Helmo Preuss

Helmo is an experienced economist and founder of marketing consultancy, Forecaster Ecosa. He has multiple degrees in Economics and Economic History, Business Economics, Computer Science, as well as Operations Research and Statistics. He just completed an M. Phil. in Marketing Research.

Cross-Border Transport Inefficiencies Cost African Economies $170bn Annually

Transport inefficiencies cost African economies $170bn annually, so implementing the One-Stop Border Post (OSBP) initiative could add that amount to Africa’s economies and allow Africa to compete with the rest of the world, Mapolao Mokoena, the senior programme office transport of the South African Development Community (SADC) secretariat said on 15 February at the regional launch of the OSBP sourcebook in Sandton.

“Transport inefficiencies cost African economies $170bn annually, especially the poor in landlocked countries. The lack of harmonisation of standards and regulations is hampering efficient transport flows, so that impedes our drive to add value and foster industrialisation and market development,” Mokoena said.

The OSBP concept refers to the legal and institutional framework, facilities, and associated procedures that enable goods, people, and vehicles to stop in a single facility (One-Stop) in which they undergo necessary border controls. Currently, more than 80 OSBPs have been planned and/or implemented in various parts of Africa as a means of reducing the time and costs of delays at border posts along major transport corridors with the Japan International Cooperation Agency (JICA) a key donor for the OSBP programme as that will also help the flow of Japanese goods to the multitude of landlocked African countries.

The Chirundu OSBP on the Zambezi River at the crossing between Zambia and Zimbabwe was the first OSBP to be commissioned in December 2009 and its example shows what can be achieved. Every month, an average of 10,000 vehicles pass through Chirundu as it is a key gateway for taking South African exports to Zambia, Malawi and the Democratic Republic of the Congo.

Previously, the border post would be clogged with hundreds of trucks waiting clearance with wait times as long as a week where the fixed cost of a heavy duty truck sitting idle is between $250 and $500 per day. Prior to December 2009 it used to take between 72 and 120 hours to clear a truck at the border, but it now takes only 12 to 24 hours or a saving of as much as $2 500 per truck. As transport costs can be as much as 60% of the retail price of an item in an African landlocked country like Zambia or Malawi, any reduction in transport costs represent a significant saving to the African consumer.

 

The Africa Regional Integration Index (ARII) Report in 2016 showed that the East African Community (EAC) was the most-integrated amongst the eight Regional Economic Communities. The greatest divergence in regional performance was in the area of financial integration and macroeconomic policy convergence, while countries with the largest economies do not always perform the best.

Regional integration is often cited as a key component of economic transformation on the continent, but up until now there were no mechanisms to measure how different African countries performed. If you cannot measure it you cannot manage it, so the report highlighted the gaps to show where politicians should focus their efforts. The ARII measured 16 indicators across five dimensions.

Getting goods to move more freely across the continent via the OSBP initiative is the bedrock of regional integration. When trade flows are faster and more cost-effective, businesses and consumers in the regions benefit. Trade impacts on people’s livelihoods and incomes to accelerate Africa’s development with formal intra-Africa trade now estimated at some $330bn annually with a further $200bn in small-scale informal cross-border trade.

When trade is more interconnected Africa’s high number of small economies such as Burundi, Lesotho, Malawi, Rwanda and Swaziland are able to access larger markets in their neighbours and regional hubs can then source from the region. All of this makes trade integration a key element in the continent’s ongoing integration journey.

A note of cation was however sounded by Mxolisi Notshulwana of the Development Bank of Southern Africa (DBSA) as he said that although the OSBP programme was desirable, it should not be seen as a silver bullet that would cure all Africa’s ills because corruption within borders remained a significant obstacle to promoting inter-African trade.

“I recently undertook a journey of more than 2,500 kilometres along the North-South Corridor (NSC). In one country, where I travelled 1,100 kilometres I only encountered two checkpoints within the borders and both of those were animal/pest control checkpoints. In another country I travelled 1,000 kilometres and faced six checkpoints. In the third country I travelled only 400 kilometres, but was confronted by 31 checkpoints. The fairly standard refrain at these checkpoints was ‘Boss, we are hungry. Do you have a Fanta?’ I am sure other travellers were asked for more than a Fanta,” he said.

He also said another constraint on the implementation of OSBPs was Internet connectivity because if the system was down then no movement could take place.

“The DBSA supports regional integration but we should not minimise the complexity, nor the vested interests when it comes to corruption that stalls operational implementation even when the physical infrastructure such as buildings and computers are in place,” he said.

The complexity and multitude of agencies involved in cross border trade is shown below although submitting all documents to a single electronic window will speed up the process provided the system is running and all agencies are connected.

Hiroyuki Kinomoto, the Chief Representative of the JICA South Africa office said he was pleased to see the presence of many key players from across the region, as that would participants to share experiences and lessons learnt from various OSBP stakeholders in the region.

“Regional trade challenges in Africa are compelling. The cost of transporting goods in Africa is the highest in the world. High transport costs raise the cost of doing business and restrict private investment, and serve as an additional barrier for African countries to benefit from trade,” he said.

“The Tokyo International Conference on African Development (TICAD) meeting in Nairobi last year gathered many heads of state and delegates from African countries, and committed Japan to continue supporting connectivity and Africa’s economical regional integration, including corridor and OSBP development,” he added.

“Reduced cross-border delays, simplified customs procedures and minimised rent-seeking activities by government officials, will significantly reduce the cost of trade transactions,” he concluded.