Road transport treaty can save Africa billions
Tuesday, 15th November 2016
An Article on NEWS24 recently published:
Road transport treaty can save Africa billions
Nov 15 2016 17:50
Cape Town - Some of the world’s highest trade costs can be found in Africa and it is estimated that about 40% of the cost of goods are actually directly attributable to transport cost.
A report by the International Road Transport Organisation (IRU) demonstrates how African countries implementing the International Road Transports (TIR) Convention can reduce the costs of trade in southern and eastern Africa, saving billions of dollars and increasing the gross domestic product (GDP) in African countries.
The TIR Convention is a multilateral treaty to simplify and harmonise the administrative formalities of international road transport and it is gaining momentum with government authorities and businesses on Africa’s trade corridors.
Fin24 asked William Petty, head - regional committee for Africa at the IRU, the global body responsible for developing and promoting the road transport industry, more about this issue.
What are the biggest transport challenges in Africa?
Road transport is a vital component for economic growth. So any obstacle that hinders road transport is an obstacle to trade.
The factors that influence the efficiency and cost of transport, and therefore of trade, can be split broadly into three categories: geography (that is the size of a country, its natural infrastructure such as terrain and waterways, and whether or not it is landlocked); hard infrastructure (roads, rail, ports and airports); and “soft” factors (for example, customs and border procedures, tariffs, other regulatory and non-tariff issues).
In terms of the first factor, geography, sub-Saharan Africa is disproportionately affected. Of the world’s 32 landlocked developing countries (LLDCs), 16 are in sub-Saharan Africa. UNOHRLLS (the UN Office of the High Representative of Landlocked Developing Countries and Small Island Developing States) estimates that LLDCs are able to achieve only 60% of the trade volume of developing countries with coastlines, and that their trade costs are 45% higher.
Some of these costs can be attributed simply to distance. But crucially, there are more borders to cross, more regulatory rules to comply with, as the goods and the vehicles have to cross at least one additional country in order to get to the port.
On hard infrastructure huge improvements are being made, but there is still significant progress to be done. Poor roads, in particular, add not only to transport time (and therefore indirectly to transport costs), but they also add to transport costs directly, as they inflict damage on vehicles leading to higher repair and maintenance costs for transport operators.
On the soft side, the tariff situation is radically improving for importers and exporters, but there remain real issues in terms of border procedures, regulatory compliance, and so on, which impact more directly on the transporters.
In many parts of Africa, there remain significant obstacles to all three of these aspects, all of which add time and cost into the supply chain. The greater the complexity of international trade and transport procedures, the longer they take (which adds cost into the supply chain), and the more fees need to be paid to intermediaries who are able to help traders and transporters navigate the bureaucratic systems.
Another cost component, given the large number of landlocked countries, is the transit guarantee itself. This is why we are working with stakeholders to explore the potential benefits of instruments such as the UN TIR Convention. As we have shown in our study, these costs could be reduced dramatically if TIR were to be implemented in the region.
Road safety is also a critical issue for many countries in the region, some of which have the world’s highest incidence of road traffic fatalities. Countries in sub-Saharan Africa typically count 20 to 30 road deaths per 100 000 of population, compared to 3 or 3.7 in Sweden and the UK, for example.
Studies reveal that 85% of accidents on the road are caused by human error – but of these, very few are attributed to freight drivers. Better training increases the predictability, professionalism and efficiency of transport operators, and delivers significant improvements in safety.
What are examples of some success stories in transport in Africa? What about the same regarding the southern African region?
There have been huge efforts in recent years to improve the transport infrastructure networks on the continent. The African Union and African Development Bank’s work on the Programme for Infrastructure Development in Africa (Pida), for example, has been really important in ensuring that infrastructure is planned and developed in a strategic way at a continental level.
Regional Economic Communities and national governments have made huge efforts across the continent to improve the infrastructure picture. The progress has not been limited to roads, but also rehabilitation of border posts, such as Malaba on the Kenya-Uganda border, and of course at Chirundu, between Zimbabwe and Zambia.
Given that our main concerns are around the soft measures, we believe that some of the most important areas of progress have been in the development of public/private partnerships that work to identify the biggest challenges in surface transport, and develop and implement solutions that are sometimes about infrastructure and ICT, but also focus on key procedural and regulatory obstacles, and often also work to improve road safety and the general health and well-being of road users and roadside communities.
The Northern, Dar, Maputo and Walvis Bay corridor organisations are good examples of this, as is the Borderless Alliance in West Africa.
Online freight exchange platforms
Another key development is that of online freight exchange platforms. One of the reasons for the relatively high cost of transport in Africa is the imbalance of trade.
Most corridors are either export or import-focused, rather than supporting two-way movements of goods. This contributes to inefficiencies in the market, as transport operators’ clients need to pay for two legs of the transport, rather than just the full, loaded leg. Freight exchange platforms, such as that which has been developed by Kenyan start-up East Africa Online Transport Agency, represent really important private sector-led solutions to this challenge, making it easier for transporters with empty trucks to find cargo, and vice-versa.
What can be done about these challenges?
By working with national governments, regional economic communities and the private sector, IRU is helping businesses and transport operators look at ways to reduce the cost of trade, and, crucially, more efficiently connect with global and regional markets via ports and trade corridors.
One of our key areas of focus is to introduce the TIR system to the region, to improve flows across borders and reduce the financial obligations and waiting times associated with these barriers, thus bringing overall costs down.
Based on the UN TIR Convention, the TIR system is now used by 58 countries around the world, largely in the EU, Turkey, Iran and across the Eurasian landmass. China, Pakistan and UAE are the latest countries to start to implement the system. TIR enables the acquisition of a single carnet-based customs guarantee for the entire transit movement, without the need to tie up large amounts of capital with banks or insurance companies, and without the need to organise different bonds in different countries.
Single customs document
It is based on a single customs document – the TIR Carnet – which would be accepted by Customs along the entire transit route, with only minimal checks at the borders – simply to ensure that the Carnet is valid and that there has been no damage to the physical integrity of the load compartment.
The report that we recently released, “Transit Costs in East and Southern Africa”, shows that it currently costs around $720 to acquire the relevant transit bonds in order to move a container of $100 000 worth of truck tyres from Walvis Bay to Lubumbashi. But if TIR were to be introduced, it would only cost around $45 to acquire a TIR guarantee for the same goods on the same route.
Via the IRU Academy, we are addressing the issue of safety. We have been working to establish Associate Training Institutes (ATIs) in order to drive forward professional standards in the transport sector. We are also working with stakeholders to identify the key issues relating to public transport and urban mobility, which will culminate in a set of policy recommendations aimed at tackling the main challenges – road safety is expected to be a high priority for the region.
What about sustainability in African transport?
There are three inter-connected aspects to sustainability – economic and social – which we have outlined above, as well as the third pillar: the environment.
Economic considerations relate broadly to regional integration and trade potential. The social aspects include safety, personal mobility as well as access to markets and trade – all key considerations for the continent.
In terms of the environment, this is certainly going up the transport agenda. COP22 – the world’s key climate change event - in Morocco this year - will have significant focus on Africa.
One of IRU’s own initiatives is the East Africa Community public-private “Smart Move” High level group, which will soon meet to establish a road map to facilitate bus and coach transport (urban transport; intercity regular lines; coach tourism services) and taxis in East Africa. The objective is to substantially increase the level of service of collective passenger transport.