards to the long term energy master plan, we will pursue gas, petroleum, nuclear, hydropower and other sources as part of the energy mix.

South Africa is surrounded by gas rich countries, while we have discovered shale gas deposits in our own Karoo region.

The Operation Phakisa Ocean Economy initiative, launched last year, also promises to unveil more oil and gas resources, which will be a game changer for our country and region.

Government is also exploring the procurement of the 9,600 megawatts nuclear build programme as approved in the Integrated Resource Plan 2010-2030.

To date government has signed Inter-Governmental Agreements and carried out vendor Parade workshops in which five countries came to present their proposals on nuclear.

These include the United States of America, South Korea, Russia, France and China.

All these countries will be engaged in a fair, transparent, and competitive procurement process to select a strategic partner or partners to undertake the nuclear build programme.

Our target is to connect the first unit to the grid by 2023, just in time for Eskom to retire part of its aging power plants.

With regards to hydro power, the Grand Inga Hydro-electrical Project partnership with the Democratic Republic of Congo will generate over 48,000 megawatts of clean hydro-electricity. South Africa will have access to over 15,000 megawatts.

For sustainability, Government will establish strategic partnerships for skills development with the countries that will partner us in the Energy Build Programme, while also generating skills locally.

Compatriots,

There are still 3.4 million households in the country without electricity.

In the June 2014 SONA, I announced that infrastructure support will be given to specific municipalities in the country.

Funding has been provided for electrification to the following municipalities in the 2015/16 financial year:

Amathole district Municipality, Umzinyathi District Municipality, Alfred Nzo District Municipality, Lukhanji Municipality and OR Tambo District Municipality.

Fellow South Africans,

While tackling the energy challenges in our country we also need to fight copper cable and metal theft.

Government will introduce tougher measures to deal with this serious crime.

Compatriots

During this year of the 60th anniversary of the Freedom Charter, land has become one of the most critical factors in achieving redress for the wrongs of the past.

Last year, we reopened the second window of opportunity for the lodgement of land claims. More than thirty six thousand land claims have been lodged nationally and the cut-off date is 2019.

We are also exploring the fifty/fifty policy framework, which proposes relative rights for people who live and work on farms. Fifty farming enterprises will be identified as a pilot project.

In terms of our new proposed laws, a ceiling of land ownership will be set at a maximum of 12 000 hectares.

Foreign nationals will not be allowed to own land in South Africa but will be eligible for long term lease.

In this regard, the Regulation of Land Holdings Bill will be submitted to Parliament this year.

Through the Land Reform Programme, more than ninety thousand hectares of land have been allocated to small holder farmers, farm dwellers and labour tenants.

The process of establishing the Office of the Valuer-General is underway, which is established in terms of the Property Valuation Act.

Once implemented the law will stop the reliance on the Willing Buyer-Willing Seller method in respect of land acquisition by the state.

Compatriots,

Agriculture is a catalyst for growth and food security.

We are working with the private sector to develop an Agricultural Policy Action Plan which will bring one million hectares of under-utilised land into full production over the next three years.

Among key interventions this year, we will promote the establishment of agri-parks or cooperatives and clusters in each of the 27 poorest district municipalities to transform rural economies.

An initial funding of R2 billion has been made available for the Agri-Park initiative.

We will further enhance our Agro-processing exports which have been growing rapidly especially to new markets in Africa and China. For example, we have concluded agricultural trade protocols for the export of South African Maize and Apples to China.

The export of apples alone is projected to generate five hundred million rand in foreign exchange over three years.

A good story to tell in agriculture is the success of some of our emerging farmers and smallholders.

In the Vhembe District Municipality in Musina, the Limpopo Government has supported the Nwanedi Cluster comprising 300 farmers growing vegetables on just over 1,300 hectares for commercial purposes.

The Cluster has already created more than 2,500 jobs as vegetable farming is highly labour-intensive.

We are happy to have in our midst today, the winner of the 2014 Agriculture Top Female Entrepreneur Award, Ms Nokwanele Mzamo, from Kirkwood in the Eastern Cape.

Madam Speaker and Madam Chairperson,

Our interventions to support the manufacturing sector are bearing fruit.

Our Automotive Investment Scheme has unlocked private-sector investment of 24.5 billion rand, and generated exports of automotives and components of 103 billion rand in 2013.

We have built a world-class auto sector on the African continent exporting to over 152 countries.

The leather and footwear sector has also grown to 60 million pairs of shoes, and exports grew by 18 percent with significant benefit to the balance of trade.

The United Nations Conference on Trade and Development shows that South Africa doubled its Foreign Direct Investment inflows to 88 billion rand in 2013 while 2014 projections are also positive.

The manufacturing sector was hit hard by the Global Financial Crisis.

Government committed more than 2.8 billion rand to companies in the sector, through the Manufacturing Competitiveness Enhancement Programme.

We are very pleased with the response of our manufacturers who, committed over 12.4 billion rand in private-sector investment. It is a very good story to tell indeed.

In addition, to advance transformation, we have introduced the programme to find and develop Black Industrialists over three years.

Compatriots,

Given such success in manufacturing, we are poised to make progress in our quest to ignite growth.

Madam Speaker and Madam Chairperson,

To attract foreign skills for our growing economy, we will invite dialogue with various stakeholders on the Migration Policy.

We will also prioritise the review of visa regulations to strike a balance between national security and growth in tourism.

Compatriots and friends,

In the June 2014 SONA, I spoke about the need to stabilize the mining sector and to promote a stable labour environment.

We had been concerned then, about the spate of long and sometimes violent strikes.

The implementation of a number of programmes under the Framework Agreement for a Sustainable Mining Industry, has caused relative stability and optimism in the mining sector, which is the backbone of our economy.

Mine Crime Combating Forums have been established in the North West, Limpopo, Free State, Mpumalanga, and Gauteng provinces.

Government will implement the agreements reached with Business and Labour, including the consideration of a national minimum wage.

We had also made a commitment in last year's SONA to revitalise distressed mining towns and a lot of progress has been made.

A total of 2.1 billion rand has been ring-fenced for this purpose with 290 million rand approved for Informal Settlement Upgrading in Mpumalanga, North West, Gauteng, Northern Cape, Limpopo and the Free State.

One hundred and thirty three (133) informal settlements are being assessed or prepared for upgrading through the National Upgrade Support Programme.

Thirty two (32) settlements are being upgraded and eighty seven (87) housing projects are being implemented across the prioritised mining towns.

Importantly, Government, the mining sector and the Banking Association of South Africa signed a Social Contract for the development of sustainable human settlements.

Government also continues to provide social development support within mining communities. Other support includes technical expertise with regards to Integrated Development Plans and the development of Special Economic Zones.

The mining towns are also being assisted with implementing the 'Back to Basics' municipal service delivery strategy.

Indeed a lot is being done to build our mining towns.

Government is also reviewing the compliance of mining companies with the 2014 Mining Charter targets.

I referred the Mineral and Petroleum Resources Development Act back parliament to enable the correction of some constitutional shortcomings and others issues.

Compatriots

Responding to business requests, Government has synchronised environmental impact assessments, water and mining rights applications and has set a maximum of three hundred days for all of these authorisations to be issued.

In addition, we will also establish a one stop inter-Departmental Clearing House to attend to investor complaints and problems.

Fellow South Africans,

The year 2015 will see further improvements in labour legislation to further promote worker rights.

The Labour Department will review the sectoral determinations of agriculture, forestry, private security, wholesale and retail sectors.

We expect the finalization of the Employment Services Act of 2014 which formally establishes a public employment service.

The legislation also formally regulates the practices of private employment agencies and temporary employment services, to prevent the abuse of unsuspecting work seekers.

In addition, the Unemployment Insurance Act of 2001 will be amended to improve benefits to beneficiaries and include public servants in the application of the Act.

Honourable members and distinguished guests,

Small business is big business.

Government will set-aside 30% of appropriate categories of State procurement for purchasing from SMMEs, co-operatives as well as township and rural enterprises.

We will also continue to promote opportunities for the youth.

The National Youth Development Agency has disbursed 25 million rand to 765 youth owned micro enterprises in the last financial year nationally.

The Agency has also partnered with the IDC and the Small Enterprise Finance Agency in a 3-way partnership that has resulted in a 2.7 billion rand fund for young people.

Compatriots,

The year 2015 will mark the beginning of the first phase of broadband roll out. Government will connect offices in 8 district municipalities.

These are Dr Kenneth Kaunda in North West, Gert Sibande in Mpumalanga, O.R. Tambo in the Eastern Cape, Pixley ka Seme in the Northern Cape, Thabo Mofutsanyane in the Free State, Umgungundlovu and Umzinyathi in KwaZulu-Natal, and Vhembe in Limpopo.

Government has also decided to designate Telkom as the lead agency to assist with broadband roll out.

As part of further igniting growth, through supporting state owned companies, processes are underway to implement a 90-day turnaround strategy aimed at stabilizing the finances of South African Airways.

Accordingly, some of the loss making international routes will be phased out.

But, we will do this in a manner that does not impact negatively on travel, trade and tourism between South Africa and the world.

Compatriots,

The National Infrastructure Development programme continues to be a key job driver and catalyst for economic growth.

Water is a critical resource for economic growth and a better life. Several projects aimed at providing water for industrial and household use are in the implementation or planning phases around the country.

Major projects include Umzimvubu Water project in the Eastern Cape, Jozini Dam in Umkhanyakude in KwaZulu-Natal and projects in Bushbuckridge in Mpumalanga and phase one of the Mokolo Crocodile Water Augmentation in Limpopo.

Progress is being made to improve the water supply to areas that had been affected by shortages, such as Makana District Municipality in the Eastern Cape, Ngaka Modiri Molema District Municipality in North West and Giyani in Limpopo where we celebrated the delivery of water to 55 villages in October last year.

Let me Honourable Speaker and Chairperson urge all in the country to conserve water. Every drop counts. The country loses seven billion rand a year to water losses.

To mitigate this challenge, Government through the Department of Water and Sanitation will train fifteen thousand artisans or plumbers who will fix leaking taps in their local communities.

We are happy to have as our special guest, the winner of the Women in Water conservation awards, Ms Mapule Phokompe from Mahikeng in North West.

Compatriots,

The infrastructure programme continues to expand transport networks and to improve roads which augurs well for economic growth.

The Department of Transport will spend about nine billion rand on the Provincial Roads Maintenance Grant or the Sihamba Sonke Programme and 11 billion rand on upgrading and maintaining roads which are not tolled.

Over six billion rand will be spent in 13 cities on planning, building and operating integrated public transport networks during this financial year.

We will also continue to improve the infrastructure in schools and higher education institutions to create a conducive environment for learning and teaching.

Through the Accelerated School Infrastructure Delivery Initiative which is part of the national infrastructure plan, ninety two (92) new schools have been completed to date and 108 are under construction.

About three hundred and forty two (342) schools have received water for the first time.

Three hundred and fifty one (351) schools have received decent sanitation while two hundred and eighty eight (288) have been connected to electricity.

Siyaqhuba. Siyasebenza. We are a nation at work.

Government has identified 16 sites for the construction of 12 new Technical and Vocational Education and Training College campuses and the refurbishment of two existing campuses.

Work is also continuing to establish the three brand new universities, Sol Plaatjie in the Northern Cape, the University of Mpumalanga and the Sefako Makgatho Allied and Health Sciences University.

Honourable Members,

We continue to deliver houses to our people. By 30 September 2014, a total number of more than fifty thousand houses were delivered in the subsidy and affordable housing segments.

Government will also provide 5000 housing opportunities for Military veterans. Government will also work to eradicate the backlog of title deeds for pre and post 1994 housing stock.

Madam Speaker and Madam Chairperson

We have in the past year introduced some innovative programmes to implement the National Development Plan.

Last year we launched Operation Phakisa, a results-driven laboratory approach to planning and execution of programmes.

Operation Phakisa on the ocean economy is aimed at unlocking opportunities in the shipping, fisheries, aquaculture, mining, oil and gas, bio-technology and tourism sectors.

We have committed 9.2 billion rand investment in gas and oil exploration in the port of Saldanha as part of the Operation Phakisa initiative.

Operation Phakisa on Scaling Up the Ideal Clinic Initiative is aimed at promoting efficiency, effectiveness and professionalism in clinics.

We will now explore Operation Phakisa in the mining sector. I have instructed Government to partner with the mining sector to develop win-win solutions to beneficiate our mineral resources.

Compatriots and friends,

Over the past five years, government has scored significant gains in health care.

This year, we are going to launch a massive programme to turn the tide against tuberculosis (TB), with a special focus on three communities, offenders at Correctional Services facilities, mineworkers and communities in mining towns.

In fighting the scourge of HIV and AIDS, the state-owned pharmaceutical company, Ketlaphela, has been established and will participate in the supply of anti-retrovirals to the Department of Health.

Madam Speaker and Madam Chairperson,

We have to continue working harder together to fight crime and to create safer communities.

We are making progress in fighting crimes against women and children.

The SAPS Family Violence, Child Protection and Sexual Offences Investigation Unit has secured 659 life sentences against perpetrators of crimes against women and children.

We are a democratic state and recognise the community's right to protest. We however appeal that these protests should be within the ambit of the law and must be peaceful as stated in the Constitution.

The police successfully brought under control thirteen thousand five hundred and seventy five (13 575) recorded public order incidents, comprising one thousand nine hundred and seven (1 907) unrest-related and eleven thousand six hundred and sixty eight (11 668) peaceful incidents.

The fight against corruption continues to be taken forward by the Anti-Corruption Inter-Ministerial Committee.

Government has in place seven anti-corruption institutions and seventeen pieces of legislation which are intended to combat corruption. This demonstrates a concerted effort by government to break the back of this scourge in the country.

In the 2013/14 financial year, 52 persons were convicted in cases involving more than five million rand.

Thirty one public servants were convicted in the first quarter of 2014/15 and freezing orders to the value of 430 million rand were obtained.

To prevent corruption and promote ethical governance, in December I signed into law the Public Administration and Management Act which amongst others prohibits public servants from doing business with the State.

Compatriots, Cabinet has adopted vigorous and integrated interventions to combat the vicious rhino poaching in the country.

The interventions include continuous joint operations with key neighbouring countries, improved intelligence gathering as well as enhancing protection in parks and provincial reserves where rhino are present.

Government has also made substantial progress in establishing a Border Management Agency, to manage all ports of entry and improve security.

To further improve access to identity documents, citizens will from this year be able to apply for the new Smart ID Card at their local bank due to partnership between the Department of Home Affairs and some banks in the country.

Madam Speaker and Madam Chairperson, building a caring, effective and responsive state will continue to be prioritized.

In the 2014 SONA, I said we would continue to advance and improve the lives of people with disabilities. In December last year, Cabinet released the draft National Disability Rights Policy for public comment.

Compatriots, local government is everybody's business. We have to make it work.

We have launched the Back to Basics programme to promote good governance and effective administration through cutting wastage, spending public funds prudently, hiring competent staff, and ensure transparency and accountability in municipalities.

The Integrated Urban Development Framework announced in the SONA last June, has been approved by Cabinet.

Fellow South Africans, to contribute to building a better Africa, South Africa continued to support peace and security and regional economic integration in the continent.

A number of key outcomes have resulted.

The African Capacity for Immediate Response to Crises (ACIRC), of which South Africa is a contributing and founding member has been operationalised.

The South African National Defence Force and SA Police Service continued to participate diligently in the conflict prevention and peacekeeping in the continent.

South Africa also continued to support conflict resolution initiatives in Lesotho, Sri Lanka and South Sudan, led by the Deputy President.

Economic cooperation with our BRICS partners was strengthened when the first two intergovernmental agreements were concluded on the occasion of the sixth BRICS Summit.

This was the Agreement on the New Development Bank and the Treaty Establishing a Contingent Reserve Arrangement.

Madam Speaker and Chairperson, countries of the developed North remain important strategic partners for South Africa through which the country is able to advance its national and foreign policy.

We have a valuable partnership with the European Union in amongst others, the infrastructure Investment Programme for South Africa valued at approximately 1,5 billion rand.

The renewal of the African Growth and Opportunity Act beyond September 2015 and a pledge to support African-led peace initiatives in the continent are among the significant outcomes of the United States-Africa leadership Summit held in the US last year.

Compatriots, at a multilateral level, 2015 marks the 70th anniversary of the United Nations which brings into sharp focus the need to transform the UN Security Council and other international institutions.

Compatriots,

National liberation heroes, Moses Kotane and JB Marks will be reburied in South Africa in March. We thank the government and people of the Russian Federation for looking after the remains of our heroes with dignity for so many decades.

In sports, Team South Africa will participate in the All Africa Games in Congo Brazzaville in 2015.

The Springboks will participate in the IRB World Cup that takes place in England in September 2015.

The Proteas are in Australia and New Zealand to participate in the International Cricket Council Cricket World Cup. All South Africans must as usual, rally behind the national teams.

We will continue to promote healthy lifestyles and to urge citizens to refrain from smoking and the abuse of alcohol and drugs.

In this regard, on the 10th of May we will mark the Move for Health Day, an international event promoted by the World Health Organisation. The day also coincides with the anniversary of the inauguration of President Mandela.

Compatriots, fellow South Africans, a lot has been achieved in the past year. We believe that our nine point economic intervention plan on the economy will consolidate the achievements, and ignite much needed growth.

During this year of the Freedom Charter and Unity in Action to Advance Economic Freedom, we rededicate ourselves to unity and hard work, to ensure continuous success in our beautiful country.

Together we move South Africa forward!

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Diminishing Growth of African Airlines

16 Jan 2015

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Chief Executive Officer of Ethiopia Airlines, Tewolde Gebremariam

Chinedu Eze writes that the failure of African nations to embrace open skies for the region’s airlines as enunciated by Yamoussoukro Declaration would perpetuate the dominance of European airlines in the continent.


Adressing journalists who attended the Aviation Media Day of the International Air Transport Association (IATA) on December 10, 2014, the Director-General and CEO, Tony Tyler expressed concerns that many years ago after African nations came up with a lofty policy to open their sky to indigenous airlines in the Yamoussoukro Declaration, they have failed to implement that policy
over a decade after.

African states met on November 13 and 14, 1999 in Yamoussoukro, Ivory Coast to ratify the decision to eliminate restrictions and open their skies for airlines owned and operated  in the continent.

The ratification followed the Abuja Treaty, which was the establishment of the African Economic Community. The Article 61 of the Treaty related to the integration of air transport in the continent and Article 10 of the Treaty related to the authority of the Assembly of Heads of State and government to adopt the decision.

On October 7, 1988, African states recognised the objectives of the Yamoussoukro Declaration, which primary purpose was to create a conducive environment for the development of intra-African and international air services.

Also in September 1994, African ministers responsible for civil aviation met in Mauritius and urged the acceleration of the implementation of the Yamoussoukro Declaration, especially those relating to granting of traffic rights and regional cooperation in air transport and the role of governments in implementing the policies.

So, the objective of the Declaration was to harmonise air transport policies in order to eliminate non-physical barriers that hamper the sustainable development of air transport services in Africa.

Little wonder therefore that Tyler was surprised that after these efforts and more than 15 years after its adoption, Africa was yet to implement the Yamoussoukro Declaration (also known as Yamoussoukro Decision).

Gains of the Declaration

African airline operators believe the implementation of the Yamoussoukro Declaration will help to sustain the airlines and make them profitable. It will also help the airlines to dominate the African airspace, which is presently under the control of foreign airlines, especially European carriers.

According to IATA, greater air connectivity in Africa would stimulate wider-spread economic and social prosperity on the continent. It said, to achieve this, air rights for intra-African flights should be liberalised.

Speaking to Ethiopian and African Union air transport policy makers, regulators and industry representatives on its recently commissioned study, IATA said indications had shown that Africa was well-placed to enjoy sustained economic growth, but that, with notable exceptions such as Ethiopia, this was being held back by tightly controlled access to markets for African airlines within Africa. That was the conclusion of the study titled, “Transforming Intra-African Air Connectivity, the economic benefits of implementing the Yamoussoukro Decision”.

The global body said these restrictions to connectivity result in lost opportunities for job creation, business and GDP growth, innovation and competitiveness.

“It also weakens the performance of many African airlines. In December IATA issued its 2015 forecast, showing African airlines are expected to report a combined US$200m net profit representing a 1.4 per cent profit margin on revenues – the lowest of all regions worldwide.

IATA noted that Ethiopia’s pursuit of more liberal reciprocal bilateral air transport agreements with other African nations has contributed to becoming one of the largest and most profitable airlines in Africa and one of the fastest-growing air traffic in the world.

“Research has found that on intra-African routes with more liberal bilaterals, Ethiopian’s benefit from 10-21 per cent lower fares and 35-38 per cent more flights on routes compared with those which were still restricted,” explained IATA’s Vice President for Africa, Raphael Kuuchi.

“Increased intra-African air connectivity is essential if Africa is to seize the opportunities for growth promised by its demographic and resources advantages. Aviation in Africa supports nearly 7 million jobs and $80 billion in GDP, but it faces challenges in terms of liberalization of markets, safety, costs, infrastructure and regulation. Only through industry and governments working hand-in-hand can these challenges be overcome, to the benefit of everyone across Africa,” added  Kuuchi.


Regional Partnerships

The Chief Executive Officer of Ethiopia Airlines, Tewolde Gebremariam said last week during an interview with selected Nigerian journalists in Addis Ababa that thus far Africa has not encouraged regional partnership in the aviation sector as much as it should.

“Now, with a renewed initiative in the Yamoussoukro Declaration we do hope that the African heads of states would declare that Africa should have a single sky, a single aviation policy, a single aeronautical policy, whereby African carriers can cooperate, African countries can cooperate to double up their aviation sector with free access to their markets to African carriers."

He said what the airlines in the continent basically expected from such meetings was full implementation of the Yamoussoukro Declaration on one hand, which means that the African airspace would be treated as a single airspace.

“So, any African carrier will be able to fly from any point to any point without any restriction in the continent. The second objective which we are pushing as African airlines, the African Airlines Association (AFRAA) and the African Civil Aviation Commission (AFCAC), which is headed by a Nigeria lady, is to formulate an aviation policy, single market for Africa which will have the same community clause as the European Union has today.”

Gebremariam explained that Yamoussoukro Declaration should create open skies policy that is similar to that of the European Union member states which treat the European airspace as a single market in order for them to have full freedom of the air for their airlines within the European Union, but that when it comes to air services agreement negotiation between member states of the European Union and other countries outside the European Union, the European Union will act as a single market.

“For instance, today as it is, if one of the European Union member country airline wants to fly to any country in Africa; in the air services agreement there will be a clause mandating the European airline to fly to that country through any other European country. For instance British Airways can fly to Addis through Paris with the European Union community clause. But unfortunately Ethiopian Airlines or Kenyan Airways or Aril Air will not be able to fly to European countries through other African countries which doesn’t have an airline,” the Ethiopian CEO said.

He further explained that an African airline may not be able to land in any other country if it is operating, say, from Paris to the Chadian capital, considering the existing air service agreements.

“While AirFrance will be able to fly to Addis Ababa through one of the member countries in Europe, an African airline may not have such opportunity in Africa. So, it is this kind of block to block, the African Union as a block, and the European Union as a block, block to block negotiation should be there to make it competitive and create level playing ground for everybody,” he said.

Unfair Competition in Africa

Gebremariam said the failure to implement the Yamoussoukro Declaration has given rise to unfair competition in the African market whereby foreign European carriers take advantage of the existing flight restrictions in the continent to exploit the market. This is because while the African nations open their door to European airlines, they restrict their skies to the airlines owned by their African neighbours.

“So, because of lack of these two policy instruments, the first one is the Yamoussoukro Declaration and the second one is what I explained now, what we see today is unfair competition in the continent. And the result of it is that 80 per cent of intercontinental traffic between African and the rest of the world is carried by non-African carriers, only twenty per cent is carried by African carriers and this is lopsided and it has to be corrected. And in other to correct this imbalance and unfair competition, it is necessary to enact those two instruments that I explained before. And I hope and I wish and I sincerely hope that Nigeria will lead the change because Nigeria is a big aviation market; she is the most populous country, the largest economy now in the continent, so Nigeria has a lot of ways to drive this initiative,” Gebremariam said.

Reluctance to Embrace the Declaration

It  is not all the countries in the continent that are enthusiastic about the implementation of the Yamoussoukro Decision and that is why the policy has not been implemented all these years. Some countries that do not have developed aviation system feel they are being exploited by other African countries, with developed airlines. Unfortunately however, these countries open their doors for European, Middle East and American airlines while they protest against the operations of African airlines.

This attitude has historical bearing. Many countries that were colonized by European countries naturally allowed the carriers of those countries to operate to these African nations. The domination of these European carriers is even pre-colonial and it has remained so, even when some African countries established their national carriers after independence.

Deputy Managing Director of Arik Air, Captain Ado Sanusi told THISDAY that the concept of Yamoussoukro Decision was good but there were problems. One of these problems is that some African airlines use the unrestricted market to exploit other countries. For example, Sanusi noted that Ethiopian Airlines established Asky in Lome, Togo exploit the Nigerian market. At the same time it avoids any commitment to the country where it airlifts the highest number of passengers from the continent.

But Gebremariam said that the objective of Ethiopian Airline is to provide connectivity to African passengers, no matter where they are, without hassles.
However, Sanusi noted: "The YD has not provided everybody with a level playing field. It gives advantage to countries like Kenya Airways and Ethiopian Airlines which have developed airlines which they use to exploit other African countries that do not have well established airlines. These countries use their airlines to develop their tourism at the expense of other African nations. They put a lot of money in their airlines which provide the vehicle for the development of other industries like tourism.

“Look at Rwand Air, the government of Rwanda knows the airline is not making money but it is providing the capacity which other industries, including the tourism industry are, using to make money”.

The question that is being asked is, since it  has become inevitable that even if the African carriers do not benefit from the air travel markets in the region other airlines would, is it not better that African airlines are given the chance by their sister nations to utilise the market and develop and grow?





Top hijacking and car theft hotspots in SA

VEHICLE-RELATED CRIME

Pricing the risk of not insuring

After a downtrend over the past 15 years, vehicle hijackings are on the rise again heading for 1 000 cars and 100 trucks a month. That’s apart from 4 750 cars and motor cycles being reported stolen each month, according to new statistics. Can you afford not to insure?

By Udo Rypstra•   

 “Crime expands according to our willingness to put up with it”. This is a quote from Barry J. Farber, a well-known American motivational speaker of the 1930s-era, and the  SAPS used it to introduce the latest South African national crime statistics for 2013/14 - statistics which show that vehicle theft, hijacking and other vehicle -related crimes are on the uptake again. 

Although nine months old now, they show a long-term pattern
and a shift to mall attacks that has manifested itself recently.
Thhe statistics show that the risks have been rising again affecting people using their own or a company car, as well as those who drive a fleet owner's taxi, bus or  truck to earn a living .

There are about 1118 precincts (police stations) in South Africa and 29 different crime categories which the South African Police Service reports on.  The stats released only deal with 17 “priority” crimes, of which six have increased in incidence while 11 have decreased.

They indicate that over the last ten years, more than 25 million “priority” crime cases have been reported starting with 2.67 million crime cases reported at a rate of almost 7300 per day in 2004. But  the overall annual rate has been diminishing with “only” 2.24 million crimes having been reported for the twelve months April 2013 - March 2014, which means that up to nine months ago, an average of 6149 crimes were reported by the SAPS everyday day! 

HIGH-RISK PROVINCES - General Crime


Of these, police stations in the smallest but densely populated province of Gauteng reported the highest number of 647 409 criminal priority cases (28.9%), followed by the Western Cape with 486 939 cases (about 22%) and Kwazulu-Natal (KZN) with 348 961 (almost 16%). This makes these three provinces jointly responsible for more than 66% of all alleged “priority”crime in SA.

 

Province                   Number of General Crime Cases  

Gauteng                         647 409

Western Cape                486 939

Kwazulu-Natal                348 961

Eastern Cape                 212 796

Free State                      132 606

Limpopo                         126 119

Mpumalanga                  120 204

North West                    117 913

Northern Cape                50 485

 

General Crimes: Worst ten precincts in 2014

 

Precinct                                 Province                   Number of Cases

Mitchells Plain                       Western Cape                  25 575

Cape Town Central               Western Cape                 18  369

Durban Central                     KZN                                  16  401

Johannesburg Central          Gauteng                           14  791

Park Road                             Free State                        14  526

Honeydew                            Gauteng                           13  561

Pretoria Central                    Gauteng                           12  682

Utrecht                                 KZN                                   12  068

Rustenburg                          North West                        11 657

Kraaifontein                         Western Cape                   11158

Truck hijacking - Up 12.1%

Way back in 1994, when South Africa became democratised, the extent of the hijacking of trucks and cars (carjacking) was not reported. These cases formed part of the overall number of cases listed under the single category of aggravated armed robbery. But these hijacking cases became so rife that it prompted  the Crime Information Analysis Centre (CIAC) of the South African Police Service (SAPS)  to start reporting statistics of both crimes as separate sub-categories of aggravated robbery from 1997 onwards.

Robbery with aggravating circumstances - this category now includes sub-categories such as truck hijacking, carjacking, as well as residential and non-residential robbery, which have increased overall by 10.8 percent.

In a surprising development, bank robberies saw a decrease of 77.4 percent over a five-year period, but increased by 300% from seven incidents in 2012/13 to 21 in 2013/14.

However, the robbery of cash-in-transit vehicles stabilised at 145 incidents in the reporting period.

The SAPS says that it hopes that the integrated partnerships with businesses and the banking sector will go a long way to address these crimes.

Truck hijacking


The CIAC reported 3732 truck hijacking cases in 1996/7 which nearly doubled to a peak of 6134 two years later (1998/9), or almost 17 trucks per day or 118 per week.

Truck hijacking was so rife at that stage that it prompted the launch of Pat O’Leary’s FleetWatch magazine which identified risk areas and risk management techniques, such as the use of many vehicle tracking, monitoring and recovery systems that appeared on the market.

It’s most probably through vehicle tracking systems and the establishment of anti-hijacking police units that reported cases reduced by almost half to 3 333 in 2001/2 and,  from 2002/3 onwards, suddenly dropped even more to under 1 000 for a few years.

There was a “hick-up” in 2007/8 when it rose to 1 245 peaking during the height of the global recession at 1 437 in 2008/9 before settling well under the 1 000 mark again at 886 in 2012.

However, in 2013 the stats went up again to 943 and they rose further to 988  in 2014 – which translates to almost 20 trucks per week or into a further, alarming, 12.1 percent year-on-year increase.

Which raises two initial questions: firstly, which routes are the most prone to hijackings and, secondly, where are the “hot spots”?

 TRUCK HIJACKINGS BY PROVINCE

Province                   Number of cases

Gauteng                           545

Mpumalanga                    197

Free State                         71

North West                       46

Kwazulu-Natal                  46

Western Cape                  40

Eastern Cape                   31

Limpopo                           13

Northern Cape                   0

Total                               989

 

Routes

The latest statistics reveal that most of the 988 truck hijackings during the year under review took place along the long-distance N3/M1 interprovincial Durban-Harrismith- Heidelberg-Johannesburg-Midrand-Pretoria route that runs through KZN, the Free State and Gauteng to and from the warehouse depots at City Deep (near Johannesburg CBD) and Midrand (near Pretoria CBD).

As usual, most trucks along that corridor were hijacked in Gauteng (545) where the risk is more than seven times greater than in the Free State (71) or almost 12 times greater than in KZN (46) or any other province in SA.

The N4 through Mpumulanga (197) to Nelspruit and Komatipoort on the way to Maputo, Mozambique, poses the second biggest risk.

Police and various newspaper reports about separate hijacking incidents suggest that trucks being hijacked are mostly truck-trailer combinations prized for high-value cargo such as fuel, cigarettes (between R500 000 and R10m-plus per load), electronics or just baby and other food that sells easily in impoverished township communities.

According to the same sources, the modus operandi by what are mostly syndicates or gangs often pretending to be policemen with fake “blue lights” police cars and motor cycles, by hitch-hikers (with accomplices hiding among roadside bushes), overpowering drivers at main intersections or while they are asleep at truck stops or resting somewhere along the road.

Hot spots

Truck hijackings have to be reported to the nearest police station (precinct) where the crime took place, therefore stations with high numbers ofhijack  cases provide a clue where hotspots are.

The Heidelberg police station (40 cases) in Gauteng, currently reports “high occurrences” of truck hijackings on the N3 between the De Hoek Plaza at Villiers and Vosloorus on its website. So does Durban-based short term insurance brokers Esbrokers, but which has extended the risk zone up to Zonkisiwe (near Midrand).

A particular hotspot in Gauteng appears to be the so-called “Truck City” area in and around Alberton, which is located close to the dry port of City Deep in southern Johannesburg. Suburbs and townships surrounding OR Tambo International Airport are also used as launch pads.

The police and Esbrokers also report a high incidence in Mpumalanga between Benoni and Emahleni on the N12/N4 freeway to Komatipoort.

A worrying aspect is that senior police officers are believed to be fighting each other for control of truck hijacking syndicates threatening the transport industry.

In June, the Star reported that several highly placed police sources confirmed that at least two police generals, whose names are known to The Star, are under investigation for using their subordinates to orchestrate hijackings and resell the stolen goods. This was after police had arrested four suspects for truck hijacking and possession of stolen goods at Crystal Road in Booysens, using the “blue lights” technique.

One of the suspects was a police officer, a sergeant of the Johannesburg Flying Squad, who was off duty at the time, according to Gauteng police spokesman Lieutenant-Colonel Lungelo Dlamini.

 Worst ten precincts in 2014

 

Precinct                   Province                   Number of cases

Heidelberg              Gauteng                            40

Alberton                  Gauteng                            34

Vosloorus                Gauteng                            27

Zonkizizwe              Gauteng                            26

Grootvlei                  Mpumalanga                     25

Delmas                    Mpumalanga                     23

Harrismith                Free State                        22

Kempton Park         Gauteng                            18

Witbank                  Mpumalanga                     18

Benoni                    Gauteng                            16

 

Carjackings




 

More worrying than truck hijacking is the incidence of carjacking, which fluctuated between 12 912 vehicles in 1996/7, reached a peak of  15 846 in 2001/2  and came down to 14 691 in 2002/3.

Since then the stats have been fluctuating between 13 793 in 2003/4, peaking  at 14915 units in 2009  before coming down appreciably to 9 540 in 2012.

But since then reported cases have been steadily rising again to 9 988 in 2013 and 11 204 in 2014 – a 12.3 percent increase – or more than 30 vehicles a day.

More than half of them (6 057) were reported in Gauteng, where your chances of losing your car in your driveway, at a mall, intersection or highway off-ramp are almost three times higher than in KwaZul Natal (2219) and six times higher than in the Western Cape (944), where criminals also place stones on the Cape Town airport freeway.

In fact, carjacking has gone up by 22 percent in Gauteng and 21 percent in the Western Cape alone.

 

By Province                          Number of Crimes

Gauteng                                6057

Kwazulu-Natal                       2219

Western Cape                         944

Eastern Cape                          756

Mpumalanga                           365

Free State                              259

Limpopo                                 258

North West                            242

Northern Cape                         29

 

 

Worst ten precincts in 2014

 

Precinct                                 Province     Num Cases

 

Booysens                              Gauteng        224

Mpumalanga station             KZN               203

Moffatview                            Gauteng       157

Roodepoort                          Gauteng        138

Rietgat                                 Gauteng        121    Near Hammanskraal

Dobsonville                          Gauteng        118    Part of Soweto

Dawn Park                           Gauteng        117    Close to Vosloorus

Chatsworth                          KZN              113     Near DBN

Springs                                Gauteng        110

Ntuzuma                             KZN                108    Near DBN CBD


                                                           

 

Gauteng

 

The precincts of Booysens and Moffat View are part of a Johannesburg-South cluster of eight police stations also including Mondeor, Johannesburg Central (formerly John Vorster Square), Sophiatown, Brixton, Langlaagte and Fairlands.

The following 30 hijacking hotspots have been identified by the Topix Works website in Gauteng, as published by the Roodepoort Herals and Moneyweb:

•The William Nicol Drive off ramp from the N1 from the Sandton side.

• The corner of Old Pretoria Road and 1st Avenue in Alexandra.

• New Road off ramp in Midrand.

• Riviera Road off ramp near Killarney Mall.

• Intersection of Christiaan de Wet Road and Wilgerood Road in Roodepoort.

• All the traffic lights along Louis Botha Avenue between Alexandra and Hillbrow.

• Parkwood and Saxonwold (Rosebank precinct).

• Upper Houghton and Killarney (Hillbrow precinct).

• Between 10th and 11th avenues and 4th and 7th avenues in Parkhurst (Parkview precinct).

• Glenhazel, Lombardy East and Sandringham (Sandringham precinct).

• Orange Grove and Highlands North (Norwood precinct).

• Yeoville, Bellevue and Bellevue East (Yeoville precinct).

• Wynberg, Bramley, Marlboro and Kew (Bramley precinct).

• Outside Megawatt Park.

• The corner of Kelvin Street, Pretoria Road and CR Swart (Kemptonpark precinct).

• The corner of Elgin Road and Pretoria Road (Kemptonpark precinct).

• Linksfield Road off ramp.

• Booysens Road off ramp.

• Nelson Mandela Bridge.

• Wolmarans street.

• The corner of Harrow Street and Abel Street.

• The corner of Able and Saratoga Street and Harrow Road.

• The corner of Jan Smuts Avenue and St Andrews.

• The corner of 17th Street and Krause Street Pageview.

• Heidelberg off ramp.

• Traffic light on Kyalami Drive.

• Beyers Naude off ramp.

• Rivonia off ramp.

• Midrand Road.

• Grayston 11th Street and Rivonia intersections.

• Jan Smuts Avenue and William Nicol Drive split in Hyde Park.

Theft of motor vehicle and motorcycle

Motor vehicle theft (including motor cycles) cases totalled 811 347 over the ten-year period and has been on the decrease almost year-on-year since 2004, when 88 144 units were stolen until 2014, when only 57 178 were stolen compared with 58 312 the previous year.

By Province                                      Number of Cases

Gauteng                                            27 372

Western Cape                                    9 452

Kwazulu-Natal                                    8 658

Eastern Cape                                     3 331

Mpumalanga                                      2 360

North West                                        2 054

Free State                                         2 037

Limpopo                                            1 026

Northern Cape                                     326

Total                                                56616

           

KZN

 

In KZN, car and motorcycle theft used to be as high as 15 060 cases (41 per day) many years ago but have been steadily reducing to under 9 000 cases (25 per day) last year.

Theft out of or from motor vehicle

By Province                                      Number of Crimes

Gauteng                                            42 635

Western Cape                                   42 369

Kwazulu-Natal                                   18 590

Eastern Cape                                    11 515

Mpumalanga                                        7 785

North West                                          6 023

Limpopo                                               5 726

Free State                                           5 686

Northern Cape                                    2 976

 

Theft out of motor vehicles, which were reported as 27 595 (76 cases per day) in 2004,  slowed down to below 16000 cases in 2012, but are well over 18 000 again.

Theft out of a motorvehicle cases include “smash and grab” cases and are the most predominant in Gauteng and the Western Cape with more than 42 000 cases having been reported by each last year. This is more than double the 18 590 cases in KZN.

The thieves have become sophisticated using car jamming which involves blocking car remotes by using a gate remote because both remotes operate on a 400Mhz frequency. The thieves jam the frequency so that when the vehicle's locking system is activated it may indicate to the owner that it is locking all the doors, but in fact it is being jammed. Motorists then walk away believing their vehicles are locked, giving the thieves ample opportunity to simply open the door and help themselves to whatever is in the car and boot.

Car jamming incidents have risen with as many as 40 cases a week reported in the Northern suburbs of Johannesburg this year. Another hotspot is the Oasis truck stop in Cato Ridge (KZN).

Cost

Three weeks before the release of the crime stats the cost of vehicle-related crime to the insurance industry was revealed by the South African Insurance Crime Bureau (SAICB) which said that a staggering R8.5bn worth of vehicles are stolen and hijacked in SA annually.

Of the R8.5bn worth of vehicles stolen, R4.9bn's worth are taken across the border, R3.1bn stay in SA as cloned vehicles and R514m end up in chop shops across SA.

According to Hugo van Zyl, CEO of the SAICB, cloned vehicle and cross-border syndicates are a growing concern, also because about 39 000 vehicles re-appeared into the system, costing a fortune for the insurance industry to pay out claims unaware that these vehicles were in fact cloned.

Van Zyl believes data sharing is the key and he has called on business and crime prevention to stand together now.

Not mentioned in the crime stats is another quote by Farber:  “There's no reward in life without risk”. 

As we all know,  risk can be reduced through preventative measures with the remainder to be insured. Can you afford to be without it?

 

          Udo Rypstra was the founding editor of FleetWatch.

 

Date: 10 December 2014

Airline Profitability Improves with Falling Oil Prices

Geneva - The International Air Transport Association (IATA) announced an outlook for improved industry profitability in its Economic Performance of the Air Transport Industry report. Airlines are expected to post a collective global net profit in 2014 of some $19.9 billion (up from the $18.0 billion projected in June). This looks set to rise to $25.0 billion in 2015.

Lower oil prices and stronger worldwide GDP growth are the main drivers behind the improved profitability.

Consumers will benefit substantially from the stronger industry performance as lower industry costs and efficiencies are passed through. The airline industry is highly competitive. After adjusting for inflation, average return airfares (excluding taxes and surcharges) are expected to fall by some 5.1% on 2014 levels and cargo rates are expected to fall by a slightly bigger 5.8%.

The expected $25 billion net post-tax profit represents a 3.2% margin. On a per passenger basis, airlines will make a net profit of $7.08 in 2015. That is up on the $6.02 earned in 2014 and more than double the $3.38 earnings per passenger achieved in 2013.

The return on invested capital (ROIC) is expected to grow to 7.0%. This is a substantial improvement on the 6.1% ROIC expected to be achieved in 2014.This is still 0.8 percentage points below the 7.8% weighted average cost of capital (WACC), so there is still some ground to cover before achieving sustainable margins.

“The industry outlook is improving. The global economy continues to recover and the fall in oil prices should strengthen the upturn next year. While we see airlines making $25 billion in 2015, it is important to remember that this is still just a 3.2% net profit margin. The industry story is largely positive, but there are a number of risks in today’s global environment—political unrest, conflicts, and some weak regional economies- among them. And a 3.2% net profit margin does not leave much room for a deterioration in the external environment before profits are hit,” said Tony Tyler, IATA’s Director General and CEO.

“Stronger industry performance is good news for all. It’s a highly competitive industry and consumers—travelers as well as shippers—will see lower costs in 2015 as the impact of lower oil prices kick in. Airline investors will see ROIC move closer to the WACC. And a healthy air transport sector will help governments in their overall objective to stimulate the economic growth needed to put the impact of the global financial crisis behind them at last,” said Tyler.

2015 Forecast Drivers

Oil Prices: Oil prices have fallen substantially in recent months and this is expected to continue into 2015 with the full-year average price expected to be $85/barrel (Brent). If that assumption is correct, it would be the first time that the average oil price has fallen below $100/barrel since 2010 (when oil averaged $79.4/barrel).

Fuel Prices: Jet fuel prices are expected to average at $99.9/barrel in 2015 for a total fuel spend of $192 billion which represents 26% of total industry costs. It is important to note that the impact of lower fuel prices will be realized with a time lag, due to forward fuel-buying practices. Improving fuel efficiency continues to be a priority for airlines. Fuel efficiency is estimated to have improved by 1.8% in 2014 and a further improvement is expected in 2015. Fuel efficiency improvements could be accelerated by reducing the 5% of wasted fuel burn as a result of airspace and airport inefficiencies.

Economic Growth: Global GDP is expected to grow by 3.2% in 2015, up from 2.6% in 2014. This will be the first time that global GDP has broken over 3.0% since 2010 (when global GDP grew by 4.1% in a post-recession bounce back), this time boosted by the fall in oil prices.
Passenger Trends: Passenger traffic is expected to grow by 7.0% in 2015 which is well-above the 5.5% growth trend of the past two decades. Capacity growth is expected to outstrip this slightly at 7.3%, pushing the passenger load factor to 79.6% (slightly down on the 79.9% expected for 2014). The fall in the price of fuel is expected to lead to cheaper airfares for consumers. After adjusting for inflation, average return air fares (excluding surcharges and taxes) are expected to fall by 5.1% to $458 in 2015. Total passenger numbers are expected to grow to 3.5 billion and passenger revenues are expected to grow to $623 billion.

Cargo Trends: Cargo volumes are expected to grow by 4.5% in 2015 (slightly ahead of the 4.3% growth expected for 2014). The air cargo business has faced weak markets and increasing competition since 2011. There has been an uptick in demand recently but cargo remains a tough business. The real cost of transporting goods in 2015 is expected to fall by 5.8%. In total, some 53.5 million tonnes of air cargo is expected to be flown in 2015. Total cargo revenues are expected to rise to $63 billion, but that is still some 5% lower than in 2010.

Regional Trends

All regions are expected to report improved net profitability in 2015 over 2014. However, there are stark differences in profitability among the regions. Current and forward-looking industry financial assessments should not be taken as reflecting the performance of individual airlines, which can differ significantly.

North America: The strongest financial performance by far is being delivered by airlines in North America. Net post-tax profits are the highest at $13.2 billion next year (up from $11.9 billion in 2014). That represents a net profit of $15.54 per enplaned passenger, which is a marked improvement from just three years earlier. Net profit margins forecast at 6% exceed the peak of the late 1990s. This improvement has been driven by consolidation, helping to raise load factors (passenger + cargo) to 65% this year, lower fuel prices and ancillaries, which together push breakeven load factors down below 60% next year.

Europe: European airlines continue to struggle as evidenced by the highest breakeven load factors among all regions (64.7%). European airlines compete vigorously in the continent’s open aviation area. But they are hampered by high regulatory costs, infrastructure inefficiency and onerous taxation. As a result, and despite the industry in the region achieving the second highest load factor, financial performance has been poor. Net profits of $4 billion next year (up from $2.7 billion in 2014) represent only $4.27 per passenger and a net profit margin of 1.8%.

Asia-Pacific:  Airlines in the Asia-Pacific region are expected to achieve a net profit of $5.0 billion in 2015 (up from $3.5 billion in 2014) for a 2.2% net profit margin. That translates into $4.30 per passenger. Some strengthening of cargo markets, particularly important in this manufacturing region, plus lower fuel costs, are expected to drive the moderate improvement on 2014.

Middle East: Middle East airlines have one of the lowest breakeven load factors (58.6%). Average yields are low but unit costs are even lower, partly driven by the strength of capacity growth. Passenger capacity is expected to expand by 15.6% in 2015 (up from 11.4% in 2014). Post-tax net profits are expected to grow to $1.6 billion in 2015 (up from $1.1 billion in 2014). This represents a profit of $7.98 per passenger and a net profit margin of 2.5%.

Latin America: Latin American airlines have faced a mixed environment. Weak home markets have hampered performance, but a degree of consolidation and some long-haul success is expected to boost net profits to $1 billion in 2015 (up from $700 million in 2014). That would be a profit of $3.53 per passenger and a net profit margin of 2.6%.

Africa: Africa is the weakest region, as in the past 2 years. Profits are barely positive ($200 million in 2015 which is an improvement on the break-even performance in 2014), and represent just $2.51 per passenger. Breakeven load factors are relatively low, as yields are a little higher than average while costs are lower. However, few airlines in the region are able to achieve adequate load factors, which are the lowest among the regions by almost five percentage points. Performance is improving, but slowly.

Connectivity, Jobs, Taxes and Environmental Performance

Despite relatively weak profitability, the airline industry continues to add value to its consumers, to the wider economy and to governments:

  • Aviation’s global connectivity now spans 16,161 city-pairs (2014), which is nearly double the number in 1994. This connectivity is a catalyst for economic benefits both for users and the wider economy. Over that same period, airlines have halved the cost of air transport, after inflation, which has been a major stimulus for trade, tourism, and foreign direct investment associated with global supply chains. 
  • The number of aviation jobs is rising although the pace of hiring is expected to taper slightly in 2015. Total direct employment in the sector is expected to reach 2.45 million (up 1.5% on 2014). The total airline payroll in 2015 is expected to reach $149 billion (up from $142 billion in 2014). Average unit labor costs are expected to fall by 2% in 2015 as productivity per employee improves by 4.8% (almost double the 2.5% improvement in 2014). Airline employees are also extremely productive for the economies in which they work, generating gross value added (GVA – which is the company level equivalent to GDP) of $108,610 per employee in 2015 (up 6.3% on 2014).
  • The industry tax bill is expected to grow to $125 billion in 2015. That is a 7.2% increase on 2014.
  • Airlines’ environmental performance continues to improve. Airlines are expected to use some 282 billion liters of fuel in 2015. In doing so, the industry is expected to emit 751 million tonnes of carbon. While that is a 5.1% increase on the previous year, it is decoupled from the 6.8% (ATK) increase in overall capacity to meet consumer demand. Investments in new aircraft are a major driver of fuel efficiency improvements. In 2015 airlines are expected take delivery of 1,700 new aircraft worth $180 billion. About half of these are expected to replace less fuel-efficient older aircraft.
    The industry remains committed to achieving carbon-neutral growth from 2020. This is in addition to a 1.5% average annual improvement in fuel efficiency to 2020 and complements the long-term goal of cutting net emissions in half by 2050 (compared with 2005 levels).
     

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