Saturday, October 24, 2020

BIDPA suggests lowering transport costs in trade

The famous recommendations of the FIAS study ÔÇô jointly conducted by the World Bank and the Botswana Institute for Development Policy Analysis (BIDPA) – are almost gathering dust.

Subsequent studies into the country’s economic ailments always point to the same conclusions and recommendations put forward in the FIAS report. In its policy brief of last month, BIDPA went the extra mile to dissect ways and means of reducing the high costs of doing business in the country, with particular attention to the issue of transportation. A research fellow at the country’s economic think tank, Margaret Sengwaketse, argues in the brief that as a landlocked, export driven economy, efficient transport and transit procedures are important ingredients to supporting the country’s competitiveness and export growth.

“Transport costs are particularly important to landlocked countries, where the additional distances to be covered can increase product price, undermine the competitiveness of exports and generally make it more difficult to compete in international markets,” she writes.

The reduction in transport costs can be achieved if harmonized with reforms on customs procedures. The procedures, she says, should be made transparent, efficient and predictable in order to reduce trading costs and would thereby support export growth and diversification. The biggest problem that compounds road transport costs in the country is that of port inefficiencies in South Africa. South African shipping costs are said to be amongst the highest in the world and the turn around time is not any better.

“For example, the turn around time in South Africa’s ports is five times longer than that of competitors and port clearance takes on average of two to three days,” states Sengwaketse.

The delays have adverse impact on the timely delivery of supplies, product shelf life and may equally strain firm-client relationship and put exporters supply contracts at risk. Previous studies have shown that each day of delay in shipping products reduces trade by 1 percent and it is equivalent to an extra 85 kilometers in distance between a producing country and its trading partner. Most of Botswana’s exports that require shipping by sea are sent via the port of Durban, South Africa. An alternative route is through Walvis Bay in Namibia ÔÇô about 1600 km from Gaborone. Durban is approximately 1100 km. BIDPA’a research fellow argues that Walvis Bay is cost effective compared to Durban.

“Walvis Bay offers exporters, particularly those destined to Europe and the East Coast of the United States, a potential reduction in shipping time of about a week,” she argues.

She adds that Walvis Bay has capacity and widely considered to be more efficient. The quality of the Trans Kalahari corridor route between Botswana and Namibia, lack of road congestion and extension of border opening hours should serve as an incentive to exporters.

Sengwaketse is worried that despite the advantages, “uptake by Batswana exporters has been slow”. The brief on the other hand bemoans the high air travel costs to and from Botswana in view of the fact that air transport is critical in promoting tourism, financial services and transportation of perishable goods. Between 1996 and 2000, air travel costs in the country increased by 36 percent and 46 percent between 2000 and 2004. Regarding the rail transport, Sengwaketse suggests an overhaul, arguing that lack of competition in the rail industry results in inefficiencies and uncertainties in goods delivery.

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