Transportation costs and efficiency in west and central Africa

Sam Smith Discussions 30 March 2016

Discussions

Transportation costs and efficiency in west and central Africa

Willemien Viljoen, tralac Researcher, discusses the state of transport and logistics costs in West and Central Africa

Transport and logistics infrastructure provides access to consumer markets, connects raw materials to beneficiation markets, promotes regional integration and improves connectivity to the global economy. Furthermore it has a direct impact on a country’s capacity to handle imports and exports, the development of distribution routes, frequency of shipments, and the cost of freight handling, storage, distribution and related services. All these factors impact the competitiveness of companies in a market. However, sub-Saharan Africa is plagued by poor, underdeveloped and inefficient transportation infrastructure, poor national, regional and international connectivity and ineffective logistical services. These factors limit accessibility to consumers, hamper intra-regional trade and increase the costs of imports and exports. The impact of these factors and other non-tariff measures on intra-regional trade among west and central African countries came to the fore in a recent two-day workshop on transport costs and connectivity of West and Central African countries held in Abuja.

West and Central Africa have the highest comparative international transport costs and excessive transit times; transport and logistics costs are amongst the highest in the world. The Economic Community of West African States (ECOWAS) and Central Africa also has the lowest international score on the perception of logistic services based on efficiency of customs clearance processes, quality of trade- and transport-related infrastructure, ease of arranging competitively priced shipments, quality of logistics services, ability to track and trace consignments and frequency with which shipments reach the consignee within the scheduled time. The average cost to transport a container within west and central Africa is US$ 2.43 per kilometre which is 1.5 and 2.2 times the freight rates applied in South Africa and the United States. For land-locked countries transport costs represent on average 45 percent of the value of imports and 35 percent of exports. This is much higher than the global averages of 5.4 percent (of imports) and 8.8 percent (of exports).

These costs have been attributed to poor and underdeveloped physical infrastructure, lack of regional and international transport connectivity, inefficient logistics services, piracy, mutual mistrust among operators, cartels of transport providers, freight sharing schemes and access to shipping services. Compared to Southern Africa, transport and logistics infrastructure in West Africa is very poor; infrastructure is inadequately maintained which have resulted in poor road condition and over-congested roads, poorly functioning railway systems and inadequate airports. There is also a significant lack of infrastructure in Central Africa which is a key barrier to connectivity between north, east, west and southern Africa.

In an attempt to reduce transportation costs the Nigerian Export-Import Bank and the Nigerian Shippers Council (known as the Regional Sealink Consortium) called for the evaluation of areas of ship building and vessels ownership to increase the number of vessels servicing the region to encourage global and regional trade. This is especially important seeing that three major shipping lines (Nippon Yusen Kaisha, Evergreen and Mitsiu OSK) recently announced their withdrawal of vessels from the West African coast. The main reason provided for the withdrawal is the disparity between rate levels and costs; with cargo volumes declining by more than 30 percent in the last year while costs have remained the same. Thus the Regional Sealink Consortium announced at the workshop that they are collaborating in an effort to establish a shipping line for trading within west and central African. This will be a multi-modal transport system to include an integrated maritime and logistics services-combined transport and warehousing facility with supporting ancillary services like container handling, weighing activities and inland waterways. There are some essential elements which should be evaluated and included in the development of the multi-modal transportation system to be effective and improve competitiveness. These are vital to ensure goods are able to move from one point to another rapidly, reliably and cheaply:

Infrastructure upgrade, maintenance and development, including ports, road, rail, air transport, inland waterways and inland ports
Allowing for direct contracting between shipper and the transporter
Reforming transportation cartels
Decreasing transit times by removing barriers including the payment of bribes, border delays and number of checkpoints along transportation routes
Efficient and reliable operations of shipping services, ports and all transportation nodes
The improvement of service delivery for the private sector through Public-private partnerships with service providers