Obstacles and solutions for regional trade

The current method of moving goods in intraregional and interregional trade in the East and Southern Africa (ESA) region is inefficient and expensive in comparison with international best practice

The significant improvements that have been achieved in East Africa reflect the potential for coordination between countries, but the changes have been largely implemented by the authorities, not the transport industry. Interstate trade throughout the ESA region has not yet benefited from the extensive improvement in the management of private sector road and rail haulage that has been made in Europe, the UK and USA by effective coordination and definition of quality standards and controls by the cross-border road freight industry.

The Tripartite Trade and Transport Transit Facilitation Project (TTTFP), which is being developed by the Southern African Development Community (SADC) Project Management Unit, is intended to provide a framework of operator registration and control of operational quality. The TTTFP is focused on harmonised vehicle standards, vehicle maintenance and operation, driver standards, control of overloading and operator responsibility for compliance with road regulations. It does not address the need for control of the movement of goods, compliance with customs regulations or guarantees for goods in transit. The lack of effective risk management procedures is a major factor in the delays on the corridors, and this is aggravated by the lack of coordinated quality control in the road freight industry.

The introduction of the Tripartite Free Trade Area (TFTA) and the larger African Continental Free Trade Area (AfCFTA) is intended to improve the levels of intraregional trade. The share of intra-African exports as a percentage of total African exports has increased from about 10% in 1995 to around 17% in 2017, but it remains low compared with levels in Europe (69%), Asia (59%) and North America (31%). According to modelling results by the Economic Commission for Africa (ECA), the AfCFTA is projected to be a game changer for stimulating intra-African trade. It is forecast, through the sole removal of tariffs on goods, to increase the value of intra-African trade by between 15% (or $50 billion) and 25% (or $70 billion), but this will depend on the levels of liberalisation. It must be recognised that the current dependence on excise revenue by many countries will have a dampening effect on compliance, but there is still extensive scope for reducing transport costs through improved efficiency. Current delays at the main regional border posts are shown in the accompanying table.

The current cost of excess delays is about $1,3 billion (R21,3 bn), which is paid primarily by the landlocked interior countries.

The current cost of a 30-ton load or a container between Durban and Lubumbashi on the North-South Corridor is approximately $10 600 or $350 (R5 600) per ton. About 27% of the cost is due to the many taxes, levies and other charges by authorities, and about 25% is due to unnecessary delays.

For South Africa, as the largest exporter of finished goods in the region, there is a crucial need to improve the efficiency of the movement of goods on the trade corridors into the region. The costs have serious impact on the potential for South African exports into the region and have restrictive impacts on industrial development in the landlocked countries.

South Africa exports approximately 40% of agricultural production to international destinations, but the intraregional trade consists mainly of processed foods and some consumer and industrial goods. Post-Covid, the recovery of the depressed economy of South Africa and the region will be dependent on increasing the production of consumer and industrial goods. Global competitiveness will depend on efficient distribution channels to reduce the cost of transport and support industrial growth and employment. 

The challenge for South Africa is to redevelop much of the industrial capacity that has been exported to the East, as this will reduce unemployment and the resulting dependence on government grants and poverty relief measures. The promotion and acceptance of South Africa industrial products in the region will depend on their cost and quality in competition with the large-scale imports from more developed countries.

Exorbitant local transport costs will be counterproductive. As road freight is by far the most important mode for goods distribution into the region, it is important that the road transport industry takes the initiative to introduce efficiency measures, in cooperation with the authorities in the region. Failure to address the problems will lead to further erosion of the interior markets and increasing pressure on regional consumers and producers to find alternative supply chains and import-export corridors.

The introduction of an efficient transit system which can be approved by customs in all countries requires coordination of the road freight transport associations in each country within a practical and proven system. The current initiative by Federation of East and Southern Africa Road Transport Associations, as the regional coordinating association for the industry, is intended to develop a workable system, such as the highly effective International Road Transport Union (IRU) Transports Internationaux Routiers (TIR), which is widely accepted as the most effective international multimodal trade and transport facilitation tool.