The region which has the highest transport and freight costs in the world often has a negative impact on businesses and renders it uncompetitive.
In 2005, Kenya, Rwanda, Uganda, Burundi and the Democratic Republic of Congo formed an umbrella body representing cargo owners in Eastern Africa, the Shippers Council of Eastern Africa (SCEA). The council provides a platform for shippers to express concerns to government regulatory institutions and logistics service providers.
Transport costs amount to 30 to 50 per cent of export value and up to 75 per cent for land-locked countries. To avert this issue, a 16 million US dollar challenge fund has been opened for innovators who can come up with innovative ways of tackling freight and transport costs in the East African region.
Dubbed the Logistics Innovation for Trade (LIFT), the challenge fund will provide grants ranging from 200,000 US dollars to 750,000 US dollars to winning proposals from innovators not only from across the region but around the globe.
In an interview with CNBC Africa Isaac Njoroge, fund manager at Trade Mark East Africa (TMEA) said, “LIFT is a project of TMEA whose purpose is to reduce the cost of transport in East Africa. The cost of efficiency is massive, we are talking about 20, 30 to 40 per cent and we need to reduce that.”
By improving the efficiency of the transport and logistics industry in the East African bloc, the LIFT Fund is poised to aid the region into becoming one of the prime economic forces on the continent.
(WATCH VIDEO: Update on East Africa's transport project)
Lisa Karanja, TMEA senior director, business competitiveness said in a press statement, “Our desire is to see East Africa adopt world class logistical technologies so it ably competes with the rest of the world. LIFT is a challenge to the private sector to develop and test new ideas that could reduce the cost and time of transport and logistics. Through the fund, TMEA will co-invest with the private sector in projects that have the potential to achieve this but may be too risky to undertake without external support.”
By increasing infrastructure investments and adopting modern methods of management, transport time in the regional bloc is expected to be reduced by 15 per cent and this will increase export by 7 per cent.
“Transit times are an important determinant of trade and the competitiveness of firms. A reduction of one day in transit leads to 7 per cent increase in export for example. Thus reducing cost and time of transport would increase trade, reduce the cost of living and contribute to higher exports and faster growth to create jobs,” Njoroge said.