Can Transport Costs Meet Service Efficiency In Africa?

Concerted efforts are being made by the Union of African Shippers’ Council (UASC) to bridge the wide gap between transport costs and efficiency in service delivery in Africa.

This followed a damning report from the United Nations Conference on Trade and Development (UNCTAD) that: “ Developing countries, especially in Africa and Oceania, pay 40 to 70 per cent more on average for the international transport of their imports than developed countries. The main reasons for this situation are to be found in these regions’ trade imbalances, pending port and trade facilitation reforms, as well as lower trade volumes and shipping connectivity.”

However, the report gave hope: “There is potential for policy makers to partly remedy the situation through investments and reforms, especially in the region’s seaports, transit systems and customs administrations.”

But in addressing this challenge, is there a meeting point for transport costs and efficiency in trade, especially in Africa, where infrastructure and services are relatively weak?

Several studies have been carried out and measures have been implemented in order to improve the transport system in Africa and promote trade. However, there is no significant progress, while recent reflections on the issue have revealed that logistics connectivity turns out to be one of the new challenges to reduce costs in Africa. It made a bold statement that the state of connectivity has an impact on transport costs. Connectivity in this case as explained last week, in the previous edition is effective integration of transport systems within a country, region or Africa.

According to Mrs. Traore Gnini Elise, an expert in Transport and Internal Trade,” Transport and logistics costs are crucial for companies’ profitability and competitiveness, most especially when these companies are located in countries which do not have direct access to sea. However, transport and logistics are known to be slow and costly in Africa, especially in West and Central Africa.”

Recent studies have equally shown that the average cost for transporting a container in West and Central African corridor is 2.43 USD per km, this being 1.5 and 2.2 times the transport tariff applied in South Africa and United States.

In landlocked countries, transport costs represent on average 45 percent of the value imports and 35 percent of that of exports, against global averages of 5.4 per cent and 8.8 per cent. These costs considerably limit the competitiveness of the region’s companies on markets and caused the consumer prices of imported products to be very high.

In reducing transport cost, UNCTAD listed improved port efficiency, port infrastructure, private sector participation and inter-port connectivity as variables that can help to reduce the international maritime transport costs.

In his contributions at the just concluded Sub-regional Workshop on Transport Costs and Connectivity of West and Central African countries in Abuja, the Secretary General of Port Management  Association of West and Central Africa (PMAWCA), Mr. Michael Luguje who spoke on Port Cost and Efficiency in Africa noted that port cost was an important component of total transport costs, which equally determines the landed price of goods, emphasizing  that, “it is imperative to improve port transit costs as part of overall strategy to improving the competitiveness of the exports of developing countries in the global markets”.

Listing port authority, terminal operators, shipping lines, freight forwarders, transport operators and government agencies as the players in costs factor, he stated that terminal operators accounts for the largest share of the total port cost with 65 per cent ratio, with the exclusion of customs duties and other governments  forms of taxations which is the highest.  He raised the question on who should take the blame for high port cost. Is it the government or terminal operators?

Trying to reach a nexus between port costs and service efficiency, he argued: “if my port guarantees short turn-around time for ships and a faster, safer cargo clearance to shipper, should I charge more for this quality? If I do, will I be deemed to be expensive?”

What he did not address is the percentage of costs charged in relation to the services rendered to the shipper. Again, are the costs fixed arbitrarily at the operator’s whims or in line with a tariff control mechanism?

This is the scenario in Nigeria’s case of private sector controlled port concession, where private monopoly has taken over public monopoly, ridden with arbitrary costs increase with disregard to service efficiency and official clearance.

Quite a good number of the concessionaires in Nigeria have invested massively on port infrastructure with improved ship turn-around time and cargo dwell time, yet UNCTAD Review of Maritime Transport 2015 still mentioned costs and efficiency in Nigeria as very weak.

While the problem of reaching an equilibrium between costs and efficiency in Africa remains a fight to be fought  satisfactorily,  a key factor to be looked at again is the shipper’s or Shippers’ satisfaction hence Luguje noted thus: “Costs- is a notion of  material cash versus cost as a notion of the value received in return.” So satisfaction could vary with the measure of services rendered to a given shipper. This could call for the need for graded port costs and services.  Let’s try this, perhaps!