Press Release
Contact: Matthew Ritchie, International Military
Markets Analyst
Phone: (203) 426-0800
Fax: (203) 426-4262
Web site: www.forecastinternational.com
E-mail: matthew.ritchie@forecast1.com
Forecast International, Inc.
22 Commerce Rd. Newtown, CT
06470 USA
FOR IMMEDIATE RELEASE
Energy Driving Long-Term Growth Prospects in African
Market
NEWTOWN, Conn. [December 3, 2007] – The African arms market,
traditionally recognized for its low value and opaque business environment, may
represent tomorrow's growth market for the global defense industry, according
to Forecast International's "Africa Market Overview" report. Driven
by changing geopolitical environments and enabled by hydrocarbon-derived
wealth, select African nations are attempting to recapitalize their military
and security forces in a way that potentially creates major opportunities for western
defense enterprises.
Forecast International expects African defense spending as a
whole to increase 3.5 percent year-on-year from $13.9 billion in 2007 to over
$15.9 billion in 2011. As less than 20 percent of defense spending is allocated
for procurement, the spending increase translates into a market value of $2.8
to $3.2 billion over the four year period.
However, the relatively unimpressive top line trend in the
African market hides the latent opportunities presented on a nation-by-nation
basis contends Matthew Ritchie, author of the report. "The African arms
market is currently a fraction of the value of any other regional market, but
looking at the confluence of burgeoning security requirements and vast oil and
[natural] gas reserves in the context of high energy prices and it becomes
readily apparent that there is a collection of Africa nations demonstrating
procurement characteristics reminiscent of the Middle East three decades
ago."
Algeria, Libya, and Nigeria represent three such emerging
arms markets. In 2007, aggregate defense spending in these nations totaled
$4.98 billion; an 11 percent increase over the previous year in contrast, to
the five percent annual growth throughout the rest of Africa.
Between 2007 and 2011, Algerian defense expenditures are
predicted to increase 14 percent ($420 million), Libyan spending is set to
increase 91 percent ($572 million), and Nigerian defense outlays will increase
by 13 percent ($118 million).
"The expansion of defense budgets in Algeria, Libya,
and Nigeria is driven by a series of push and pull factors," notes
Ritchie. "On the pull side, the combination of high energy prices and
expanding production provides the means to finance growing defense
expenditures; on the push side, these nations' increasing reliance on energy
revenues is forcing them to acquire the military capabilities needed to protect
their economic mainstay."
In 2007, these emerging markets accounted for roughly 70
percent of Africa's oil and natural gas production and over 35 percent of its
defense spending.
Consequently, the relationship between high-energy prices
and increased defense spending has bolstered arms acquisitions. Since 2005, Algeria
has signed defense contracts worth $8 billion, a majority of which is linked to
the $7.5 billion contract with Russia in 2006; Libya, still re-emerging from
two decades of arms embargos, has signed defense contracts estimated at $750
million; and Nigeria, despite domestic political instability, has signed a
myriad of defense contracts valued at over $1 billion.
Of greater interest is the fact that these procurement funds
are increasingly devoted to acquiring U.S. and European arms: between 1999-2002
and 2003-2006, U.S. and European share of the total value of arms transfer
agreements with Africa increased from 34 to 37 percent.
“Modernizing entire force structures from power projection
assets to surveillance and communication networks is the focus of procurement
programs in these emerging markets. Recent acquisition and
requests-for-purchase have targeted fighter and strike aircraft, advanced
trainers and military transports, attack and utility helicopters, littoral
patrol vessels, modern air defense systems, and integrated tactical
communications networks," says Ritchie.
Looking forward, the energy wealth that is central to these
arms acquisition programs is expected to increase. According to data from the
U.S. Energy Information Administration, the combined oil and natural gas
production of Algeria, Libya, and Nigeria is projected to grow by 50 percent
over the next decade. Likewise, Forecast International's defense spending
outlook for Africa indicates that expenditures in these three energy-rich
markets will account for over 55 percent of the $2.2 billion in defense
spending growth to occur in Africa over the same period.
Forecast International, Inc., is a leading provider of
Market Intelligence and Analysis in the areas of aerospace, defense, power
systems and military electronics. Based in Newtown, Conn., USA, Forecast
International specializes in long-range industry forecasts and market
assessments used by strategic planners, marketing professionals, military
organizations, and governments worldwide. To arrange an interview with
Forecast International’s editors, please contact Ray Peterson, Vice President,
Research & Editorial Services (203-426-0800, ray.peterson@forecast1.com).