Transport Costs And Efficiency In Africa: Bridging The Gap (I)

Over the years, African countries, especially the West and Central African countries have been suffering the pains of relatively high freight and shipping costs, with serious negative impact on the income and standard of living of the populations. This trend dealt heavy blow to economic activities and the competitiveness of the countries in international trade. The flipside of this is the mutual mistrust and blame-game among the operators on who is responsible for this trade barrier. The cost of the consequences of this disaffection is unquantifiable yet damaging. For instance, in Nigeria, the Nigerian Shippers’ Council (NSC) and the terminal operators as well as the shipping lines are still  in court over transport or logistics costs. While the court case stands, with interpretations and judgments awaited, which is normal, the absurdity here is where the leadership of the terminal operators would not want to remain under one roof and speak with anybody from shippers’ council. Again, given any opportunity  to discuss port cost, Princess Vicky Haastrup, who is the President of the Seaport Terminals Association of Nigeria (STOAN), would want to rubbish the NSC as an over-ambitious institution. Can the economic effect of this on the people, economy and the system be quantified?

Findings show that raising transport costs by 10 per cent reduces trade volumes by more than 20 per cent, as transport cost constitutes 6 to 7 percent of the total value of landed cost in the developed world and in contrast, constitutes 30-35 per cent in West and Central Africa.

A school of thought, however, has argued that a high transport cost could be over-looked when the services are commensurate with the cost. So, at what point are services meeting the cost?  Efficiency is the answer?  Therefore, what is efficiency in this case? What are the strategies to reduce costs? How can the cost be reduced? Is there a meeting point between costs and efficiency?

All these questions begging for answers were the reasons a Sub-Regional Workshop on Transport Costs and Connectivity of West and Central African Countries as well as Sensitization Seminar on IMO’s SOLAS Rules on Container Weighing and Payment Terms took place in Abuja recently.

It was organized by Union of African Shippers’ Council (UASC) in collaboration with United Nations Conference On Trade and Development (UNCTAD), Global Shippers’ Forum(GSF) but hosted by the NSC  under the auspices of the Federal Ministry of Transport.

There are also efforts to link connectivity with costs because as essential transactions and movements are delayed or disrupted, transport costs rise and time is also lost. Hence there is need to find ways of integrating and simplifying transport infrastructure in the region.

In his keynote address at the event, the Minister of Transport, Rt. Hon. Rotimi Amaechi, represented by his Minister of State for Aviation, Sen. Hadi Sirika emphasized the need for multi-modal transport system that will take into consideration all the modes of transport—road, rail, air, inland waterways and inland ports for effective connectivity.  Consequently, he said, “the main policy thrust of this administration is to evolve a multimodal, integrated and sustainable transport system, with greater emphasis on rail and inland waterways transportation in order to foster quality connectivity within the system.” He added: “an enabling environment for public-private partnership (PPP) is being created by designing new policies , legislation and institutional framework that would support the envisaged improvement of the sector”.

The Minister therefore called for a holistic approach towards addressing  challenges of the transport costs and connectivity, advising that such approach should factor into consideration: Cost effectiveness of shipping services, competitiveness and survival of national and regional operators, efficiency of transit corridors and special needs of  landlocked countries, efficiency of seaports, availability of coastal shipping services, efficiency of multimodal transport system, protection of shippers interest and partnership with service providers.

According to Sirika, “Efficiency in shipping is closely interlinked with ports and land transport services and that is why the world’s major ports are located close to the main international shipping routes that transverse the east-west global axis. Africa’s intra-regional liner shipping connections are largely determined by the shipping liner routes, connecting African countries with Europe, Asia and to a lesser extent the Americas. Access to shipping services is thus a crucial aspect of competitiveness and determines the geography of the trade”.

Agreeing with the Minister, the Executive Secretary and Chief Executive Officer of NSC, Barr. Hassan Bello noted that Nigeria generates 60 per cent of the trade in West and Central African region, adding that poor transport connectivity has remained the major obstacle to the realization of the potentials of regional and global trade by the sub-saharan Africa countries.

Bello said, “modern logistics is about developing connectivity between the various sectors in the supply chain, that is, with cargo sources and between different modes of transport. Shippers are looking not only at transport cost but at all costs involving both the marketing and distribution of goods and all it entails to get the goods from the factory of the producer  or farm gate to the shelf or market and ultimately to the hands of the final consumer of goods”.

“There are two kinds of connectivity. There is the connectivity to outside markets and there is intra-regional connectivity. In view of the rapid changes in global trade, we urgently need effective connectivity within the sub-region as this will enhance trade, investment, tourism, and development, narrow development gaps and facilitate people-to- people contacts. We must encourage South-South trade within West and Central Africa and we then build on this to look outwards to the global market. It is rather worrisome that more than 50 percent of trade from Asia to the West bypasses us in spite of going through Africa’s coastline and almost all of our imports and exports are transported by foreign ships to and from our countries.” Bello said.

And this is because most countries in the sub-region including Nigeria, do not own fleets, making them to be at the mercy of foreign shipping companies.  Consequently, to improve connectivity and lower the cost of transport, “we need to look very seriously at the areas of ship building and vessels ownership in order to increase the number of vessels plying our waters with a view  to encouraging international trade. We pay dearly for poor connectivity by the fact that while in developed economies freight as a percentage of the value of imports is only about 3 Percent, in developing economies it is about 10 percent.  While for Africa the figure is estimated at a mind-boggling value of between 20 percent and 35 percent especially for landlocked countries.”