Logistics: EAC transport costs high at US$1.8 per km

  • EABC Calls for the formulation of EAC transport and logistic charter/framework to boost the competitiveness of the region
  • EAC transport costs are high estimated at US$1.8 per km per container against international best practices of US$1 per km per container
  • The logistics performance in the region over time has improved as a result of a decline in tariffs and removal of trade barriers

Transport and logistic costs compose 35 per cent to 42 per cent of production, which is high compared to 8 per cent in Asian countries.

Dr. Merian Sebunya, Chairperson of National Logistics Platform, Uganda, explains that this has negatively impacted the competitiveness of the EAC bloc and trade balance.

EAC transport costs are high, estimated at US$1.8 per km per container, against international best practices of US$1 per km per container.

Cost of transport and logistics in the EAC region

Speaking at the EABC-TradeMark East Africa (TMEA) Webinar on Corridor Performance & Impact on EAC Business Competitiveness, Dr. Sebunya appealed to Governments of the EAC Partner States to take deliberate actions to bring down the cost of transport and logistics in the EAC region to ensure EAC exports can compete at AfCFTA and international level.

The EAC Trade & Investment Report (2020) shows EAC exports globally stood at US$16.2 billion in 2020 while imports at US$35.6 billion, registering a negative trade balance of US$19.4 billion.

Agayo Ogambi from the Shippers Council of Eastern Africa said Mombasa port throughput declined by 0.9 per cent in 2020. A total of 34.13 million tonnes of cargo were handled in 2020, which is 1.8 million tonnes shy of the target of 35.90 million tonnes in 2019.

Haulage trucks. Stakeholders want an EAC transport and logistic charter/framework to integrate the ecosystem. [Photo/ Air Cargo]
Containerized cargo declined by 4 per cent from 1.4 tonnes (2019) to 1.35 million tonnes (2020).

Ogambi called upon government agencies to render services that are commensurate to the fees charged, as outlined in Article 6 of the WTO Trade Facilitation Agreement.

Dr. Sebunya emphasized, “We need to improve the export competitiveness and production capacities of the EAC bloc to ensure imported containers return back full with EAC exports.”

66 per cent of East African cargo uses the Northern Corridor

Emmanuel Imaniranzi from the Northern Corridor Transit and Transport Agreement (NCTTA) said the cargo throughput at the Mombasa port increased, and the Nothern Corridor’s transit time is recovering to normal following the easing of Covid-19 restrictions and use of digital certificates, but transportation costs are still high.

The Northern Corridor Transport Observatory monitors 40 indicators of performance such as transit time, productivity & efficiency, costs, volume & capacity and intra-regional trade.

Imaniranzi stated that infrastructure, automation and interconnectivity improvement are set to reduce transport costs. Nearly 66 per cent of East African cargo uses the Northern Corridor.

Melchior Barantandikiye, HOD for Logistics of Central Corridor Transit and Transport Facilitation Agency (CCTTFA), said the reduction of the number of weighbridges from 9 to 3 and road tolls from US$16 per 100KM to US$10 per 100KM are some of the measures to improve the performance of the Central Corridor.

He revealed that 80 per cent of cargo in the central corridor uses road transport.

The Managing Director, VIASERVICE LTD, John Mathenge, expounded that logistics is a business enabler.

Mathenge called for regional holistic approaches and a vision of the competitiveness of the transport & logistic sector to reduce the cost of doing business in the EAC region. He called for an EAC transport and logistic charter/framework to integrate the ecosystem and boost complementarities to enhance efficiency and lower production costs.

John Bosco Kalisa, EABC CEO, urged geo-fencing of the Northern Corridor and Central Corridor to facilitate trade.

Stakeholders in the sector include transporters, importers, exporters, freight forwarders, shippers, trade facilitation agencies, the public sector and the EAC Secretariat.

Transport and logistic providers in the EAC

Full implementation of the Single Customs Territory, Development of multimodal transport systems – inland waterways & railways, Structure Public Private Dialogue and collaboration in research and policy formulation and sharing best practices, improving physical and soft infrastructure, elimination of Non-Tariff Barriers, adoption of technology by both private and public sector such as weigh in motion, cost of Insurance and Freight and Evidence-based research and impact analysis, Improving compliance by the private sector are among the key recommendations outlined by the stakeholders

According to EASC Logistics Performance Survey 2021, the efficiency and cost of freight transport services play a critical role in the competitiveness of international traders and, by extension, a country’s economic performance.

Transport and logistic providers were enlisted as essential service providers during the imposition of the Covid-19 containment measures. This underscores the importance of transport and logistics in the regional economy.

Attempts to measure the efficiency of logistics services of a country have been made through the  World Bank Logistics Performance Index (LPI), which attempts to rank the logistics performance of  countries based on the following set of indicators, namely;

  • Customs
  • Infrastructure
  • International Shipment
  • Logistics Competence
  • Tracking and timelines.

One of the main agendas of economic growth and competitiveness is improving freight logistics performance.

Globally, the freight logistics sector has been recognized as one of the core pillars of economic development. Improving trade logistics through enhancing trade facilitation measures has continued to be important to EACs regional integration agenda.

Over time, the logistics performance in the region has improved due to a decline in tariffs and the removal of trade barriers.

Read: Investment in modern logistic parks in Kenya growing: report

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