SD Publication Series Office ofSustainable Development Bureau forAfrica * Comparative Transportation Cost Analysis in East Africa Executive Summary Gordon Anyango The Management Center Nairobi, Kenya Technoserve, Inc. Nairobi, Kenya Technical Paper No. 21 June 1996 '4ii"i * A Joint Publication ofAFR/SD and REDSO/ESA Thi publication is part ofthe ~ional Trade Agenda Series USAID I Africa Bureau Office of Sustainable Development Productive Sector Growth and Environment Division Food Security and Productivity Unit and Regional Economic Development Support Office Eastern and Southern Africa, Office of Agriculture and Natural Resources Activity Title Regional Trade and Comparative Advantage in Eastern and Southern Africa: Implications for Food Security The series includes thefollowing publications: • Trade et: U. ers Guide to InterMail • Comparative Analysis ofEcollomic R fonn and Structural Adju tment Programs in East Africa: With Emphasi on Trade Policies • Comparative Analy i ofEconomic Reform and Structural Adjustment Program in Ea t Africa: With Emphasi on Trade Policies-ANNEX • Comparative Transportation Cost Analy i in Ea t Africa: Executive Summary • Comparative Transportation Co t Analy is in East Africa: Final Report • Comparative Analysis ofStTuctural Adjustment Policie in Southern Africa: With Emphasis on Agriculture and Trade • Comparative ost ofProduction Analy i in East Africa: Implicationsjor Competitiveness and Comparative Advantage • Methodologies for Estimating Informal Cro s-Border Trade in Eastern and Southern Africa • Reported Trad in East and Southern Africa: Analysis ojOfficially Reported Data • Analy i ofPolicy Reform and tructural Adju tment Program in Malawi: With Emphasis on Agriculture and Trade • Struchrral Adju tment and Agricultural Policy Reform in South Africa • Policy Reform and Structural Adjustment in Zambia: The Case ojAgriculture and Trade • Analy i ofPolicy Refoffil and tructural Adjustment Program in Zimbabwe: With Empha i on Agriculture and Trade For more information about the series, contact: Office ofSustainable Development REDSOIESAIAR Brian D'Silva Joe Carvalho USAIDIAFRJSD/PSGE USAIDfREDSOIESNANR Rm 2744 S, Wa hington D.C. 20523-0089 airobi, Kenya TEL: 703-235-5254; FAX: 703-235-3805 TEL: 254-2-751613; FAX: 254-2-743204 Intern t: bdsilva@u aid.gov Intern t: jcarvalho@u aid.gov Productive Sector Growth and Environment Division Office of Sustainable Development Bureau for Africa U. S. Agency for International Development Comparative Transportation Cost Analysis in East Africa Executive Summary Prepared in January 1996 by: Gordon Anyango The Management Center Nairobi. Kenya Summitted by: Technoserve, Inc. Nairobi, Kenya Project CA 623-0478-00-3180-00 June 1996 Publication services provided by AMEX Intemational, Inc. pursuant to the following USAID contract: Project Title: Policy, Analysis, Research, and Technical "4N'·' Support Project Project Number: 698-0478 • Contract Number: AOT-0478-C-00-3168-00 Contents Foreword v Acknowledgments vii Glossary of Acronyms and Abbreviations IX 1.· Comparative Transportation Cost Analysis in East Africa Introduction 1 Historical Transportation Perspective 1 The Current Routes 2 Potential New Routes 3 Other Modes 4 2. Major Issues in Transit Traffic 5 Ports' Infrastructure and Facilities 5 Customs Services 5 The Railway System 6 Road Freight Transportation System 7 Marine Services 8 Coordination of ZBRU Traffic 8 3. Major Cost Components 11 Port Charges 11 Clearing and Forwarding Charges 11 Freight Costs 11 4. Total Costs of Transportation 13 Recommendations 13 The Ports of Mombasa and Dar-es-Salaam 13 Clearing and Forwarding Issues 14 Customs Procedures 14 The Railway Systems 15 Marine Services 15 Road Transport 16 Competition in the Road Sector 16 Regional Cooperation 17 Training 17 iii 5. Route Options 19 Uganda 19 Rwanda and Burundi 19 IV Foreword A number of East African countries continue to face rity. Additionally, with cheaper and more secure trans­ severe deterioration in their sea/port, road, rail, and portation, food aid supplies are more certain to reach air transport networks. In the main ports, the infra­ their rural destinations than would otherwise be the structure is so limited and outmoded that it has failed case. The region's exports-mostly bulk agricultural to keep pace with growing traffic demands. As a items-are also more likely to be transported effec­ consequence, the subregional transport system is of­ tively and efficiently, thereby minimizing spoilage ten being used beyond capacity, insecure, costly, and and enhancing incomes. considered unreliable to meet growing national and In view of the widespread economic benefits of regional needs, as well as projected future require­ using least-cost transportation, this study is timely ments. and intuitive. The author's discussion of the major Using data and information based on transport underlying issues in regional transit traffic, as well as costs and issues from the two main sea ports of the major cost components, is detailed and informa­ Mombasa and Dar-es-Saalam to selected destinations, tive. this study presents a comparative cost analysis (with This study finds and recommends that in order to emphasis on total transportation costs to the shipper) make transit traffic more cost effective in East Africa of in-country and intercountry transport costs for and routes and modes more competitive, additional various transit and landlocked countries in East Af­ investment on the basis ofboth existing and projected rica. traffic levels should be made within the framework of In light of the interrelationship between the cost donor-supported regional projects, and coordinated and efficiency ofthe transportation network, and the at that level. This approach reinforces the enormity cost, timeliness, and state of delivery of cargo, espe­ and broad-based nature ofthe problem, as well as the cially agricultural cargo, it is imperative that the ship­ need for cost sharing on an issue that will yield per have access to options for transporting merchan­ collective regional benefit if designed and imple­ dise rather than having to opt for a particular mode mented appropriately. (although it may be more expensive) only because no This report is one in a series ofstudies on Africa's other choice exists. Further, over the past few de­ regional trade and agricultural comparative advan­ cades, the East African region has suffered frequent tage, a joint activity of the USAID Africa Bureau's severe droughts that have threatened national and Food Security and Productivity Unit in the Office of regional food security. Food shortages have been Sustainable Development, Productive Sector Growth further complicated by continued structural grain and Environment Division (AFRISDIPSGE), and the deficits caused by the poor, insecure, and high cost Regional Economic Development Services Office for transport system. East and Southern Africa (REDSO/ESA). With more cost effective and secure modes of transportation, the cost of transporting grain from rural, agricultural regions to cities and other urban Curt Reintsma areas will be cheaper and food affordability could be Division Chief enhanced, thus assuring a key element of food secu- USAIDIAFRISDIPSGE v Acknowledgments We express our gratitude to the many people and We are grateful to senior officials and other organizations who have contributed to and supported employees of relevant transport organizations and this study. associated industry players in the region. Since it is Special thanks to those who provided funding not possible to personally thank every individual, we and formulated this study's terms of reference-the hope that you will accept our sincere gratitude. Bureau for Africa, Office of Sustainable Develop­ For the provision of data on which much of this ment at USAID and USAID/REDSO/ESA in study is based, special thanks to Kenya Railways Nairobi-and Technoserve Inc., who acted as con­ Corporation, Tanzania Railways Corporation, Uganda tract managers. We also wish to specially thank Dr. Railways Corporation, Kenya Ports Authority, and Joe W. Carvalho, policy adviser, USAID/REDSOI Tanzania Harbors Authority. We are grateful to of­ ESA/ANR, who guided the study with his useful ficials of customs departments in the region, clearing comments and suggestions, and whose understanding and forwarding agencies and regional transporters for ofkey issues has been central to this report's success­ their cooperation and valuable information used in ful completion. this study. vii Glossary of Acronyms and Abbreviations' ACIS Advance Cargo Infonnation Services ABO African Development Bank AFR Bureau for Africa (USAID) AMI Agence Maritime Internationale ANR Office of Agriculture and Natural Resources (REDSO/ESA) BIF Bond in Force BP British Petroleum BUJ Bujumbura CBS Central Bureau of Statistics COO Customs Documentation Officer CFA Clearing & Forwarding Agents CIF Cost, Insurance and Freight CMB Coffee Marketing Board (Uganda) COMESA Common Market for Eastern and Southern Africa CR Clean Report of Findings CTLA Central Transport Licensing Authority CTL Commercial Transaction Levy DANIDA Danish International Development Agency D&DOs Declaration & Disposal Order DWT Dead Weight Ton EAC East Africa Community EACA East Africa Cooperation Agreement EACL East African Conference Lines EARC East African Railway Corporation EARH East Africa Railways and Harbors EC European Community ECA Economic Commission for Africa EDF European Development Fund EEC European Economic