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The regional transport and logistics business has received a boost following the launch of a fund aimed at reducing freight costs through the use of technology.
The regional transport and logistics business has received a boost following the launch of a fund aimed at reducing freight costs through the use of technology.

Dubbed Logistics Innovation for Trade (Lift), the fund, amounting to Sh1.3 billion ($16 million), was launched in Dar es Salaam, Tanzania, last week and is expected to see the use of advanced business practices in the industry.

It will be used to search for solutions aimed at improving trade effectiveness in the region and facilitate doing business in the bloc.

According to a statement from TradeMark East Africa (TMEA), the EAC region currently has some of the highest freight and transport costs in the world.

Transport costs amount to 30-50 per cent of export value and up to 75 per cent for land-locked countries such as Rwanda and Uganda.

Speaking at the recently concluded shippers open day, the Cabinet secretary for Transport and Infrastructure, Mr Michael Kamau, noted that the cost of transporting export goods is 30 per cent higher than that in Southern Africa.

He said such charges account for nearly 40 per cent of the total cost of doing business in Kenya.


“These costs seriously erode the competitiveness of goods exported by East African countries, thus reducing trade, economic growth, job creation, and poverty reduction,” reads the TMEA statement.

The fund is designed to change this by supporting and adding to existing activities of TMEA. This is expected to reduce transport time in the bloc by 15 per cent come 2016.

This shall be done by increasing infrastructure investments and adopting modern methods of management.

Lift will achieve its objectives through the use of similar grants to the private sector on a competitive basis.

At least 50 per cent of the capital for the projects will be contributed by private industry players.

Grants will vary in size according to the challenges a specific partnership will try to address, but typically grants will be up to Sh42 million ($500,000).

“Trade can lift countries out of poverty for good, but bad infrastructure, lengthy delays, and red tape mean that goods often struggle to get to the market. We need to find new ways to unblock bottlenecks and make East African countries more competitive.

Backed by Britain, this new project could help reduce transport times in the region by 15 per cent over the next three years,” said UK International Development secretary Justine Greening during the launch.

TMEA chief executive Frank Matsaert cited the high freight charges as some of the challenges that the bloc is plagued with.

“The East African region continues to be overwhelmed by high costs of doing business. Transport and logistics costs are predominant drivers of this inefficiency estimated at 42 per cent of the total value of imports and as high as 75 per cent of the value of exports,” said Mr Matsaert.

According to the CEO, a 10 per cent reduction in transport costs is likely to increase trade by 25 per cent worldwide, more in Africa where the charges are higher.

“Without logistics efficiency problems being addressed, East Africa’s growth potential will be seriously constrained,” he warned.

Other governments supporting the project include Belgium, Denmark, Finland, Netherlands, Sweden, and the US. It is set to provide matching grants on a competitive basis to leverage substantial private sector investment into freight and other logistics technologies and business processes in East Africa.

“By improving the efficacy of the transport and logistics industry in East Africa, the Lift Fund is poised to help turn the region into one of the economic powerhouses of the continent,” said the regional director for private sector development, Ms Lisa Karanja.

“Lift is implemented by the TradeMark East Africa Challenge Fund (TRAC), which aims to promote cross-border trade in East Africa by investing in good ideas that can boost trade and contribute to economic growth in the region,” said the TMEA fund manager, Mr Isaac Njoroge.