RESSANO GARCIA INTERNATIONAL ROAD TERMINAL (KM4): POTENTIAL IMPACT ON THE MAPUTO DEVELOPMENT CORRIDOR Presentation on Preliminary Findings
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1 RESSANO GARCIA INTERNATIONAL ROAD TERMINAL (KM4): POTENTIAL IMPACT ON THE MAPUTO DEVELOPMENT CORRIDOR Presentation on Preliminary Findings E. Jocitala M. Dengo O. Zimba 15 June 2016
2 2 CONTENT A. Our starting point B. What was CTA request? C. How did we proceed? D. What did we learn? Time, Costs, Predictability and impact on business and competitiveness E. Main bottlenecks F. Perceptions on the performance of KM4 G. Mozambique s position compared to other countries H. Suggestions for consideration
3 OUR STARTING POINT KM4 has huge potential to facilitate international trade and improve the competitiveness of the Maputo Development Corridor However There is concern regarding the way in which the services at KM4 are carried out, leading to: High costs Delays in clearing customs Loss of competitiveness Unpredictability Possible volume of cargo reduction more competitive routes 3
4 4 WHAT WAS EXPECTED FROM THE STUDY? A fact-finding study: Assess the main costs associated with international trade clearance procedures at KM4 Comparative analysis with other terminals in competing corridors Assess the impact of KM4 on the competitiveness of the Maputo corridor Is there room for improvement in the operation of international road terminals?
5 5 HOW DID WE PROCEED? Fact-Finding approach Inform the interested parties of the relevant aspects of the study: We focused the analysis on KM4 to understand its operations Relevant literature review Key informants In interviews (group and individually) We observed the operation of the terminals in loco (KM4 and KM7)
6 6 INFORMATION COLLECTED We focused mainly on the following: Costs (parking, scanner, MCNet) Time spent at KM4 + time spent waiting to access the facilities Perceptions on the predictability of KM4 s performance Implications on the competitiveness of the corridor (potential re-routing of cargo)
7 WHAT DID WE LEARN? Customs clearance times at Km4 are lengthy TIME Most vehicles take less than 6 hours to complete customs clearance formalities at Km4, four times longer than at Km7, in neighbouring South Africa! More than 85% of vehicles that used TIRO services at Km4 cleared customs in less than 3 days Of these, approximately 60% cleared customs in less than 6 hours! Fixing a tariff associated with a guaranteed 3 day parking fee leads to economic loss and inefficiencies! Vehicles in transit spend the least time at KM4 7
8 WHAT DID WE LEARN? Customs clearance times at KM4 are lengthy Comparison of Waiting Time LBDP (Km7) South Africa TIRO at Km4 Mozambique Time spent waiting to enter the terminal 0 hours 3-4 hours Parking/clearing at terminal 30 min - 2 hours 45 min 5 hours Operating Hours 24/7 16/7 Parking Area Enormous, difficult to become congested Limited frequently congested capacit, Source: Analysis of data from the SGT Gatehouse Report and interviews at LBDP 8
9 9 WHAT DID WE LEARN? Loss of revenue due to long waiting periods. Resulting losses MCLI estimates that loss of revenue due to waiting times vary between ZAR 2, (equivalent to MZM 8,250.00) to ZAR 9, (MZM 32,670) per truck/month for waiting times of 15 min to 1 hour, respectively!
10 10 WHAT DID WE LEARN? Expensive parking tariffs do not encourage efficient services COSTS The equivalent hourly parking tariffs (parking) at KM4 for imports in vehicles over 28 tons (MZM 161) is ten times higher than the tariff in use at Km7! The lowest basic parking tariff is for minerals in transit and is equal to the tariff in use at Km7. The model adopted by Km7 suggests greater efficiency
11 11 WHAT DID WE LEARN? Expensive parking tariffs do not encourage efficient services COSTS Transfer to warehouse fee: 1, (VAT incl.)/vehicle Loading and offloading of the same cargo pays twice This latter case has an economic impact on companies and its economic rationality is questionable it penalises, above all, imports
12 12 WHAT DID WE LEARN? COSTS Other associated issues Lack of private sector participation (users of KM4) in defining current tariffs is questioned. Consultations with the private sector were inconclusive Legislation (Diploma regulating the TIMs) is silent on the underlying rationale for the establishment of parking tariffs and the participation of users in the life of the terminals
13 13 WHAT DID WE LEARN? COSTS Specific to the Scanner The manner in which INI is implemented, is questioned: Definition of the fee based on the vehicle s weight Penalises operators who deal in small quantities of goods Payment of the entire load, regardless of whether it goes through the scanner or not Indexing the tariff paid to the exchange rate
14 WHAT DID WE LEARN? COSTS Specific to the Single Electronic Window Despite recognising the positive impact of the JUE on facilitating trade, there are still problems associated with: Irregular availability of the system (internet) for customs clearance procedures delays in customs clearance of goods The failure to integrate some relevant public institutions in the international trade platform, such as agricultural services increases delays, particularly in exports, where a licence must be produced manually The rate of 0.85% of CIF value on imports of over USD 50,000.00, is contested. 14
15 WHAT DID WE LEARN? PREDICTABILITY Insufficient sharing of information between actors in Mozambique and South Africa Time (delay) it takes to complete the customs clearance process. 15
16 16 WHAT DID WE LEARN? IMPACT ON BUSINESS Case of banana exports Tariffs applied represent an additional cost of approximately 8.5 million Meticais for the Banana industry. Fixing the tariffs charged on banana exports, at the same levels practiced for citrus fruits in transit, would reduce the export cost of bananas by approximately 50% Tariffs practiced are damaging to Mozambican producers and exporters they penalise Mozambican exports.
17 17 WHAT DID WE LEARN? ON THE COMPETITIVENESS OF MAPUTO CORRIDOR Comparing the Maputo (MZ) and Richards Bay (ZA) corridors Maputo is only competitive in terms of road transport, explained by the relatively short distance between the markets and the Maputo port; Maputo is not competitive in the remaining segments of the value chain, being US$ 4.38/ton more expensive than Richards Bay, approximately 5% of the total costs of the Maputo corridor value chain.
18 WHAT DID WE LEARN? ON THE COMPETITIVENESS OF MAPUTO CORRIDOR The cost of services (JUE, INI and KM4), which should facilitate trade, if efficient, make the corridor US$ 2.12/ton more expensive 50% of the additional costs which remove the competitiveness of the corridor and are approximately 3% of the total cost of the of the corridor s value chain. In a context of low commodity prices, taking iron ore as an example, the additional cost (JUE, INI and KM4) currently represents 10% of the international iron ore price, much higher than the 3% when commodity prices were much better. 18
19 19 MAIN BOTTLENECKS Factors contributing to delays in the use of services at KM4: Excessive examination by customs Suspected errors (and/or inconsistencies) in the classification of goods, 100% verification of the authenticity of SADC certificates of origin, and Limited capacity of clients (particularly importers) Do not have the necessary documents Delays in making payments
20 PERCEPTIONS ON THE PERFORMANCE OF KM4 Accessibility and services Acknowledgement of the modernity of the infrastructure Important location to increase fiscal revenue through better control of road traffic flows In periods of greater demand, infrastructure becomes insufficient, exacerbated by bureaucratic procedures Service and time Processing documents at customs is still described as time consuming 20
21 PERCEPTIONS ON THE PERFORMANCE OF KM4 Strengths Infrastructure Existing cooperation between Mozambique and South Africa Opportunities Geostrategic location Weaknesses Little predictability Rigidity in setting tariffs Limited operating hours (16H in Moz., 24H in SA) Limited parking Excessive physical examination Limited capacity of staff examining cargo Poor coordination (Scanner vs. Examination) Threats Reduction in traffic volumes Loss of competitiveness of Maputo port 21
22 22 WHAT IS MOZAMBIQUE S POSITION COMPARED TO OTHER COUNTRIES? According to the Logistics Performance Index (LPI), Mozambique has been classified as a hostile logistics environment since Mozambique s position in the Enabling Trade Index (ETI) shows a persistent deterioration, dropping 17 places between 2010 and According to Trading Across Borders (TAB), one of the variables of Doing Business, the cost of importing has increased by approximately 8% since 2010.
23 SUGGESTIONS FOR CONSIDERATION Short / Medium-Term Consider a review of border tariffs (JUE, INI and Km4) Adopt processes and practices leading to efficiency Strengthen information sharing, coordination, harmonised documentation mechanisms Improve the efficiency of services Improve internal management of customs processes integrated management and introduce a single point of payment 23
24 24 SUGGESTIONS FOR CONSIDERATION Short / Medium-Term cont. Implement a complaints mechanism Encourage the use of procedures to speed up the customs clearance process e.g.: a pre-clearance mechanism Medium / Long-term Institutionalise a Competitiveness Council of Mozambique Establish a balance between the need/duty to protect the country against illegal acts, with the risk of losing competitiveness
25 THANK YOU FOR YOUR ATTENTION 25
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