Logistics talks due in Kampala as Kenyans dominate market

September 12, 2018 in Business, Markets, Transport by Editor

September 12, 2018—The logistics and freight sector only contributes 2.3 percent of Uganda’s annual GDP according to the industry’s umbrella association despite the country being landlocked in a market dominated by Kenyan firms.

Poor trade logistics is a leading cause for high transit costs for business people however during the past decade the East African Community (EAC) member states with the help of TradeMark East Africa (TMEA), the consultancy, have managed to substantially reduce the time it takes to ferry goods to and from the coastal ports of Mombasa and Dar es Salaam.

Between September 17 and 18, the second Global Logistics Convention will take place in Kampala. It is being organized by the Uganda Freight Forwards Association, under the National Logistics Platform, in partnership with TMEA and DfID, the British government aid agency. On the agenda are ways at improving both business prospects and minimizing logistics bottlenecks for Ugandans and East Africans in general.

Mid last year, the London-based think-tank, Overseas Development Institute, came out with findings showing transport prices could fall by as much as 30 pc from their current levels through trade facilitation measures that reduce transit time and costs to a minimum.

Representing TMEA, Damali Ssali said during a news conference on Tuesday, “We have been working with the National Logistic Platform for three years by providing technical assistance to support them develop the private logistic strategy. We are going to offer technical facilitation like training, management skills, policy advocacy to make sure the sector improves and competes favourably.”

Not long ago, JICA, the Japanese agency, paid for a report that showed heavy road congestion is experienced around Mombasa, Nairobi, Nakuru, Eldoret, Kisumu and Malaba in Kenya and also around Jinja, Kampala and Entebbe in Uganda. The congestion around these points are caused not only by cargo traffic but also passenger traffic. Traffic demands for both cargo and  passengers have been increasing rapidly due to population and economic growth within the region. Although improvement of existing road networks and construction of new ones have been aggressively implemented, road congestion still remains a serious problem.

Hussein Kiddedde, the Chair of the freight forwarders umbrella, said there is considerable potential to expand business once the right supporting policies are put in place. He said the local industry is fragmented, lacks an adequate pool of professional and trained drivers and suitable insurance cover. He also cited the high costs for new trucks which limited the numbers of Ugandans being involved.

The ODI research shows that Ugandan truckers face a user road charge of $249 every time they cross into Kenya, while the Ugandan road user charge for Kenyan trucks is only $50. Together with Mombasa’s lower fuel prices (last year), these factors put Ugandan truckers at a disadvantage, making it very difficult for them to compete with Kenyan trucking firms. As a result, Ugandan truckers are typically active on routes going west or north from Kampala, leaving the eastward routes between Kampala and Mombasa to Kenyan truckers.

Kenyan transporters prefer more expensive Mercedes trucks for their operations due to their greater reliability,
longer life expectancy and higher fuel efficiency. A new Mercedes truck is estimated to cost about $120,000,
excluding the necessary trailer which can be bought for an additional $30,000. By contrast, Ugandan transporters
preferred cheaper trucks (often imported from China) which can be acquired at a significantly lower price of
about $65,000 excluding the trailer.

TMEA has been at the forefront of facilitating regional trade with most of the foreign donor money for such facilities as One Stop Border Posts being channeled through the Nairobi-based firm. It country offices across the EAC. by supporting development of the one stop border posts at all Ugandan borders and facilitating electronic support systems at Uganda Revenue authority and other trade facilitation agencies.

According to Dr. Merian Sebunya, Head of the National Logistic Platform, said they have already started providing training, skilling and certification of willing truck drivers so that they can attain international standards.