With rising transport costs, poor connectivity in West and Central African sub-region, stakeholders believe the solution is for member countries to revisit their trade facilitation programmes, in addition to improvement in the area of infrastructure and adoption of fewer direct services to multiple ports as a strategy for developing a hub-spoke system for the region. Francis Ugwoke writes
At a time when the global economy is facing recession, countries appear to have been left with no other option than to adopt measures to improve shipping trade through the reduction of cost of doing business. This is being pursued with the intent of promoting trade facilitation without compromising efficiency. For the West and Central African countries which are affected by the global fall in crude oil prices, among others, the agenda on the table is how to improve trade and check cost of doing business. This was the demonstration of industry leaders, experts and other stakeholders who gathered recently in Abuja to discuss transport costs, connectivity, new rules by the International Maritime Organisation (IMO) on container weighing and Nigeria’s terms of payment in international trade. The discussion centred on providing a panacea for economic development of Nigeria and the entire countries of the sub-region.
Connectivity and Transport Costs
The issues that played up during the conference include connectivity and transport costs within the sub-region and indeed within the global community. The two – connectivity and transport costs – impact either negatively or positively on trade. To the Union of African Shippers’ Councils (UASC), which organised the event in collaboration with the United Nation’s Conference on Trade and Development (UNCTAD) and hosted by the Nigerian Shippers’ Council (NSC) in Abuja, poor connectivity in the region has been “the reason why Africa’s share of global trade is very small”. The share, according to UASC is about 3 per cent for an annual volume of 9 billion tons and less than 10 per cent with regards to intra-African trade.
To facilitate trade, the council called for more efforts by governments in the region to improve on infrastructure, including roads, railways, ports and airports. These infrastructure offer economic and social advantages by connecting enterprises to regional and international markets. On costs in the sub-region, the council pointed out that transport costs and logistics have been known to be slow and costly. The average cost to transport a container within the West and Central African corridors was put at $2.43 per km, described as 1.5 and 2.2 times the freight rates applied in South Africa and the United States respectively. For the landlocked countries, transport costs represent on average of 45 percent of the value of imports and 35 percent of exports against global averages of 5.4percent and 8.8 percent respectively. With this development, such costs limit the competitiveness of the sub-region’s enterprises on markets.
Benefitting from Global Market Share
Apparently realising the importance of the global market share to the entire Africa, particularly the West and Central African economy, Nigeria during the workshop said it was time for the stakeholders to rise and take their share. This, according to the Minister of State for Transportation, Senator Hadi Sirika, requires the development of a global reach in trade and enterprises in the sub-region.
To do this, Sirika said, requires connectivity nationally, sub-regionally and internationally. According to him, this will include a multi-modal, integrated and sustainable transport system that will foster quality connectivity within the sub-region and indeed the rest of Africa. He argued that the ports alone were not enough to connect to the markets, and noted other modes, including road, rail and air transport, inland waterways and inland ports. These, he said, were essential since trade logistics now involve door-to-door or factory to warehouse movement of goods in international trade transactions. Calling for the adoption of a holistic approach towards addressing the challenges of transport costs and connectivity, he said this should consider “cost effectiveness of shipping services, competitiveness and survival of national and regional operators, efficiency of seaports, availability of coastal shipping services, protection of shippers’ interest and partnership with service providers”.
Sirika disclosed that an enabling environment for Public-Private Partnership (PPP) is being created by government through new policies, legislation and institutional framework that would support the envisaged improvement of trade in Nigeria. President Muhammadu Buhari, he said, is interested in addressing the lingering challenges in trade and transport sectors of the nation’s economy. He added that the main policy thrust of the administration was to evolve a multi-modal, integrated and sustainable transport system with greater emphasis on rail and inland waterways transportation in order to foster quality of connectivity within the system. Noting that maritime transport has remained an indispensable tool for international trade because of its mode, operation and character, Sirika added that opportunities, problems and policy issues associated with it transcend national boundaries and can best be handled in an integrated regional and international level.
The Executive Secretary, Nigerian Shippers’ Council (NSC), Mr. Hassan Bello, during the occasion said the challenge of poor transport connectivity was a major obstacle to sub-Saharan Africa (SSA) countries realising their potential in both regional and global trade. He said: “With the advent of global supply chains, a new premium is being placed on being able to move goods from A to B rapidly, reliably, and cheaply. Being able to connect to what has been referred to as the “physical internet” is fast being a key determinant of a country’s competitiveness”. Transportation networks, Bello said, represent the economic arteries of countries and regions, adding that the network of transport routes and facilities all over the world can be likened to an internet.
“As observed by experts, for those able to connect, the physical internet brings access to vast new markets; but for those whose links to the global logistics web are weak, the costs of exclusion are large and growing. Whether a cause or consequence, no country has grown successfully without a large expansion of its trade,” he said. He observed that most countries in the sub-region, including Nigeria, do not own fleets, stating that with this development, the sub-region is at the mercy of foreign shipping companies.
To improve the connectivity and lower the cost of transport, Bello called on African countries to look very seriously at the areas of ship building and vessels ownership in order to increase the number of vessels plying their waters with a view to encouraging international trade.
According to him, “We pay dearly for poor connectivity by the fact that while in developed economies, freight as a percentage of the value of imports is only about 3 per cent, in developing economies it is about 10 per cent. While for Africa, the figure is estimated at a mind bogging value of between 20 per cent – 35 per cent, especially for land locked countries”.
Way Forward for Africa
Among the decisions reached at the end of the workshop which was organised under the auspices of the Transport Ministry headed by Hon. Chibuike Rotimi Amaechi include a call for the adoption of the Liner Shipping Connectivity Index (LSCI) by various countries to avoid multiple port calls in the region. The sub-region was equally advised to adopt fewer direct services to multiple ports so as to develop a hub-spoke for the West and Central African countries. In the communiqué issued at the end of the event which was sent to all the governments within the sub-region, member countries were urged to revisit the various programmes on transport connectivity and trade facilitation, such as the Sealgrid system, Lakaji Corridor, Sealink project in their efforts to achieve connectivity. The communiqué also identified trade barriers and restrictions of the flow of goods among the countries, which according to them hamper transport interconnectivity amongst member countries.
For instance, it was pointed out that the flow of containerised cargo in the sub-region does not exhibit good connectivity between the ports and the hinterland. Member countries were therefore advised to develop their infrastructure through public private partnership (PPP). The stakeholders, who noted that freight cost was determined by several factors, said the drive for the sub-region to create a hub-centre can lead to the achievement of economies of scale of ports within the sub-region.
IMO Rules on Container Weight
One of the issues that played up at the workshop was the information on the new IMO rules on container weighing and its implication to export trade. IMO trade expert who is also a member of the Global Shippers’ Council (GSC), Mr. Chris Welsh, had informed the participants that new rules agreed by the international maritime apex body place new responsibilities on the shipper to verify the actual goods, packing and stowing materials , pallets and the tare weight of the container. The rules which apply only to export provide that the responsibility of verification of the gross mass weight of the container and goods rests on the shipper.
The rules take effect July 1 this year. This information took the participants who are into export by surprise with many of them calling for its suspension. But Wesh was quick to inform them that IMO would not be in a position to suspend what it has agreed on just for the sake of the sub-region. Some had argued that there was not enough awareness creation on the matter. In the communiqué, however, the stakeholders agreed that for effective implementation of IMO rules on container weighing, member countries should advise their governments to set up a technical committee to carry out the relevant consultation, documentation and development of guidelines for enforcement. Member countries were also advised to sensitise relevant stakeholders on the importance of compliance with the IMO rules on container weighing as part of the urgent implementation.
Piracy, Arbitrary Charges in the Sub-region
One other issue raised during the workshop was the rate of piracy in the region, which has affected shipping trade, including rise in charges and insurance cost. The communiqué called for a joint task force to wage war against piracy in the Gulf of Guinea. They also called on member countries to check the activities of concessionaires by regulatory authorities in order to ensure that charges are commensurate with service delivery.