A study shows that agricultural fertiliser can land at the Kenyan Port of Mombasa at $350/t, and then sell for 300% to 400% more 1 000 km inland, says Common Market for Eastern and Southern Africa (Comesa) Alliance for Commodity Trade in Eastern and Southern Africa CEO Argent Chuula.
“The same is true for Tanzania. The fertiliser will arrive in Dar es Salaam at $350/t, then sell in southern Tanzania for $800/t.
“Around 30% of these cost increases are taxes, but the bulk comes from transport costs.”
Chuula adds that African farmers typically receive only 20% to 25% of the final market price of their goods, compared with the 70% to 85% Asian farmers receive.
“Most of the difference comes from transport costs.”
Yet another figure quoted by Chuula is that transport charges in Ghana and Zimbabwe are 2 to 2.5 times more expensive than in Pakistan or Sri Lanka.
He notes that the transport costs added to the price of goods in Africa lead to an increase in costs to the consumer, who is forced to act “as the price taker”.
Chuula says infrastructure deficiencies are to a large extent to blame for the high transport costs on the continent.
“The current infrastructure situation [in Africa] is inadequate to deal with cargo and people movement.”
Infrastructure deficiencies have also seen steep costs in cross-border trade.
“Intra-African trade costs are 50% higher than costs in East Asia. Africa has the highest intraregional costs of any developing region,” adds Chuula.
“The result of these costs have been that Africa has integrated faster with the rest of the world than with itself. This situation has to be reversed. We need more trade within Africa.”
Chuula says trade within Africa made up only 13% of the continent’s total trade last year.
He believes increased trade will lead to higher household income, which will lead to wealth and job creation, as well as economic growth.
It will also provide the people of Africa with “choice, options”.
“Increased trade can also aid political stability in Africa.”
Again, improved transport infrastructure is one of the best answers to increasing intra-continental trade.
Chuula believes public–private partnerships can go some way towards alleviating the shortage in infrastructure investment, as it would bring together “the power of the pen” (policymaking) and “the power of money”.
It will also be positive to harmonise technical standards across borders, such as in railway systems, for example, allowing for the same train to move “from Cape to Cairo”.
Ad hoc trade restrictions and fees also add “price uncertainty”, which leads to low profits, which, in turn, result in private-sector underinvestment, which increases pressure on the public sector to remain the only entity delivering infrastructure in large parts of Africa, notes Chuula.