Establishing Trade Facilitation Priorities for African Businesses

1. Establishing Trade Facilitation Priorities for African Businesses Symposium on WTO Trade Facilitation for African Countries Nairobi, Kenya 13-15 November 2012

2. Why trade facilitation: 95% of the volume of cargo transported in the region is by road transport. The typical charge for a stationary truck is between US$200 to US$400 a day. If a truck takes 3 days to clear a border the transporter will pass on an additional cost of between US$600 to US$1,200 for the cost of the truck sitting idle at the border to the importer. Result: costs about US$8,000 to ship a 20ft container Durban-Lusaka and takes about 8-15 days – compare that to US$1,800 to ship a container Japan-Durban. • Improving trade facilitation and logistics is essential: • transport, customs and logistics inefficiencies raise trade costs; • restrictive rules of origin limit preferential trade; • poorly designed technical regulations & standards limit consumer choice and hamper trade; • non-tariff barriers restrict regional sourcing. Reducing costs of cross-border business is essential for Africa’s economic growth, poverty reduction and job creation

3. Trade Facilitation is the most important instrument for reducing costs of cross-border trade and business

4. What are the delays at Borders? • Delays are process and behavioural. • Process delays could include:- • Time taken for customs to clear goods or to process transit documentation. • Immigration issues – visas etc • SPS clearances • Interpol – vehicle checks • Behavioural Delays could include: • Waiting for funds to arrive to clear. • Drivers resting (days or hours) • Need to implement programmes to reduce process delays. Border Delays add significantly to Transport Costs

5. Comprehensive Trade and Transport Facilitation Programme • To address trade facilitation challenges the Tripartite developed the Comprehensive Trade and Transport Facilitation Programme (CTTTFP) – supported by TMSA: • The NTB Monitoring, Reporting and Removal System • Border and Customs procedures (one-stop border posts; Integrated Border Management, regional customs bond, transit management); • Immigration procedures; • Transport procedures (regional 3rd party insurance, vehicle standards and regulation, self-regulation of transporters, overload control, harmonised road user charges, regional corridor management systems; and • The establishment of the Joint Competition Authority linked to air transport liberalisation. • The programme encompasses regulatory and policy reforms encouraging the adoption of international instruments and best practices; national and regional capacity building activities to facilitate cross-border movements; and enhancement of infrastructure facilities at border posts to improve efficiency of cross-border movements.

6. NTB Monitoring and Removal System: Although intra-Tripartite export trade remains low in relation to total trade, in 2000-2008 it grew by over 250% - arguably, as a result of trade liberalisation. Surveyed firms reported NTBs affected one-fifth of regional trade in ESA ($3.3 billion in Southern Africa alone). The removal of NTBs will lead to increased levels of regional trade - identification, removal and monitoring of NTBs is a priority area. www.tradebarriers.org

7. Integrated Border Management Systems: State interests at the border include protection of national security, enforcement of immigration requirements, enforcement of import and export restrictions and prohibitions, collection of revenue, recording cross-border statistics, and enforcement of International Health Regulations. The responsibility for protecting these interests is vested in several state agencies. They include Police, Security, Customs, Immigration, those responsible for Sanitary and Phyto-sanitary regulations, and the bureau for standards. Typically, the border management agencies in the Tripartite region that need to co-operation within an IBM framework include: Immigration; Customs; Bureau of Standards; Environment Management Agency; Health, Food Safety and International Health Regulations Enforcement To improve the efficiency of border crossings it is advisable to do as many clearance functions “behind the border” as possible. This reduces waiting times at the border and reduces the number of agencies that require a physical presence at the border. The trend in the Tripartite is to implement Integrated Border Management (IBM) systems coupled with improved computerised systems. Good examples of the trends taking place can be found in Zimbabwe (based on ASYCUDA World), Kenya (based on SIMBA) and South Africa (based on TATIS).

8. One Stop Border Posts To implement an OSBP there is need to address: physical facilities (common control zone with a fenced perimeter, common facilities – scanning, weighbridges and inspection bays); operations and training; and legal framework (extraterritorial jurisdiction). Chirundu is an example of a juxtaposed border post:

9. Border Crossing Monitoring: Have relatively sophisticated border monitoring processes based on a GPS truck tracking system. The system tracks “queuing” times as well as border clearing times. Before the one stop border post was operational clearing times were between 3-5 days. Now with the OSBP in operation, clearance is done on the same day. An average of 480 trucks cross at Chirundu every day so a total of 960 to 1,920 travel days per day are being saved, which translates, as a conservative estimate, to between US$288,000 and US$576,000 in savings every day.

10. Border Monitoring with GPS - Results 27 hours Average April 2012 Nr of Crossings Corridor Performance Monitoring

11. Border Monitoring with GPS - Results 61% within 24h hours Corridor Performance Monitoring

12. Legal and Regulatory Framework for Road Transport: • Road transport in the region is largely unregulated. No regulation does not equal deregulation. Regulation can assist in enforcement (withdrawing a carrier’s licence for overloaded vehicles). The current situation in the region could be characterised as benign neglect. A lack of regulation can: • Improve competition - operations competing but also compromises service quality and safety as maintenance is deferred to lower costs; • Allow other government agencies to dictate transport policy (revenue authorities licensing transit vehicles to reduce illegal imports but also restricting back loads); • Allow countries to license foreign trucks as a protectionist measure and restrict commercial presence of foreign trucking companies. • In Southern Africa there is open competition in road transport but with some protection such as cabotagerules (the transport of goods on the domestic market by foreign registered operators) and restrictions on third country operators (transport along routes not passing through the country of registration).

13. Regional Customs Bond: The challenge is to take the best of the SADC and COMESA systems and merge them into one system for the benefit of the entire region. A study on how this can be done has been undertaken but implementation needs to take place. Regional Transit Management System: Within the Tripartite region, and because many of the Tripartite countries are land-locked, management of goods in transit is an important trade facilitation instrument which, if not implemented appropriately, results in excessive delays for transporters and losses to governments as goods in transit get diverted to customers that are in countries which ostensibly the goods are supposed to be transiting through. Computerised Immigration Systems: The Tripartite is currently working with one country on a computerised immigration system that could be used as a standard for other countries that require it. Transport Procedures: The Tripartite is addressing market liberalisation of the transport sector by carrying out work on carriage of international road freight; introduction of international regulatory mechanisms; and regional harmonisation of road traffic legislation.

14. Overload Controls: Given the high costs of transport in the Tripartite region it is not difficult to understand the economic attractiveness of overloading vehicles to reduce the unit cost of transport to an importer. However, vehicle overloading not only significantly accelerates the rate of deterioration of road pavements but, when coupled with inadequate funding for road maintenance, it contributes significantly to poor road conditions and high transport costs. The indicative cost of overloading in East and Southern Africa has been estimated at more than US$4 billion per annum (Mike Pinard 2010). This exceeds the amounts being spent on road rehabilitation. Therefore, unless the problem is tackled head on, it will negate the expected benefits from the huge amounts of resources that countries and donors are investing into improved road infrastructure across the continent. Significant progress has been made to standardise the axle load limits and Gross Vehicle Mass across the region, with the latter set at 56 tonnes for a 7-axle inter-link. Harmonised Road User Charges: Efforts are underway to harmonise cross-border road user charges in the Eastern and Southern Africa region. COMESA and EAC are to review the 2007 SADC Road User Charges study findings and recommendations with a view to examining whether these recommendations could be extended to cover all Tripartite member States.

15. Third Party Vehicle Insurance: The Tripartite region has three different third party vehicle liability insurance schemes: Cash Payments; Fuel Levy System; and COMESA Yellow Card. Work is on-going to harmonise these systems. Vehicles Standards and Regulations: Harmonised standards for fitness of vehicles, such as smoke emissions, vehicle registration standards, training of examiners, bus overloading, etc. are being developed. Self-Regulation of Transporters: Many of the region’s transport delays can be attributed to bureaucratic delays caused by the need to check on compliance (such as customs inspections, weighing trucks, document checks at police road blocks, etc.). These delays can be reduced through the introduction of a transporter accreditation system in which a transporter undertakes to comply with a specified package of regulations. In doing so the transporter will be exempt from the usual compliance checks. There would, however, be a system of spot checks which would also apply to accredited transporters and if an accredited transporter was caught contravening the regulations he would face severe penalties and lose his accredited status.

16. Ethiopia - Djibouti Northern Central Dar es Salaam Malanje Lobito-Benguela Nacala Namibe Trans-Caprivi Trans-Cunene Beira North-South Trans-Kalahari Maputo Corridor Management Committees: Transport Corridors have their own management structures that are usually established through a MoU between the countries the corridor transits through. Efforts are being made to “cluster corridors and to manage the corridors in clusters. EAC Cluster Western Cluster Eastern Cluster N-S Cluster

17. Linkages between Tripartite and WTO Trade Facilitation: • Many see Trade Facilitation at the WTO as a potential candidate for “early harvest”. Although developing countries and LDCs are well aware of the need to implement trade facilitation measures they have shown a great deal of reticence in agreeing to binding rules on trade facilitation in the WTO. This may be because of concerns about their capacity to implement the new obligations and trying to link commitments to capacity building commitments. • What is clear is that what is “on the ground” in the region is far in advance of the level of commitments the WTO trade negotiators are willing to make in Geneva. • The benefit (and also challenge) of the WTO trade facilitation negotiated text is that it implies a precise and obligatory commitment that is legally binding and enforceable. Although the COMESA-EAC-SADC Tripartite is not able to offer that legally binding regime as yet, the work being done by the Tripartite and its Member States, supported by international organisations and bilateral donors, is of major importance to the harmonisation, strengthening, improvement and development of new trade facilitation measures that will go a long way to making the Tripartite Free Trade Area a more competitive business environment.

18. Conclusions: • Trade facilitation touches on all aspects of trade and the key objective is to reduce costs of trading and doing business. • It seeks to achieve continuous operational improvements at the interface between business and public regulators in relation to transaction costs and is rooted in logistics and supply chain management. • Most of the trade facilitation initiatives aim for improved trading environment with less but better regulation and enhanced self regulation where appropriate. • Customs modernisation, simplicity of regulatory requirements, transparency, standardisation, fair and consistent enforcement, electronic exchange of data, pre-clearance and automation have all become key words when talking about trade facilitation, increased trade and economic growth. • Encouraging improvements are being made in transport facilitation, including harmonisation of axle loads and GVM, 3rd party vehicle insurance, road user charges, transit management, customs bonds, etc. • The state of play in the region, in terms of implementation of trade facilitation measures goes far beyond the binding commitments the region’s members are willing to take within the WTO framework.

19. Thank You mpearson@trademarksa.org www.trademarksa.org