A FORTY-FOOT container of dry freight, leaving Zimbabwe for export via road, requires five export-related documents involving up to 10 agencies. There is a 40% chance it will be subject to more than one round of physical inspection which may add to the lead time.
Dr Eldrede Kahiya
Landing this container in a regional export market winds up costing a Zimbabwean firm an average of $1 500.
Meanwhile, a Tanzanian firm could serve this same export market, not only with higher efficiency, but also at half the cost. The disparity between these two scenarios emanates from logistics performance, a key driver of competitive advantage in international trade.
Starting in 2007, the World Bank has been collecting and disseminating data on country-level logistics performance. The need for the Logistics Performance Index (LPI) grew out of a realisation by supply chain and international trade experts, that logistics performance plays a fundamental role in facilitating trade. The World Bank publishes a domestic LPI which uses raw data on trade transactions, and an international LPI which depicts comparative performance. Now in its fourth edition (2014), the international LPI is based on six key indicators: efficiency of border control agencies, quality of infrastructure, pricing of shipments, competence of logistics service providers, tracking and tracing shipments, and the timeliness of delivery.
For 2014, Zimbabwe’s international LPI score was 2,34 (on a five-point scale ranging from ‘1’ to ‘5’) translating to a ranking of 137th in the world. Although the World Bank indicates international LPI scores for developing countries have been on the upswing, this does not necessarily apply to Zimbabwe. In fact Zimbabwe attained its highest average score (2,55) and ranking (103) in 2012 and the scores for 2014 are virtually identical to those from 2007.
This lacklustre performance has implications for the wider economy.
Poor logistics performance generates expensive import transactions that cost substantially more than they really should, hurting individual consumers and businesses. Sub-par logistics performance also hinders the price competitiveness of exports as well as the exporters’ ability to provide DIFOT (delivery in-full, on-time). Ultimately, this jeopardises the potential of Zimbabwean firms to participate in global value chains.
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It should be noted that Zimbabwe is not considered a bottom feeder per se, and currently ranks among the top 10 low income countries in the world.
However, as is the case with a number of macroeconomic indicators, Zimbabwe lags behind its regional counterparts such as South Africa and Malawi which out-compete Zimbabwe across all six indicators. The urgent need for improvement is self-evident.
The three most obvious areas demanding attention are logistics-related infrastructure, border control agencies, and tracking and tracing shipments. Infrastructure (2,25), border control agencies (1,89) and tracking and tracing (2,22) are some of the aspects for which Zimbabwe has its lowest scores. Concerning logistics infrastructure, upgrades to road and rail networks should be prioritised together with ports of entry/exit and container handling terminals.
This, admittedly, will call for ongoing capital investment. Improving the efficiency of border control agencies does not involve as large a capital outlay and comes down to crafting robust and integrated systems that eliminate avoidable delays, duplication, and other inefficiencies.
Finally, Zimbabwean firms have to be more astute regarding tracking and tracing information and merchandise involved in cross-border transactions. In recent years this has been expedited by the adoption of logistics information systems. Where such information systems are prohibitively expensive (which they usually are), firms should seek closer ties with third party logistics providers most of whom already have such systems in place.
Now more than ever, superior logistics performance presents an avenue to advance Zimbabwe’s international competitiveness and tap the unrealised potential in global value chains.
●Dr Eldrede Kahiya is affiliated with the Department of Global Value Chains and Trade at Lincoln University. He writes in his personal capacity and can be contacted at [email protected]
