News & Information



27
March
2018

High Transport Rates and Costs are still the silent killers of Trade along the Northern Corridor


By: TTCA
Summary/Brief
The transport costs in East Africa are on average still about 60% higher than in the US and Europe. Landlocked countries like Rwanda, Uganda, South Sudan and Democratic Republic of Congo canít export much because the costs are just so high


Sub-saharan Africa and the Northern Corridor region in particular, has seen massive trade liberalisation in the last three decades. But the success of translating reduced tariffs into increased international trade has been limited and geographically unbalanced. One of the main reasons for this is the high cost of moving goods within countries.

A study by the Wold Bank, 2007, revealed that “the costs of moving goods within countries are generally higher in developing countries than in the rest of the world, and this is especially true in much of Africa. Transport in Africa is often unpredictable and unreliable, and the cost of transport is therefore often higher than the value of the goods being transported.”

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“The transport costs in East Africa are on average still about 60% higher than in the US and Europe. Landlocked countries like Rwanda, Uganda, South Sudan and Democratic Republic of Congo can’t export much because the costs are just so high. The high trade cost is holding back these economies”, revealed Trade Mark East Africa in November 2015.

 

In addition, the improvements in globalization’s lower or free trade tariffs do not necessarily translate into equal outcomes within a country due to the high cost of transporting goods. This impact is notably different between urban and rural areas. So the prices of imported goods might fall in urban/port city areas but by not as much in rural locations. This exacerbates regional inequalities. 

Transport Costs in the region as per the Northern Corridor Transport Observatory

The Northern Corridor, a multimodal transport system which includes the Port of Mombasa, roads, railways, pipeline, inland waterways, border stations, weighbridges, transit parking yards and inland container depots designated by the Member States, links the landlocked countries of Burundi, Democratic Republic of Congo (DRC), Rwanda, South Sudan and Uganda to the sea port of Mombasa-Kenya.

The Northern Corridor Transit and Transport Coordination Authority (NCTTCA) was established through the Northern Corridor Transit and Transport Agreement and consists of six-member States namely; Burundi, DRC, Kenya, Rwanda, South Sudan and Uganda.

The NCTTCA uses the “Northern Corridor Transport Observatory” to monitor the performance of the Northern Corridor. The observatory has three components namely the main observatory, the GIS component, and the northern corridor performance dashboard. 

The main Transport Observatory tool monitors 31 performance indicators on a regular basis while the dashboard is used in monitoring the implementation of the Port Community Charter that commits various stakeholders, both public and private to increase efficiency at the Mombasa Port and along the transport logistics chain in Kenya on a weekly and monthly basis.

Through these monitoring tools, the NCTTCA Secretariat is able to track the performance of the Corridor as per indicators categories namely; Volume and capacity, Transport rates/costs, Transit time/delays, Efficiency and productivity, Intra-regional trade and Road safety and provide evidence-based recommendations to the stakeholders and policymakers.

The Northern Corridor Transport Observatory data reveals the road freight charges are still high at approximately USD 2.23 per Km for containerized cargo between Mombasa and Kigali. Mombasa to Kampala is USD 1.79 per container per kilometre while Mombasa to Bujumbura recorded USD 3.07 per container per kilometre. Also, different countries charge different freight charges even though there are common rates established for Transport.

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Map of the Northern Corridor Member States

 

By comparing the freight costs of alternative transport modes to the journey times, researchers have been able to come up with measures of the value of time saved in transit. For instance, delays at borders along the Northern Corridor have been estimated to cost USD 250 per day for a truck company. Moreover, distribution and transportation costs along the Northern Corridor have been more than 35 or 40 percent of final product costs. It is estimated that the total indirect (hidden) costs per day for delays are approximated at USD 384.4 for a loaded truck along the Northern Corridor. Road condition also plays a vital role in transport rates and costs.

According to the “11th Report of the Northern Corridor Transport Observatory”, the average transport charges from Mombasa to Nairobi, is USD 777 for containerized cargo. For clinker whose destination is mostly Athi-river, the average rate is USD 25.2 per ton.

The average transport cost from Mombasa to Kampala is USD 2000. However, larger companies serving to cooperate clients, charge up to USD 2,700. Road user charges only apply and they are paid to the countries where the trucks are not registered. For instance, Kenyan registered trucks transiting through Uganda would pay road user charges based on harmonized COMESA road user charges of USD 10 per 100Km for transit trucks. Kenya registered trucks travelling from Malaba to Kampala a distance approximately 250km pay a Road User Charge of USD 50 for the return journey to and from Kampala.

From Mombasa to Bujumbura and/or Goma, the transport rates per kilometre are higher with the road user charges taking about 8.1% and 11% of the total cost of transport.

High transport charges as internal trade barriers, not only hinder trade and dampen economic growth, they also distort the benefits of globalisation and increased trade. As tariffs fall and international transportation improves, the benefits from the consequent price changes may not accrue to all consumers equally. Remote locations are generally harmed more by the burdens of intranational trade costs than areas close to borders or ports.

Findings of a research by International Growth Centre (IGC), March 2018, revealed that “the high cost of getting goods to and from borders or ports in Africa is restricting the continent’s potential gains from international trade”.

In order to reduce Transport Costs along the Northern Corridor, different stakeholders have to tackle the problem of Insecurity in some parts of the Corridor and high insurance costs, fresh insurance cover needed given that the Republic of South Sudan is not under COMESA Yellow Card Insurance Scheme and Eliminate the requirement to have both local and COMESA Yellow Card Insurance Scheme in some jurisdictions.

Additionally, Northern Corridor member States have to reduce the imbalance between imports and exports. Consequently, VISA requirement between some Member states with fee ranging between USD 50 and USD 100 within the Northern corridor is against article 43 of the Northern Corridor Agreement which calls for abolishing VISA fees;

Last but not least, Transit goods license USD 400 per year follows the calendar year. Transit goods license should be charged pro-rata. This should be followed up with the East African Community (EAC) Secretariat.





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