The cost of shipping cars to West Africa remains high due to the effect of international transit on the cost of goods. According to World Bank studies, each additional transit day costs 0.8% of the total value of goods. But many landlocked African countries raise the transport cost to around 50% of the total goods value.
In addition, delays during transit are also a menace to transportation costs. The higher the delays, the higher the inventory costs. For instance, for road transport, expenses related to maintenance, tire wear, and fuel can be twice more between the Ngaoundéré-Moundou corridor in East Africa.
Another example shows that the license, administration, insurance, and security costs can be higher between Tema and Bamako, double that of shipping cars to West Africa. Certain internal and external factors affect the transit costs in Africa.
While some are beyond authorities’ control, many are linked to public policies and hinder transport. Thus raising the transit costs. This article will explain the reasons behind high transport costs in Africa and what can be done about them.
Reason behind High Transit Costs and Delays in Africa
External factors such as geographical isolation are particularly responsible for high transit operation costs and delays in Africa. While some countries have direct access to the ocean and international shipping, Niger, Chad, Burundi, and the Central African Republic are landlocked.
They wholly depend on their neighboring countries to access ocean freight, inland rail, and road networks.
Depending on the routes taken by the transport company, goods traded to and fro from Chad and Rwanda may have to pass through other countries. This increases the number of border crossings and kilometers to the nearest port, causing costly delays.
Other factors, such as hydrography and climate, also affect shipping costs to West Africa and other African regions. For instance, transporters can only navigate the Oubangui River that connects Bangui with Brazzaville and Kinshasa six months a year. Otherwise, it remains a non-navigable rest of the year.
Armed groups and political instability also have an impact on transit costs. For example, the security condition in Central Africa is weak, not allowing the rapid transit of cargo.
The Boko Haram insurgency in some areas is also a threat to trade development and transport. Armed militants continuously attack trucks carrying goods in part of the sub-region.
Major Transit Challenges for African countries
Other internal factors that restrict transport facilitation in Africa include:
The need for technological infrastructure
The need for technological infrastructure is the primary reason behind the high transport costs for African countries. Poor internet networks and connections and limited access are significant challenges throughout the sub-region.
Countries such as Rwanda have established an online Trade Information Portal that will relay information about transport regulations and procedures. The portal will take technical support from UNCTAD. But the government must guarantee a stable internet connection and access for the transport operators to leverage the portal fully.
Moreover, there is also a lack of use for IT and communication tools among African customs authorities and border agencies. Several agencies do not use these tools for security or customs clearance.
In Burundi alone, customs offices lack computerized services, and neither do they have any access to the internet. Besides, they have no link to each other on a national level. For example, before the implementation of ASYCUDA World, many custom offices were using individual servers in Central and West Africa.
However, after implementing ASYCUDA World, custom offices in Gabon, Côte d’Ivoire, and Burkina Faso have a centralized server and are interconnected. South Africa uses Interfront Customs and Border Management Solution (iCBS), and Botswana uses Crimson Logic.
Inefficient Physical Infrastructure
The transport infrastructure provides access to consumer markets, promotes regional integration, and connects raw materials to beneficiaries. Therefore, it directly influences a country’s capacity to handle trade, freight handling costs, distribution, and storage services.
Both Central and West Africa suffer severely from an inefficient physical infrastructure. According to the World Economic Forum, Central Africa has a deficient road infrastructure, more so than the rest of the sub-continent. For example, Congo ranks 138th for its quality of road infrastructure out of 141 countries, while Chad ranks 141st.
Transporters in West and Central Africa often complain of poor road conditions that increase vehicle wear and tear and breakdowns. Potholes and unpaved roads also make for unsafe driving conditions.
Furthermore, the severe lack of bridges over important rivers hinders international transport. Transporters have to make do with river barges for transporting the goods, which further increases transportation costs.
But there is a proposal for a road-rail bridge between Kinshasa and Brazzaville, cities of Congo. The bridge will provide an excellent trade route from the port of Pointe-Noire, eliminating the need for barges and reducing transportation costs.
Another proposed Senegambia bridge in West Africa over River Gambia will connect Mauritania with Senegal and Nigeria. The bridge has the potential to improve trade in West Africa.
Rail networks are either broken, disjointed or scarce in Central and West Africa. In many areas, the rail network does not cover major regional transit corridors. For example, there is an acute need for upgrading railway infrastructure, especially in Namibia, where the transport of goods still relies on colonial rail infrastructure.
On the Douala-Bangui corridor, the railway line only covers 884 km of area, while transporters have to transport goods on a further 566 km by road.
Additionally, on the Douala-N’Djaména corridor, the rail line only covers 556 km of the entire 1830 km corridor. The railway network in South Africa is better, but the region still suffers from port capacity shortages.
Lack of National and Regional Coordination
Lags in national and regional coordination efforts regarding trade in Africa are raising obstacles to the transit of goods. Shipping lines often refuse to transport goods to landlocked areas, so the goods need to be transshipped at ports.
Traders refuse to pay demurrage which can accelerate the deterioration of goods and increase transportation costs. Other than that, many countries’ freight allocation agreements and permit systems also hinder regional transport.
There is an overlap of memberships to sub-regional trading blocs among Regional Economic Communities (RECs) in Africa. Multiple memberships hinder cooperation within the sub-region. Many African countries try to accrue benefits by entering into several agreements that otherwise may not be available through sole membership.
However, it is noteworthy that the overlapping agreement rules and lack of harmonization due to inconsistent origin rules limit certain things. It is likely to increase transaction costs in trade, limit preferential integration implementation and obstruct trade flow.
There are multiple challenges associated with being a member of more than one regional group. They include different trading regimes, lack of political commitment, conflicting goals, divided loyalty, and duplication of programs.
Moreover, the multiplication of initiatives leads to fragmented actions, which doesn’t facilitate the construction of a regional transit system for goods.
Apart from instability, corruption, civil warfare, and undemocratic rule disrupting trade in Africa, the private sector also lacks the will to integrate regional schemes. In some instances, economic reforms have no proper design and implementation.
African countries should be more pragmatic than ambitious by spending more time on building competitive economies and undertaking far-reaching economic reforms. In fact, the Africa Economic Conference (AEC) has established some protocols in place for a range of areas, including transport.
Already agencies such as the World Bank are granting financial resources to Africa to improve infrastructure and transport systems. The Continental Free Trade Area (CFTA) agreement signed by 44 African countries in 2018 offers a long-term goal for a prosperous and united Africa.
Its main objective is to improve trade regime coordination and eliminate issues associated with overlapping and multiple trade agreements.
Other factors that increase the transportation cost of goods to Africa
Other than the above factors, there are many variables that impact the transport of goods and vehicles to Africa. They include:
While arranging for shipping to Africa, there are two available international methods of transport. RoRo and container shipping. If you are shipping cars to West Africa or South Africa, RoRo is the most affordable and quickest shipment method.
It involves driving the car on the ship’s deck and driving it off at the destination port. As it doesn’t require labor or a crane for the loading and unloading process, it costs less.
But if you wish to send goods alongside your vehicle, container shipping is another transportation method that offers secure cargo delivery. However, it will cost you more than RoRo as it requires labor and cranes to load and unload your cargo.
The cost of transporting goods to Africa may increase if you ship during peak season. At this time, the demand for trade is high, and there is less availability of carriers and trucks.
Generally, the peak season lies between August and September and January and February. However, you can secure a return shipment at lower rates if you are shipping in the opposite direction of the high demand. The transport cost will be less as the carrier has to return anyway.
Cargo weight and size
The heavier and larger your cargo will be, the more space it will require on a carrier, reducing the number of goods that can be loaded. The carrier will generate less profit, so the transportation company will quote a higher rate for heavier and large cargo to compensate for that.
In addition, heavier and larger cargo will require loading and unloading, consuming more time and fuel. This is also another reason for higher transportation costs to Africa.
If your chosen destination port has a higher demand for shipment, this will automatically increase your transportation costs. However, demand for international shipping could be low for other urban ports, which means the shipping rates will also be low.
Another factor to consider while choosing a destination in Africa is the physical location of the port.
Ports located in rural areas don’t get a higher influx of trade demand. Distant locations will force your carrier to make a special trip for your cargo, resulting in increased transportation costs.
Therefore, it is affordable to choose an urban port for shipping cars to west Africa. The ship will deliver several shipments to a single port, which will consolidate its cost, thus reducing your transportation costs.
Distance between ports
The distance between the origin and destination ports factors into raising transportation costs to Africa. Larger distances will consume more fuel, and the carrier also has to pay operational expenses.
This will reflect in your shipping costs. If a particular African country is landlocked, the inland transportation cost will also add to your overall shipping costs.
Whether you are shipping cars to West Africa or Central or South Africa, higher transportation costs for this region can be worrisome. The average container cost is $2.43 per kilometer within Central and West Africa.
This is 1.5 to 2.2 times more than freight rates in South Africa and the USA. For landlocked African countries, the average transport cost is 45% of the value of imported goods, higher than the global average of 5.4 percent for imports.
But you don’t have to worry about transportation costs with AFL. As an NVOCC company, we can book the best carrier for your cargo at competitive pricing. We have a great understanding of the customs rules and regulations of Africa and experience in shipping to all popular and unpopular ports.
Moreover, we have no hidden or upfront costs and offer complete transparency during customs clearance and documentation. Book your shipment today at an affordable price!