East African News Agency
There is has been considerable improvement in easing trade restrictions but high transport costs are emerging as the new hurdle for doing business in East Africa.
Kenya Shippers Council (KSC), CEO Gilbert Langat made the remarks in Nairobi during the meeting of the council's Logistics Performance Index for East Africa over the weekend.
The current pace is considered to be impacting seriously shipping business and experts have pointed that it was back-pedaling economic growth by one per cent yearly in the region. The most affected are EAC landlocked Partners Burundi, Rwanda and Uganda, whose development heavily depended on transit solutions in neighboring Kenya and Tanzania, according to Langat.
He said transport costs in East Africa were between 60 -70 higher compared to the United States and Europe. They were also 30 per cent higher compared to land linked Southern Sudan, Africa’s newest nation. The scenario in East Africa casts a heavy shadow over growth, he added.
“Dar es Salaam and Mombasa ports have cumulatively experienced an annual average growth in cargo throughput of 8.8 per cent occasioned by growth in regional trade. These ports have over the past decade experienced delays and congestion,” he said.
However, a number of reforms were underway, including 24 hour and seven days a week operations, construction of additional terminal facilities and automation of the container handling processes. Others were improvement in documentation and cargo clearance, cargo verification and scanning.
The Northern Corridor, which links Mombasa to landlocked Uganda, Rwanda and Burundi, Northern Tanzania, the Democratic Republic of Congo, South Sudan, Ethiopia and Somalia accounts for annual cargo volumes in excess 10 million tons and combined transit and trans-shipment traffic of more than two million tons.
While the Central Transport Corridor, which connects Dar es Salaam to Burundi, Rwanda, Uganda, Malawi, Zambia and the DR Congo also accounts for the same cargo volumes as its Northern counterpart.
"Trade along these corridors has a positive impact on the region and many initiatives have been undertaken to improve their efficiency," He said. However, he noted that performance was still hampered by high transport costs, inadequate physical infrastructure and national policies that are incompatible with the EAC goals for regional integration.
In order to address key transport and logistics challenges in the region, Langat suggested both businesses and policy makers need to fully understand the bottlenecks that exist on the transport and logistics chain in the region, which he said, could only be done through a major analysis of the logistics processes and links in the East African transport system in the form of an annual logistics performance index.
In East African, about 75 percent of the cost of exports is due to transport costs. It takes up to 71 days to import goods to Burundi from any of the four East African member states where poor road infrastructure, unreliable railway transport, different axle load measurements and a myriad of unnecessary roadblocks all add up to the burden of transporters.
A Dar es Salaam shipping agent who requested anonymity added that transport costs almost went up between three to even five times or more because of delayed clearance and congestion.
''The bureaucratic clearance and congestion consumes time and money. For us in East Africa the final cost of the product is unbearable for the final consumer,'' he told the Independent East African News Agency (EANA).
He further said that graft was another crippling factor in shipping business.
He underscored that special attention must be paid by East Africa to swiftly resolve factors undermining shipping business or else the cargo export would shift to Port of Beira (Mozambique) where the costs are much reasonable and the services are efficient.
This is the first such Index for the region which compares the EAC performance in the trade logistics indicators of time, cost and complexity with those of the world's leading trade hubs.
The Index, compiled following a study commissioned by KSC, revealed that while it takes 28 days to move a 40ft container from Shanghai, China, to Mombasa at a cost of 600 dollars, it takes 41 days for the same container to reach Bujumbura from Mombasa at a cost of 8,000 dollars. That represents double the time at 13 times the cost, hardly the kind of situation that makes business to flourish.
In addition, that did not include other costs due to delays, corruption and in some cases, theft of the cargo and the often lengthy and frustrating litigations for redress. These costs make EAC products very uncompetitive and require urgent action to bring them down, he said.
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