EAST AFRICA’S INFRASTRUCTURE: A REGIONAL PERSPECTIVE These large companies obtain loads from long-term direct contracting and reach a much higher mileage than companies in other parts of Africa (Teravaninthorn and Raballand 2009).

# **Box 2.1. Deregulation of the trucking industry in Rwanda**

The only deregulation experience in the African region so far took place in Rwanda in 1994, and it had a huge effect on transport prices, confirming the impact that cartels have had elsewhere in Africa. After deregulation of international transport, prices declined by more than 30 percent in nominal terms and by almost 75 percent in real terms when taking into account the continued increase in input prices. The impact of deregulation in Rwanda was probably stronger than in most other countries because previously the country’s freight services were a monopoly of a parastatal trucking company (STIR) that was able to set high prices without any restraint. Furthermore, 1994 was also the bloodiest period of the Rwandan civil war, during which, for all practical purposes, a road freight fleet had ceased to exist.

Deregulation led to growth in the Rwandan fleet. This result was in contrast with common fears that deregulation, which liberalizes market entry, leads to eradication of the fleet owned by truckers from landlocked countries. In the case of Rwanda, the fear was even stronger, given the disappearance of its trucking fleet at the height of the civil war in 1994. In fact, deregulation aided in a rapid recovery of the domestically owned fleet. A distinctive feature of the business strategy followed by Rwandan truckers has been their specialization in specific goods to capture niche and profitable markets, such as petroleum products. This largely explains why the current fleet is as large as it was prior to deregulation of international transport.

<u>Source: Teravaninthorn and Raballand 2009.</u> The comparatively slow effective velocity of freight in East Africa can be explained by lengthy customs clearance processes, administrative delays at ports, and delays at the border. The situation seems to have worsened since 2009. According to the LPI survey, customs clearance time in the region is up to seven times less predictable than in other parts of the world. Associated border delays are also lengthy (World Bank 2010b). Based on estimates from 2008, East African trucking companies have indicated that their trucks have to wait between one and two days at Malaba (the border post between Kenya and Uganda). Congestion at the posts due to limited parking availability, limited space in customs yards, poor cargo documentation, and duplication of administrative processes in Uganda and Kenya have also contributed to the delays. Ugandan and Kenyan authorities are now working on an initiative that would oblige trucks to pass through only one stop instead of two. Once fully launched this effort should significantly reduce delays (Teravaninthorn and Raballand 2009).

Recent reports indicate that roadblocks and weigh stations significantly increase transport costs. A 2008 survey of the East African Business Council found that random police checks that impose costs and delay trucks are pervasive. Similar problems have been documented in West Africa. Truckers traveling west from Mombasa or Dar es Salaam report an average of 19 roadblocks and 4.4 weigh stations per trip, resulting in 12 hours spent on diversions. Truckers traveling between Kigali and Mombasa experienced a combined total of 47 roadblocks and weigh stations. Although the value of the individual bribes sought at roadblocks and weigh stations is not large, their cumulative total is daunting—around $8 million per year in the East African Community alone (USAID 2009).

East Africa has four landlocked countries, which use Dar es Salaam and Mombasa as their gateways to the sea. Ethiopia uses Djibouti as its gateway, and Sudan has access to Port Sudan. Rwanda and Burundi have the option of using either Mombasa or Dar es Salaam, which creates the possibility of competition along corridors and between ports. For example, Burundi’s most direct route to the coast is 11