African Defense Market Churning Despite Economic Woes

Africa is host to a dynamic arms market polarized by broad economic disparities and myriad security challenges. Burgeoning energy economies have fueled significant market growth in recent years, but a new wave of economic challenges threatens to slow this expansion. These critical issues are addressed in Forecast International's latest assessment of the African defense sector.

Chief among the developments in the Africa market is the fact that northern nations, most specifically Algeria, have supplanted South Africa as the region's largest, most active, and thus most lucrative arms market. Furthermore, a collection of energy-rich nations are forming a second tier of mid-value markets, most notably Angola and Nigeria. This development is of note, as the African arms market, which has traditionally been defined in terms of geographic segments, is now being stratified based on the avail¬ability of resources - i.e., oil-rich markets.
Subsequently, as energy prices soared, the five nations that produce over 80 percent of the region's oil supply - Algeria, Angola, Libya, Nigeria, and Sudan - saw significant increases in energy-export revenue. Moreover, three of those five - Algeria, Libya, and Nigeria - are also responsible for over 70 percent of the region's annual natural gas production. This surge in revenue translated into an increase in defense spending among those nations that significantly outpaced that of other African countries and resulted in expeditious market growth.

Indeed, total defense spending by the African nations reviewed by Forecast International amounted to approximately $18.0 billion in 2008, reflecting an increase of 7.7 percent over the previous year. Moreover, the African market has been subject to sustained growth in recent years, with a compound annual growth rate of 9.1 percent from 2004 to 2008.

This growth appears to be slowing, however, and Forecast International projects that the African defense market will expand by an average of 2.6 percent annually from 2009 to 2013. "This cooling trend corresponds with a weaker global economy and resultant fluctuations in the commodity markets," says Shaun McDougall, Forecast International Military Markets Analyst and author of the report. There is a light at the end of the tunnel, however.

"Although lower prices have tightened the revenue streams of energy-exporting states, a resurgence in global demand will serve to secure their economic prosperity and bolster the financing of military acquisition programs and other defense initiatives," McDougall says.

The value of the Algerian market, for one, has increased considerably as its government pursues a major force-wide modernization program. Between 2004 and 2008, defense expenditures grew at a compound annual rate of 10 percent. The Algerian defense budget then grew an astounding 33 percent from 2008 to 2009. "Angola has also seen its defense spending increase rapidly," McDougall says, "though procurement activity is only gradually ramping up." Nevertheless, Angola could also pursue an extensive modernization effort that would involve the purchase of a multitude of aircraft, command and control assets, armored vehicles, and ships.

Morocco has also leveraged a more substantial defense budget to modernize its force structure, including the purchase of new F-16s, a FREMM multirole frigate, and Sigma class corvettes. Libya, meanwhile, has been negotiating with France over an arms package worth upwards of $6.4 billion, though recent reports indicate that Moscow may be making inroads with Libyan leader Muammar al-Qaddafi with the sale of new Russian fighters.