The search for home-grown innovations that could cut the cost of transport in East Africa has gained momentum with the recent launch of a Sh1.4 billion ($16 million) fund targeting logistics firms.

The Logistics Innovation For Trade (Lift) fund launched by Trade Mark East Africa (TMA) in November will up to the end of February be receiving proposals on how firms intend to trigger their innovation verve to boost efficiency in cross border trade.

The winning proposals will get grants of between Sh18 million ($200,000) and Sh67.5 million.

Targeted firms include vehicle and equipment manufacturers, agricultural produce importers, educational institutions, clearing/forwarding companies, freight tracking systems, barge operators, and shipping and financial services institutions.

Civil society organisations that advocate for regulatory and structural reforms to boost competition will also compete for grants of between Sh9 million and Sh18 million.

The call for proposals comes hot on the heels of a recent study that found that East Africa had the second highest freight logistics costs on the continent, accounting for 42 per cent of the total value of imports.

“These costs seriously erode the marginal competitiveness of goods exported by East African countries and raise the cost of living, reducing trade, economic growth, job creation and poverty reduction,” said Nelson Karanja, communications manager at TMA.

Mr Karanja said road transport accounts for 95 per cent of freight traffic in the region and this is unlikely to change much even with the standard gauge railway.

“Even if rail is cheaper, unless loading and unloading is efficient and logistics providers offer intermodal solutions, road will continue to be the preferred mode. Such intermodal logistic services are yet to develop in East Africa,” he said.

TMA’s objective is to cut down on transportation time along the main regional transport corridors by 15 per cent next year through successful implementation of various reforms and initiatives like Lift fund.

A recent World Bank study that analysed transit times, documentation requirements and ports and customs for countries in sub-Saharan Africa found that transit times have the most economically significant effect on exports. It estimated that a reduction in inland travel times of one day leads to a seven per cent increase in exports.

Technologies to enable vehicle and merchandise tracking, driver monitoring and supply chain integration in the region will improve the efficiency of transport and logistics.

“Lift fund aims at promoting innovation in East Africa’s transport and logistics industry. Introducing new services and technology will also better coordination of the logistics chain. In addition, the system shall give rise to new business models, such as third party logistics, that enable SMEs to participate in the logistics chain, improve financial services and manpower training in the industry, reduce middlemen and promote regulatory reforms and enforcement of standards,” said Mr Karanja.

Source: Business Daily

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.