The current average transport cost per kilometre stands at USD 2 in Uganda. This is twice as high as that of comparative middle-income economies.
By Damali Ssali
The development of Uganda’s trade and economy requires efficient, reliable and competitive transport and logistics.
Unfortunately, water transport, which is the cheapest and most inclusive mode of transport, is underdeveloped and underutilized.
As a result, 95% of cargo and people movement is through road transport. This over-reliance on road transport is unsustainable; with different studies indicate that it has led to the rapid deterioration of the road assets. The annual road maintenance cost is estimated at USD 21m.
In addition, road transport is not the safest mode of transport. The World Health Organisation (2015) estimates the economies such as Uganda lose almost 3% of their GDP to road crashes. That is about USD 800m.
Whilst Uganda has serviceable national road network that covers both the Northern and Central corridor, the limitation of rail and water transport pushes goods transport onto roads creating congestion and raising the unit cost of transport over longer distances.
The current average transport cost per kilometre stands at USD 2 in Uganda. This is twice as high as that of comparative middle-income economies which stands at USD 1 per kilometre.
Furthermore, the World Bank 2016 Logistics Performance Indicator ranked Uganda 58 (out of 180 economies). This ranking must be improved as poor logistics leads to a 0.4% contraction in the GDP of an economy.
This problem is going to be further compounded with upcoming Oil and Gas economy. Conservative estimates report that, during this sector’s peak period of development, an additional 1.2million tonnes of containerised cargo and over 13,000 jobs and passenger traffic is going to be added to the current road load.
The existing road infrastructure is already optimised above capacity and cannot operate with these new capacities without significant deterioration.
Therefore, the development of efficient water transport and related logistics services is the catalyst required to strengthen the autonomy and independence of the Ugandan economy.
An improvement of inland waterways will have a very significant impact on the other transport modes, especially railways and roads, by pulling cargo and passenger traffic to new logistics supply chains. This will allow for sustainable utilization of existing transport capacities.
Uganda’s natural comparative advantage for water transport is evident, as over 30% of the territory is covered by water. This provides navigable channels through rivers and lakes.
However, lake transport is under-utilised. Available data indicates that only 1million tonnes (about 8%) of total freight cargo, to and through Uganda, uses this mode of transport. This demonstrates the opportunity available, which if tapped into has the potential to lead to an exponential growth in Uganda’s domestic and cross border trade.
Water transport can be developed to facilitate trade and tourism. This will not only trigger economic growth in Uganda but also the East African Community and the Democratic Republic of Congo. A comprehensive view should be taken on lake transport development to cater for large scale international traffic.
The development must include multimodal ship-road-rail-port and logistics services. Simultaneously the ship building and rehabilitation industry must be catalysed. Water transport is important in shipping passengers, raw materials, manufactured products among domestic and international points of trade. Generally, the capacity of water vessels far exceeds the capacity of rail wagons, and trucks. Therefore, ports intermodal facilities that have warehousing, and physical infrastructure for freight transfer from water vessels to railways and trucks, and vice versa should be prioritised.
Furthermore, inland water transport is the second least labour intensive compared to other modes, with pipelines in the lead. It is characterised by low fixed costs though it has high variable costs related to insurance. The efficiency of a transport mode can be judged in terms of travel time, safety, frequency, cheapness, employment generation, trade transactions, environmental pollution, automation and computerization. Based on this criteria water transport outperforms road and air transport.
Although Lake Victoria is strategically located at the convergence of the Northern Corridor and the Central Corridor, its potential for marine transport has not been fully exploited. Freight traffic on Lake Victoria is modest. This is mainly due to poor infrastructure of port handling facilities and few vessels.
However, despite these limitations, the Lake Victoria basin alone services the economic activities of several countries. Uganda, Tanzania, Uganda and Kenya directly share this trans-boundary water resource, while Rwanda and Burundi also benefit indirectly. The population of this basin stands at 40million, representing approximately 30% of the entire population of the EAC member countries and a GDP USD30 billion, about 40% of the total EAC economy. Therefore, the potential of the Lake Victoria economy is immense if water transport infrastructure is developed.
The main categories of cargo transported by water is 70% agricultural (food and live animals), 20% Ugandan manufactured products and the rest at 10%. Most of the users of water transport are in the informal sector, using small motorized and non-motorized boats, to transport goods and services between the islands and across international borders. As such, development must focus on local passenger transport to nearby islands and shorelines, small scale local cargo transport, pedestrian cars and small trucks. The additional advantage of water transport development is that it will not only catalyse the informal fishing industry but also commercial fish farming.
It is important to note that the development of water transport must be in tandem with addressing environmental degradation issues. The reduction in water levels, due to extensive deforestation around the various lake basins, if unchecked, will greatly curtail the navigability of the lakes and rivers.
Uganda can, and should, exploit its natural comparative advantage and develop water transport, through efficient infrastructure and logistics services. This will facilitate domestic and international trade, tourism, employment and economic output.
Damali Ssali is a Trade Development Expert