Angola’s airport construction opportunities is likely to decline due to low airline traffic and tourist arrivals.

According to Fitch Solutions, these weak fundamentals present a negative outlook on significant opportunities in the country’s airport infrastructure sector.

“Low airline traffic and tourist arrivals will likely limit demand for airport construction in Angola, underpinning our negative outlook on opportunities in the country’s airport infrastructure sector.”

With Covid-19 continuing to suppress a bounce back of near term travel, for 2021, domestically registered airline take-offs in Angola are forecasted to be at only 9600. This projection puts Angola in the bottom quintile on a global scale, together with regional peers such as Namibia and Ghana.

However, this is not all gloomy for the aviation sector, Fitch Solutions expects Angola to see a significantly slower medium-term air traffic growth, with domestically registered airline take-offs forecast to grow by an average 8 per cent per year between 2021 and 2025.

In contrast, over the same time period, domestically registered airline take-off is forecast to grow by of 30.2 per cent and 17 per cent on average per year in Ghana and Namibia, respectively.

According to Fitch Solutions, “these stronger medium-term growth rates will allow for a medium-term recovery of air traffic in both markets, while we do not currently expect domestically registered airline take-offs in Angola to recover to pre-Covid-19 levels between 2021 and 2025.”

In addition to the negative impact of the COVID-19 pandemic, on Angolan air travel, Fitch Solutions is of the view that the continued blacklisting of numerous Angolan airlines by the EU is lengthening the limits of air traffic in the country.

While a case may be made that other international airlines may compensate for some of the negative impact of these EU bans on Angolan air traffic, this does not address the low volumes of tourist arrivals. Thus, the low volumes of tourist arrivals lends support to expectations that the limited demand for airport infrastructure improvements in Angola will curb construction opportunities in the sector, Fitch Solutions asserts.

As such, Fitch Solutions forecasts 2021 tourist arrivals in Angola to come in at reach about only 9100 which is 19 per cent of those forecast for Namibia and 13 per cent of those forecast for Ghana.

Aside this, the weak risk profile in the sector will deter international companies in channeling funds into projects such as airport construction. According to Fitch Solutions, Angola’s legal environment poses significant risks for companies, such as high levels of corruption, under-resourced courts, extensive red tape and weak enforcement capabilities.

That said, Fitch solutions expects that the Angolan government will attempt to increasingly rely on private investment in infrastructure, with public investment constrained by a high debt load and elevated servicing cost.

“Angola’s weak risk profile will continue to deter construction firms and investors. As the government will likely attempt to rely increasingly on private infrastructure investment, we expect investors’ reluctance to exert additional downward pressure on airport construction opportunities in Angola.”

However, both high operational risks and a weak long-term economic risk outlook will curb private investment in long-term infrastructure assets like airports. Fitch Solutions expect that the country’s long-term economic outlook will be undermined by declining oil production. This is due to maturing oil fields and lacking investment in oil exploration.

Also, Fitch Solutions is of the view that the government’s likely inability to sufficiently diversify the country’s economy to fill the resulting gap is a worry.