South Africa takes lion’s share in LPI 2016

Amidst a global downturn in economy, African countries have shown remarkable improvement in the World Bank’s Logistics Performance Index for 2016 (LPI 2016). Certain infrastructure developments have been a game changer for South Africa as it moves 14 places up and ranked 20th in LPI 2016. Other African economies too are moving up rapidly. Twinkle Sahita reports.

Though tomorrow is always uncertain, but one certain thing that can be predicted from the recent Logistics Performance Index 2016 (LPI 2016) published by the World Bank is that Africa is gearing up to become the known continent on the map of world trade.

The logistics performance index of the World Bank takes into account criteria such as the efficiency of clearing procedures, the quality of infrastructure and the respect of delivery times.

Amongst the major countries in Africa, South Africa has gained momentum in the logistics sector as it shows incredible improvement on the basis of customs, infrastructure, international shipments, logistics competence, tracking & tracing and timeliness.

Source: World Bank

South Africa is the best performer in Africa when it comes to trade facilitation logistics and among the best in terms of transport infrastructure. The key factors supporting South Africa’s position are its well-developed financial, legal, communications and transport sectors, as well as an open trade policy and a comparatively strong domestic market. However, there are some obstacles, including rigid labour policies that diminish growth prospects to a mediocre level. Furthermore, South Africa faces the triple challenge of poverty, unemployment and income inequality.

In the top 10 of this ranking in Africa, we can also find Kenya, Egypt, Botswana, Uganda, Tanzania, Rwanda, Namibia and Burkina Faso.

One of the lower middle income economies, Kenya, surprised the world with statistically significant changes in LPI ranking. Its long-term growth prospects appear to be solid. Key supporting factors will be its increasingly broad-based economy, youthful population and strategic location in the East African Community (EAC).

Egypt, that ranked 49 out of 160 countries on LPI 2016, had planned to invest $110 billion in power infrastructure over the 2010-2027 period. Egypt’s geographical location is a boon to its maritime sector. The Suez Canal remains Egypt’s greatest asset and it is the main trade between Europe and Asia, accounting for roughly 7.5 percent of world sea trade. Despite the Suez Canal being the greatest asset, it could also become a huge liability though. Any disruption on the narrow passage could cause major delays and cause a spike in transport costs.

African economies with low income, Tanzania and Congo, Democratic Republic of Congo have also shown unexpected results.

Within the low-income group, East African countries namely Uganda, Rwanda and Tanzania are leading the performance in the latest index.

Relatively rapid improvements can also be achieved regionally if countries have a strong political will and align their efforts in implementation of administrative reform. This is the case, for example, of the Northern Corridor that links Burundi, Rwanda, and Uganda with Kenya’s maritime port of Mombasa. It also serves the eastern part of the Democratic Republic of Congo, South Sudan, and Tanzania, connecting the five countries of the East African Community and beyond and playing an important role in the movement and trade of goods.

The Northern Corridor was once known for multiple barriers to trade and transport, including lengthy dwell times at Mombasa port and cumbersome clearance procedures along the corridor. In 2012-13, the corridor countries started a series of reforms that significantly improved the logistics environment and drove down logistics costs.

One of the major reforms was to introduce Single Customs Territory clearance procedures within the East African Community, including Burundi and Tanzania. This means final customs clearances for free circulation can be made already at the port of entry in Mombasa. Cargo is then released at this port by customs officials of a respective hinterland country such as Rwanda. Shipments do not have to be transported under customs control because official payments have already been made.

In the Central African Economic and Monetary Community (CEMAC) region, Cameroon is among the least performing countries in Africa as well as worldwide. At the continental level, we learn, the country is 40th out of 46 African countries ranked. On the global level, Cameroon is 148th out of 160. The CEMAC region includes six states: Gabon, Cameroon, the Central African Republic (CAR), Chad, the Republic of the Congo and Equatorial Guinea.

In the 2016 edition, the relative lowest performer is the Syrian Arab Republic, with a score equal to 19 percent of the score of the highest performer (Germany). In 2014, the relative lowest performer was Somalia, with a score equal to 25 percent of the score of the highest performer.

Africa needs to develop more and more infrastructure for logistics and address the security issues in order to be among the top ten countries in the LPI.