The IRU report, “Transit costs in East and Southern Africa” clearly demonstrates how African countries implementing the TIR Convention can reduce the costs of trade in southern and eastern Africa by hundreds of dollars per container, thus saving billions of dollars and increasing GDP in African countries.

The report unequivocally concludes that the TIR system is the most cost effective transit bond method and could be deployed on all trade corridors in Africa.

Umberto de Pretto, IRU Secretary General said: “The results show that TIR is up to 16 times less expensive than the national bond system on the Northern Corridor between Walvis Bay and Lubumbashi, and is also substantially more cost efficient on the three other African trade corridors in the study.”

He continued: “Some of the world’s highest trade costs can be found in Africa and the world’s road transport organisation, IRU, is working to support governments and the private sector to reduce these costs.”

TIR, the world’s only universal customs transit system and one of the most successful international transport conventions, has a big role to play in reducing the costs of trade. TIR makes border crossings faster, more secure and more efficient, reducing transport costs, and boosting trade and development.

The TIR Convention is gaining momentum with government authorities and businesses on African’s trade corridors. IRU is working closely with stakeholders in Kenya, Uganda, Tanzania, Zambia and Namibia to analyse the potential benefits of TIR and to work towards accession and implementation.

Clive Smith from Walvis Bay Corridor Group said: “Implementing TIR along the Walvis Bay Corridor could have a huge impact on reducing the cost of moving goods between the port and the hinterland. It makes total sense to be looking at implementing a trade facilitation solution that is already proven and successful.”

“TIR fits with Namibia’s vision to become a logistics hub for Southern Africa and we are really keen to see concrete steps taken towards implementation in the region,” he added.

The IRU report provides detailed cost comparisons between the three different methods of acquiring guarantees for goods in transit to meet the requirements of the different revenue authorities. TIR is the most harmonised system that reduces transit costs and time, reduces documentation and simplifies the clearing process.

The report analyses the comparative costs of using a national bond, the Common Market for East and Southern Africa (COMESA) Regional Customs Transit Guarantee (RCTG) Carnet, and the IRU TIR Carnet, for two types of cargo (containerised load and tanker transporting liquid bulk).

The comparisons are along four major transit corridor routes; namely North South Corridor (Durban to Lubumbashi), Walvis Bay-Ndola-Lubumbashi Corridor, Dar Corridor (Dar es Salaam to Lubumbashi) and the Northern Corridor (Mombasa to Kigali).

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Transit costs in East and Southern Africa

IRU commissioned a study to analyse the comparative costs of using a national bond, the Common Market for East and Southern Africa (COMESA) Regional Customs Transit Guarantee (RCTG) Carnet where applicable, and the IRU TIR Carnet, for two types of cargo (containerised load and tanker transporting liquid bulk) along four major corridor routes; namely North South Corridor (Durban to Lubumbashi), Walvis Bay-Ndola-Lubumbashi Corridor, Dar Corridor (Dar es Salaam to Lubumbashi) and the Northern Corridor (Mombasa to Kigali).

The report describes the methodology and approach adopted by the consultant in undertaking the analysis and provides detailed cost comparisons between the three different methods of acquiring guarantees for goods in transit to meet the requirements of the different revenue authorities. The study methodology included contacts with reputable clearing agents who were approached for information on how national transit bonds are applied and costed along the different corridors.

The two categories of cargo used for comparisons in each case were;

1. 1x 40ft container of tyres with value USD 100,000

2. 1x road tanker of diesel fuel with value USD 30,000

From the discussions and analysis, it is clear that there are no common processes that work for all corridors and the pricing is highly variable. There is intense competition between large numbers of agents with the result that RITs (“RIT” is common terminology for a transit bond in southern Africa) are offered by agents from as low as USD 60 and as high as USD 200 depending on the agent and the agent marketing pressures.

This differential unfortunately raises questions about the reliability of some of the insurance companies used. In other words, some users are concerned that the lower cost bonds may be backed by less reliable insurance companies who are potentially unable to pay any duties and taxes that might be owing to customs.

It is clear from the summary of findings that the regional or single bond system has distinct advantages in terms of cost and time savings over the traditional national transit bond system still being deployed along certain corridors. Regional or single bonds reduce transit time, simplify clearing, reduce documentation and reduce transit costs.

As the systems are not universally available for all countries and corridors, there is still a high level of variation and doubt as to the reliability of the cheaper offerings. This leaves the import-export customer with uncertainty as to the level of risk inherent in each offering and could impact on the level of facilitation offered by customs. The existing regional and national offerings are by definition limited in their application. Importers therefore do not have freedom of choice purely on the basis of efficiency and cost effectiveness. Rather, their choice is prescribed by the route they are taking.

There is clearly a need for a system that can be implemented in all regions and along all corridors. The system should include optimum features and benefits, with the least possible risk. It must be cost-effective to implement and should offer large reductions in the transit time and costs which are caused by the delays in current transit regimes.

The system should offer a standardised methodology with minimum variation in pricing so as to simplify transactions and give maximum efficiency, as these are the primary objectives of import/export operators and makes the most business sense. It is also critical that any proposed system can show the revenue authorities evidence of wholesale international usage and advanced systems for monitoring and control, to give assurance of reliability and security.

From the integrated cost and complexity comparisons described in this study there is only one single transit bond system that meets all the above criteria and could be deployed throughout the region on all corridors and that is the TIR System.

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This final report is submitted by Michael Laurence Fitzmaurice, a consultant based in Port Elizabeth (South Africa), for IRU, the world’s road transport organisation based in Geneva, Switzerland.