Share this
Mister Wong
Digg
Del.icio.us
Slashdot
Furl
Yahoo
Technorati
Newsvine
Googlize this
Blinklist
Facebook
Wikio
Hear this text
Export PDF
Print
E-mail
Tags
Time-consuming red tape increases the cost of trade with the countryTo improve its position as ranked 134th in cost to do business with out of 178 economies, conscious decisions and actions should be implemented for South Africa to improve on the cost of cross-border trade. Egypt, a fellow African country with ports, which ranked 26th overall, can be used as a case study and/or benchmark.
This is the conclusion of a scoping study by the South African Institute of International Affairs (SAIIA) and Business Unity South Africa (BUSA) on the cost of cross-border trade aimed at identifying factors that contribute to high cost of trading with the country.
In the 2008 Doing Business Report prepared by the World Bank, South Africa performed poorly in trading across borders. The country was rated 134 out of 178 economies, which was a drop by four places compared to the 2007 report and was by far the most negative factor in the analysis of South Africa.
In the ranking countries, the cost and procedures involved in importing and exporting a standardised shipment of goods are used, and the following six criteria apply:
• Number of documents required for export;
• Time taken to export in days;
• Cost to export (US$ per container);
• Number of documents required for import;
• Time taken to import in days; and
• Cost to import (US$ per container).
The Doing Business project compiled procedural requirements for exporting and importing a standardised cargo of goods by ocean transport. Every official procedure for exporting and importing the goods is recorded from the contractual agreement between the two parties to the delivery of goods, along with the time and cost.
For South Africa, the duration for import and export has the greatest effect on trade as evidenced by the differences in the comparison with its neighbours and other emerging markets. The effects of time are clearly emphasised in the Trading on Time study.
The results imply that on average, each additional day of delay reduces trade by at least one percent. A one-day reduction in delays before a cargo sails to its export destination is equivalent to reducing the distance to trading partners by about 70km.
In the case of exports from South Africa, half the time is taken up in documentation preparation and a further 30% of the time is allocated to ports and terminal handling. There are eight documents for export and nine for import procedures.
On average it takes 30 days to handle exports, including documentation, while it takes 35 days to process imports.
“It is therefore clear that document preparation and ports and terminal handling are the two activities that are taking up most of the time in the processing of exports and imports and therefore this is where change can be effected in order to improve on South Africa’s competitiveness,” states the SAIIA/BUSA study.
The preparation of export and import documents accounts for 5% of the total cost, with inland transportation and handling contributing 70% of the cost. Ports and terminal handling accounts for 18% of the total cost for both export and import procedures.
“In order to achieve competitiveness in global trade, a number of aspects have to be addressed. One of the most important factors is the number of documents require for both import and export in South Africa,” the study states.
It is suggested that some of the documents can be combined to reduce the duration which has a huge bearing on the overall cost. The fewer the documents, the less time it takes to prepare them hence improving efficiency.
In comparison to South Africa’s eight and nine documents, in Singapore, which was ranked first, it takes one day to process the only four documents required.
The study notes that changes in the number of documents has the highest influence on the rankings for South Africa, followed by cost to import and export.
”Trade facilitation is not only about the physical infrastructure for trade. Indeed, only about a quarter of the delays (in a sample used) is due to poor road or port infrastructure – in part because the exporter is located in the largest business city. Seventy-five percent is due to administrative hurdles – numerous customs procedures, tax procedures, clearance and cargo inspections – often before the containers reach the port.
The problems are magnified for landlocked African countries whose exporters need to comply with different requirements at each border,” it is stated.
South Africa should also explore ways of reducing the duration needed to complete the required documentation without necessarily reducing the number of documents by simplification of existing documents, like its neighbour Swaziland has done.
In the case of South Africa, customs clearance ad technical control takes four days at a cost of $75 for both import and export compared to Singapore, where it takes one day at a cost of $31.
For cargo to get through ports and terminal handling in South Africa, it takes nine days at a cost of $198 for export and one day at a cost of $220 for imports.
The cost of terminal handling is not of much concern, as it is not too far from the top ranked Singapore. “Of great concern, however, is the duration it takes to go through the process, 14 days, therefore increasing time-bound costs which will ultimately affect the cargo landing costs. In comparison to Singapore, the same process takes only one day.
“It is therefore recommended that South Africa revisits its import/export procedures with the aim of improving efficiency, thereby reducing costs of trading across borders. A reduction in these costs would be favourable for potential cross-border trades, thereby creating a conducive trading environment, which will in turn promote economic growth,” the study states.
The study also found that South Africa has dropped in the rankings from 130 to134 not because of a change in any of its key factors, but other countries have performed better than South Africa over time.
In comparison to its neighbouring countries, South Africa ranks only third behind Botswana and Swaziland. In preparation of documentation, Swaziland takes seven days, which is half the duration of 14 days in South Africa and Botswana.
While Swaziland itself has nine documents to get in order, it seems to indicate that it may not be the number of documents that has a bearing in document preparation, but the actual processes and procedures of preparation that have to improve to attain higher efficiency.
The countries comprising the Southern African Development Community (SADC) all have low ranks, which is an indication of common problems being faced by all seven of South Africa’s neighbours. ”The most common challenge is dealing with the infrastructural development concerns which include the poor road and railway network, lack of warehousing facilities, customs inefficiencies, backward IT infrastructure, ease of arranging shipment and affordability and constraints in accessing market information.
However, most African counties depend on trade taxes and revenue from trade taxes is at least 10% of total government revenue. In addition, past experience suggests that African countries have very limited success in replacing lost trade taxes with revenue from other sources.
“This should lead governments to take swift action in addressing findings such as those of the World Bank, to improve efficiency and ultimately the revenue from trade taxes,” the study concludes.
The study also notes that large trade volumes have contributed to the development of sophisticated port facilities in Singapore and other East Asian countries, and South Africa should also develop its ports to be more sophisticated – not only to catch up and handle the large volumes, but to anticipate future growth.
