Logistics without borders will boost trade in Africa

 

Early this year, a tweet from the Federation of Kenya Employers (FKE) chairman stating ‘‘Now Uganda and Tanzania are exporting more food to Kenya than any other point in history...’’ attracted varied reactions from Twittersphere and opened up the debate on regional trade.

The chair argued that Kenya was becoming sloppy in agriculture, education and health and that there’s need for sober reflection on this trend. This commentary compelled me to reflect more critically on the role of the logistics industry in improving economic development of Kenya and the African continent in general.

Firstly, Africa does not really need to rely on western countries’ support to develop its ability to trade and do business with itself. The continent only requires an inward and outward strategy to enable it cement its place in the global logistic economy through foreign investment and improved trading ties while internally driving regional trade through cross-border integration.

The logistics sector across various countries in Africa reveals that substandard infrastructure continues to negatively impact the free flow of goods and largely influences the high cost of goods as well as inflate the cost of doing business in the industry.

Today, cargo movement across Africa by road is painfully slow due to poor road networks and the multiple tariff barriers which make it extremely expensive to trade even within regional trade blocs.

In addition, the movement of cargo across Africa has been riddled with corruption and poor management of respective customs bodies further curtailing logistics operations.

Though transport by sea in Africa accounts for 90 per cent of trade, more than any other region, poor infrastructure, challenges associated with piracy has continued to stifle smooth operations and come with additional security costs which are passed on to the consumer. As a result of these challenges, intra-Africa trade still remains a challenge and Africa is operating below its potential with volumes of 12 per cent of all trade in the continent. However, the income generated from the logistics sector through customs department, is currently estimated at 40 per cent of government revenues and points to the huge income potential that remains largely untapped.

Kenya recently commissioned the Standard Gauge Railway (SGR) ferrying cargo from the Port of Mombasa inland and beyond with the expectation of efficient cargo movement, reduced revenue leakages and cost savings for the consumer.

It is envisioned that the SGR will extend to the regional neighbours of Rwanda, Tanzania, Uganda and South Sudan to enable efficient interconnection of transit cargo and boost economic development.

On the air transportation front, the launch of the Single African Air Transport Market (SAATM) by the African Union in January 2018 is a silver lining with great opportunities for the logistics industry as it is bound to encourage pan-African integration by opening up the continent’s skies which could be a huge gain in reducing the cost of air cargo.

To reap full benefits of these interventions, Africa therefore needs to as a matter of priority - enhance its transport infrastructure, remove all the bottlenecks associated with intra-trade by opening up their borders for cargo movement using a single rail network and single transport documents to facilitate the growth of key sectors of the region’s economies.

The writer is the Group Managing Director at Siginon Group | corporate@siginon.com