Transport costs in East Africa The Community is stifling business
Nairobi, Kenya | THE INDEPENDENT | Private sector actors in the region accuse the leaders of the East African Community (EAC) of doing too little as the transport sector continues to suffer, allegedly from bad policies.
And this, they say, has led to an increase in the cost of transport, especially freight transport, which in turn influences the cost of doing business in the region.
Freight transport in East Africa is among the highest in the world, estimated at US$1.8 (6,700 shillings) per km per container compared to the international average and recommended US$1 per km per container, according to Merian Sebunya, Chairperson of National Logistics Hub, Uganda.
This has affected the region in terms of competitiveness, as it is a major contributor to the cost of goods and services in East Africa. Now, the East African Business Council, EABC, is calling for the formulation of an EAC transport and logistics charter or framework to boost the competitiveness of the region.
Speaking during a dialogue on the state of transport corridors in East Africa, Dr Sebunya said: “Transport and logistics costs contribute 35-42% of production, which is very high compared to 8% in Asian countries. ”
She said this has had a negative impact on the competitiveness of the EAC bloc and the trade balance, mainly because the authorities do not take the sector seriously, nor understand its importance for the economy.
The virtual meeting was convened to review the performance of transport corridors during and after the COVID-19 pandemic and the impact on the competitiveness of East African businesses.
During the lockdowns at the height of the pandemic, freight and logistics operations were deemed essential and therefore remained open, but were generally disrupted by standard operating procedures such as mandatory testing at borders.
Restrictions in other regions have also had an impact on the cost of transporting goods in general.
Former Uganda Revenue Authority Customs Commissioner Dickson Kateshumbwa, for example, says the average cost of shipping a container from China to Mombasa is $7,000, down from $9,000. dollars.
It has not yet returned to the pre-Covid $5,000. Dr. Sebunya called on the governments of EAC Partner States to take deliberate measures to reduce transport and logistics costs in the EAC region.
This was echoed by John Bosco Kaliisa, the executive director of the East African Business Council, said that the shortfalls and high costs on the northern and central corridors will make it difficult for the business community to reap the benefits. benefits of the African Continental Free Trade Agreement. (AfCFTA). Indeed, the conditions will make the products of the region uncompetitive.
The EAC Trade and Investment Report (2020) shows that the EAC’s global exports stood at $16.2 billion in 2020 while imports were at $35.6 billion, recording a trade balance negative 19.4 billion. Agayo Ogambi, chief executive of the Shippers Council of Eastern Africa, said throughput at the Port of Mombasa declined by 0.9% in 2020, while a total of 34.13 million tonnes of cargo were handled, i.e. 1.8 million tonnes less than the target of 35.90 million tonnes. in 2019.
Ogambi called on government agencies to provide services commensurate with the fees charged, as stated in Article 6 of the WTO Trade Facilitation Agreement.
He said transport is much easier and more predictable between the coast and other areas, but becomes unreliable between Mombasa or Dar es Salaam and final destinations.
He also urged governments not to determine the performance of transport corridors in number of days, but the actual changes in monetary terms, which would give a better idea of where there is improvement or not.
Dr Sebunya also expressed concern about the low exports compared to imports, saying it makes transport more expensive as ships and containers come back empty.
“We need to improve the export competitiveness and production capacities of the EAC bloc to ensure that imported containers come back full with EAC exports,” she said.
Emmanuel Imaniranzi, director of transport planning and policy at the Northern Corridor Transit and Transport Authority, urged the business community to appreciate what has been done so far, although much is still lacking. He said, for example, that their advice and recommendations have seen the reduction of mandatory weighbridges from nine to three, among other cost-saving developments.
According to the Authority, cargo throughput at the Port of Mombasa has increased and transit time in the Northern Corridor is returning to normal following the lifting of COVID-19 restrictions and the use of digital certificates, but the costs of transport remain high.
EABC Executive Director John Bosco Kaliisa has asked transport authorities to comment on whether the central and northern corridors compare to others such as the north-south corridor that connects the city of Durban in southern Africa to the landlocked countries in this part of the continent.
Imaniranzi said while the Southern Africa Corridor is better, more reliable and cheaper, the EAC Corridors are slowly improving their facilities and adopting new technologies. He said improved infrastructure, automation and interconnectivity should reduce transport costs.
Almost 66% of East African freight uses the Northern Corridor from Mombasa to the hinterland. Melchior Barantandikiye, head of logistics at the Central Corridor Transit and Transport Facilitation Agency (CCTTFA), said reducing the number of weighbridges is among the measures taken to improve the performance of the Central Corridor.
He said their goal is to continue to reduce NTBs to make transportation easier, convenient and cheaper.
John Mathenge, Managing Director of VIASERVICE LTD, called for regional holistic approaches and competitiveness of the transport and logistics sector to reduce the cost of doing business in the EAC region.
He called for an EAC transport and logistics charter or framework to integrate the ecosystem and enhance complementarities to improve efficiency and reduce production costs.