CAV Annual Report 2021

“SUPPORT THE GROWTH OF THE AEROSPACE, DEFENCE AND ADVANCED MANUFACTURING INDUSTRIES”

4. SITUATIONAL ANALYSIS 4.1. THE AEROSPACE AND DEFENCE INDUSTRY: GLOBAL CONTEXT Global and African Aerospace and Defence (A&D) Industry trends 1 are of significant importance for the South African aerospace and defence industry and will influence the strategic outlook for CAV as it opens up new opportunities to provide support to the South African Aerospace and Defence sectors. The key findings of the report reveal that: • The commercial aircraft order backlog is at its peak of more than 14,000 with approximately 38,000 aircraft expected to be produced globally over the next 20 years. Manufacturers are ramping up production to accommodate growing aircraft demand and as OEMs increase production rates, suppliers are at risk to fail in ramping up production. • Geopolitical tensions are continuing to intensify and demand for military equipment is on the uptick, driving defence spending across the globe. • Changes in international trade agreements are likely to disrupt the global supply chains and increase costs. OEMs are seeking new solutions to develop international best- of-breed suppliers. Many of the latest breakthroughs and the most adaptable advances in new technologies are driven by and available not from A&D companies, but from the innovation clusters that are expanding their influence in virtually every large global seat of power. • Mergers and Acquisitions (M&A) activity remains strong as pressure on suppliers to reduce costs and increase production rates continues. • Though A&D industry growth is primarily led by the United States, few other regions including China, France, India, Japan, the Middle East, and the UK, will be contributing to the industry’s performance in the near term. Africa is predicted by the International Air Transport Association (IATA) to become one of the fastest growing aviation regions in the next 20 years with an annual expansion rate of nearly 5%. 2 Other regional A&D trends

include 3 : China’s defence industry spend projected to grow by 9%-10% in the future; France intends to increase military spending by 5% per annum; India has a demand for more than 2000 single-aisle aircraft; Japanese air traffic projected to grow sluggishly by 3,2% per annum; Middle East air traffic projected to grow by 5,2% creating a demand for almost 3,000 new wide-body aircraft; in the United Kingdom Brexit is expected to disrupt supply chains and the country’s aviation industry would seek new trade agreements with supplying countries. 4.2. AEROSPACE AND DEFENCE INDUSTRY: AFRICAN CONTEXT Over 4 the recent years, opportunities in the dynamic African aviation industry is steadily rising, thanks to the continent’s growing political stability and tourism potentials. The International Air Transport Association (IATA) has predicted that Africa will become one of the fastest growing aviation communities in the world over the next 20 years at a yearly increase of almost 5%. The continent continues to strengthen its aviation industry as it is considered one of the key drivers of Africa’s future economic development. Today, Africa accounts for around 3% of the global air transport sector, running 731 airports and 419 airlines. Aviation, to date, supports around 6.9 million jobs and USD 80 billion in economic activities. Commercial airlines, in particular, can capitalize and attain a significant market share in this vast market by taking advantage of the booming leisure and business travel and tourism. In 2018, the World Travel & Tourism Council (WTTC) declared Africa as the second-fastest growing tourism region next to Asia-Pacific. Challenges in the African Aerospace Industry: • While 5 it is evident that aviation in Africa has the potential to fuel economic growth, several barriers exist. Weak infrastructure, high ticket prices, poor connectivity and lack of liberalisation rank amongst the many challenges. • Safety and security. Safety is the most pressing challenge facing the aviation industry. 3 Deloitte: 2019 global aerospace and defense industry outlook: Robin Lineberger; 2018 4 https://www.atqnews.com/ng/opportunities-and-challenges-in- african-aviation-industry/ 5 https://oecd-development-matters.org/2018/10/29/unlocking-africas- aviation-potential/

1 https://www2.deloitte.com/global/en/pages/manufacturing/articles/ global-a-and-d-outlook.html 2 https://www.africanaerospace.aero/african-carriers-see-fastest-growth- of-any-region-in-august-for-air-freight.html

CENTURION AEROSPACE VILLAGE NPC I ANNUAL REPORT I 2020/21

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