In the last week I spent a lot of time talking to petroleum transporters and dealers. This led me to another related field, the haulage industry.
In Rwanda we have done a lot of the hard work with regards developing as a logistical hub, we have good roads, a strategic location, working institutions and regulations. Sadly our haulage sector has been dying in recent years.
In the last 10 years, our fleet has dwindled from over 6,000 trucks to under 2,000. In the same time our total tonnage has tripled. The gap has been filled by foreign hauliers, and most of our same fleet is registered outside.
The price of clearing a haulage truck at Magerwa is 3 times the price of Uganda, 5 times that of Burundi and 2 times that of Kenya. For that reason most of our trucks are increasingly registered outside.
This means that our fleet is not renewed and is not fuel efficient, a newer model can use half the fuel consumption of an older more polluting model.
This keeps the cost of haulage up, and makes it even more susceptible to variable costs like fuel and repairs. In order to develop our logistical capabilities, we need to reduce the charges for clearing and customs.
Another factor of taxation is that VAT is charged on a cost like transportation, there has been no value added by moving an object from A to B.
The sector needs incentives to not only protect and develop Rwandan haulage but also to encourage regional haulage carriers to base here.
The recent peace and cooperation agreement with the Democratic Republic of Congo has shifted Rwanda from a logistical outpost to the center. Today you see thousands of Congolese trucks passing through Rwanda.
The Somali community in Kenya have revived their tradition of long distance trading, except not with camels but with trucks.
The only way the Rwandan haulage industry will thrive is by taking a regional approach, the Rwandan market is not enough to rely on alone.
The way economies of scale works in logistics is not by volumes but by extending trade route and increasing the number of drops. The customs union will make it easier to load and unload goods along the route as taxes are already paid.
A Rwandan hauler should integrate the trips into a longer trip. For example, a Somali hauler told me that an average truck does a one year trip.
From Mombasa, Nairobi, Kampala, Kigali, Kisangani, Bujumbura, Kigoma, Lusaka, Ndola, Lumumbashi, Huambo, Harare, Johannesburg, Cape Town, then back up to Mombasa again. A total of more than 26,000 km, equal to the distance around the world.
The final issue is making our trade agreements work and benefit us, right now we are in COMESA and items are meant to be tax exempt. However if one wanted to import grain for example from Kenya, a COMESA certificate is limited to a certain tonnage.
The tax on goods affects haulers, and eats into margins, it discourages wholesalers from in-sourcing their transport and limits supply and demand.