Logistics companies that are looking to expand their business into East Africa should now turn to TradeMark East Africa. With its recently launched ‘LIFT challenge fund’, the non-profit will award ‘matching grants’ of between €180,000 and €660,000 to support projects by private sector firms in the transport and logistics industry. It is expected that at least 50 per cent of the capital for LIFT projects will be matched.
TradeMark East Africa, a not-for-profit organisation with headquarters in Nairobi, Kenya, enjoys the financial backing of eight donor countries. Until 2016, its budget of €520 million is deployed to improve the way logistics is done in East Africa. LIFT, short for ‘logistics innovation for trade’, is TradeMark East Africa’s call for European companies to bring knowhow and innovation to East Africa and explore the opportunities for transport and logistics in the region. Yet the fund also compensates for risk, by investing – or matching – half of the initial capital required for projects that are valued between €180,000 and €660,000. TradeMark East Africa CEO Frank Matsaert explains the need for, and benefits of, investing in this region’s logistics sector.
High transportation costs
“According to the World Bank Logistics Performance Index, costs of transportation are 50 to 60 per cent higher in East Africa when compared to Europe”, says Matsaert. He came up with the vision for TradeMark East Africa in 2007, and grew his initial idea into an organisation of over 130 employees, with offices in six countries. “While it costs €350 to import a container into China, shipping that same container into Rwanda costs €4300. It is no surprise that landlocked East African countries are uncompetitive at present.”
A part of high transportation costs are related to national protectionist policies, which cause border delays. Some border posts produce trucking queues of up to 15 kilometres, making some truck drivers wait for two days. But the biggest proportion of transportation costs is associated with port inefficiencies. We are currently investing €130 million in the ports of Mombasa and Dar Es Salaam. Which is only just a drop in the ocean given that entry gates are narrow, yards are set up inconveniently, and the many agencies that work there do not sufficiently speak to each other.”
Growing prosperity through trade
All in all, there are indefinite ways to improve the way logistics is done. TradeMark East Africa invites European companies to transfer their knowledge and bring their innovative logistics solutions into the region – and reap high return-on-investment rates. “Very simple solutions like palletising transports or a facility for small businesses to buy space on a truck, exist in Europe and are taken for granted. But in East Africa, they do not. Whilst in 2013, the East African Community enjoyed a GDP growth rate of 5.6 per cent. These are emerging markets that European companies need to start thinking heavily about.”
In 2012, TradeMark East Africa implemented the Rwanda Electronic Single Window. This system drove down border clearance time from 4.5 days to 18 hours. As a result, the average cost of an imported container fell from €130 to €44. Making the produce inside the container cheaper, local companies more competitive, and poor consumers benefitting. “Our mission is to grow prosperity through trade”, says Frank, “and we welcome European companies to bring their solutions to the East African table of innovation!”