Extortionate transport costs continue to throttle regional trade

The high cost of over-border
road freight transport is
throttling two-way trade in
southern Africa, according to
the United Nations University
(UNU), a postgraduate
teaching organisation involved
in collaborative research and
education.
And this lack of costcompetitive,
two-way
movement of goods is in itself
a major contributor to the
overall cost factor. Empty
return hauls impose costs on
SA exporters as the full cost
of the return trip must be
allocated to the outbound leg.
This is a good example of the
benefits of fostering trade as a
two-way street.
A working paper for
UNU by Thando Vilakazi
and Anthea Paelo, titled
‘Understanding intraregional
transport towards
the integration of markets:
Competition in road
transportation between
Malawi, Mozambique, SA,
Zambia, and Zimbabwe’,
pointed out that, with these
high cross-border freight
prices in southern Africa,
deep-water imports were
in some cases cheaper than
regionally produced goods.
Because of high transport
costs, the researchers point
out that it costs less overall
to import animal feed and
refined sugar from South
America than to source both
products from Zambia, even
though Zambia enjoys a cost
advantage in the production of
both products.
With animal feed costs
at around US$400/tonne
in 2015 and transport from
Zambia to Gauteng at above
US$100/t, the researchers
asserted that transport
costs effectively broke the
regional value chain and
favoured deep-water trade.
“A competitive benchmark
for this route would be about
US$40/t,” they said.
And Vilakazi and Paelo
added that reducing transport
costs by half would improve
the cost competitiveness of
regional producers by more
than 10%, allowing them to
more effectively compete with
deep-water suppliers who
supplied more than US$200
million worth of animal feed.
“High transport costs
are detrimental to regional
value chains and encourage
deep-water imports,”
the research brief said,
adding that “transport
infrastructure is critical to
the efficiency of trade in
goods and services”. And,
with most goods in the sub-
Saharan region transported
by road, “understanding
the efficiencies, cost- and
price-drivers, investments
and market dynamics along
road networks is therefore
important”.
The paper added that
prices for overland crossborder
freight in southern
Africa remained higher than
in other regions. This “even
though many of the input
costs of road transportation
– vehicles, fuel and drivers’
wages – are lower than in
Europe and North America.
Benchmarking exercises
indicate that transport costs
from, for example, Zambia to
the province of Gauteng are
around twice
what they
should be”.
Not that the
researchers
are laying the
blame on road
transporters
charging
high prices
to push up
their profits.
“Improving
border efficiency plays an
integral part in achieving cost
reductions,” they said. “Border
delays add around US$20/t
to delay costs per day for a
bulk load and have a larger
impact on sensitive goods
such as perishable foods. Such
costs, both in monetary terms
and time, reduce the scope of
mutually beneficial regional
trade flows.”
And the transporters, who
work on profit margins often
well below 5% – and even, in
some cases, actually below
cost – agreed. They have many
times complained to FTW
that border-post inefficiencies
in Africa cost them days
in delays, and “delays are
money”. The truckers are also
beset by inherent corruption
at the borders, with drivers
often allocated slush funds
of anything up to US$1000
to bribe their
way through
border posts.
Either that,
or they sit for
days while
customs
officials
shuffle their
documents,
until often
a transport
company
member brings the cash
to buy them out of trouble.
Police roadblocks on the road
networks also require bribes
to negotiate.
Added to that is the sheer
inadequacy of the continent’s
infrastructure. The title of
‘main highways’ often refers to
roads full of dangerously deep
potholes, and many surfaces
that have so broken up that
they are now little more than
dirt roads.
INSERT
Transport costs from
Zambia to Gauteng
are around twice
what they should be.