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African Defense Spending Growth Expected To Slow

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by Staff Writers
Newtown CT (SPX) Dec 21, 2010
The structure of the African arms market has shifted in recent years due to burgeoning energy economies and the efforts of certain nations to launch long-awaited equipment recapitalization programs. As a result, defense spending in Africa has increased substantially over the past five years, with compound annual growth rate of about 13 percent from 2005 to 2009.

Nevertheless, this trend is unsustainable over the long term, and growth in the African defense market is expected to slow, according to Forecast International's annual African market overview.

"This cooling trend can be explained by the fact that Africa's overall market growth over the past five years has been driven primarily by a small number of key players," says Forecast International Africa Military Markets Analyst, Shaun McDougall, author of the report.

One of the driving forces in this regard is the relationship that has developed between energy export-based economies and rising defense expenditures. Energy prices, despite falling from their 2008 high, have increased significantly over the past decade, with average oil prices moving from $27 per barrel in 2001 to more than $80 per barrel today.

As a result, Africa's largest oil exporters - Algeria, Angola, Libya, Nigeria, and Sudan - have experienced significant increases in energy-export revenue. This surge in revenue has provided an opportunity for African governments to support much-needed military acquisition and improvement programs, resulting in defense spending growth that has significantly outpaced that of non-petrostates.

Apart from Africa's major energy exporters, Morocco and South Africa represent the region's primary spenders. Morocco's defense budget doubled in size between 2005 and 2009.

This development comes as the government supports a series of new arms acquisitions that will allow the country to maintain a balance of power with neighboring Algeria. South Africa also remains a focal point in the African arms market, though its spending habits have been far more stable than those of the aforementioned countries.

In terms of defense spending, the value of the African market will continue to grow, albeit at a much slower pace than what has taken place over the last five years.

Forecast International projects that the value of African defense spending will increase by an average of just over 3 percent per year through 2014, falling short of 4 percent annual growth that was forecast prior to the downward shift in the global economy.

Algeria and Morocco have leveraged economic gains to acquire new aircraft and warships, while procurement trends in South Africa are shifting toward ground force modernization.

At the same time, however, the South African Defense Force (SANF) is still deciding how to meet its air transport needs after terminating an order for eight A400M aircraft. Nigeria is doing its part to capitalize on oil revenues through the acquisition of new maritime patrol aircraft and a mix of patrol ships; however, a lingering conflict in the Niger Delta region continues to hinder oil production.

Angola, meanwhile, with a rapidly growing defense budget, is focusing on developing a more professional fighting force, which includes establishing new education and training programs, increasing pay and benefits, and improving living standards for troops.

"The African arms market is likely to remain dynamic in light of the region's widespread political, economic, and security challenges," McDougall says.

"Aging force structures abound, and governments are eager to modernize given the opportunity. Though less affluent nations have come to rely a great deal on security assistance, the top tier spenders in the region will continue to drive the market as a whole."



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