The UK’s Department for International Development (DFID) has teamed up with a prominent East African organization for the express purpose of speeding up development – literally. DFID has prepared a fund that will award grants to individuals or companies that are able to come up with innovative ideas to cut transport costs in the region, which should result in greater market access and incomes for East Africa countries and their populations.
The fund, affectionately known as LIFT (Logistics Innovation for Trade), totals £10.5m (US $16m) and will be managed by Trade Mark East Africa, a prominent NGO that works to reduce transport time along main corridors of the East African Community (EAC). Grants of between US $200 – 700,000 will go to winning proposals for individuals and companies in trade, transport or logistics, or those working in companies that service those industries. Those submitting proposals must currently be operating in the region, or planning to begin operations there. The grant will match the costs of the innovation, with the hopes that this will spark private sector investments in freight, logistics and technology. It is well known that high transport costs have been a major barrier to market access and trade growth for much of Africa. The fund is a great catalyst for developing new business practices and encouraging investment in infrastructure. This initiative hopes to decrease transport costs by 10%, which could increase trade by up to 25%, according to the Guardian.
The initiative was formally launched in November of 2013 by Justine Greening, the UK’s International Development Secretary, who has been working to increase opportunities for trading between East African nations and the UK. According to a speech made by Greening in Tanzania at the launch of the initiative,
Trade can lift countries out of poverty for good, but bad infrastructure,
lengthy delays and red-tape mean that goods often struggle to get to market.
We need to find new ways to unblock bottlenecks and make East African
countries more competitive.
The launch highlighted key areas of concern that this partnership hopes to address, including freight and logistics techniques (ramping up the use of technology for inventory and processing), systems for tracking freight, infrastructure for making main transport corridors more accessible and efficient and industry performance more broadly.
LIFT will combat logistics problems by supporting and adding to existing TMEA activities. Greening visited Tanzania recently and used TMEA’s past work in Tanzania as a model to showcase the impact that a more streamlined transport system could have for the region. In 2012, TMEA offered a challenge fund worth about USD $10m that supported other trade innovations in the area. What resulted was the Airtel Cross Border Transfer (a money transfer service) that piloted in Kenya, Uganda and Rwanda last year, and the Africado Ltd initiative, a capacity building project to increase access to export markets for avocado farmers in the Kilimanjaro region of Tanzania.
Logistics developments that were born from the project included the construction of a packing and cold-chain export facility, which kept produce fresher longer. This reduced spoilage and there was a reduction in the amount of project rejected by the EU market. More product going to market also meant higher returns for the farmers themselves. The expansion also demanded the addition of 2000 more farmers, spurring growth and employment in the region.
East Africa is often cited as bearing the 2nd highest transport and logistics costs worldwide, which stem for a variety of inefficiencies in logistics, infrastructure, and government support. According to the World Bank, the high costs associated with doing business in locales with poor transport infrastructure can account for upwards of 40% of consumer costs and can deplete growth by up to 1% per year. These high costs essentially nullify competitiveness, which results in less trading, less economic growth, and fewer opportunities for both job creation and, by extension, poverty reduction.
We will continue to follow this initiative as it takes shape and will showcase some of the projects and innovations that are proposed and accepted when that information is made available. In the meantime, take a look at Trade Mark East Africa to learn more about how DFID and the UK are working with the organization to strengthen the trading capacity of the East African region.