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Friday, April 15, 2016

Why Dar port is losing out

  •  According to a parliamentary watchdog committee, importers and exporters are being scared away mainly by multiple taxes on transit goods which make it all too expensive
THE port of Dar es Salaam, which handles annual trade volumes equivalent to more than half of Tanzania's total economic output,is facing an all-too-familiar problem despite improving its efficiency over the years - it is still losing business to rival ports in other African countries along the Indian Ocean coast.

Kenya’s Mombasa port has traditionally been Dar’s main competitor for international transit trade from land-locked African nations seeking to access the ocean. But other ports, including Durban in far-away South Africa and Beira in neighbouring Mozambique, are also luring customers away.

According to the parliamentary Infrastructure Development Committee, what is pushing customers away from the Dar es Salaam port is not its notorious bureaucratic delays in clearing cargo, but rather an unfavourable tax regime attached to the transport hub.

The committee's chairman, Prof Norman Sigalla, said yesterday that the problem of multiple taxes and levies imposed on transit cargo was proving a highly discouraging factor for many importers and exporters from neighbouring countries.

Prof Sigalla said it was this lack of problem comprehension shown by relevant local authorities that was slowly stripping the Dar port of any competitive advantage it may have over its rivals.

The committee has advised the government to scrap off value added tax (VAT) on transit goods passing through the port, pointing out that competing ports like Durban, Beira and Mombasa do not charge the tax, which basically makes Dar a much more expensive gateway.

According to Prof Sigalla, the overall volume of transit cargo has declined significantly at the Dar es Salaam port, largely due to the VAT factor.

“VAT is scaring away importers because it rather unnecessarily inflates their costs of doing business,” he said.

The committee also urged the government to abolish double taxation for cargo storage, citing the storage rent charged by the Tanzania Ports Authority (TPA) and a similar warehouse rent imposed by the Tanzania Revenue Authority (TRA) for the same cargo.

Both TPA and TRA are government agencies.

The Bunge team further advised that the maximum period of stay at the port for imported oil be officially extended from 30 days to 90 days in line with other rival ports.

“We also call on the government to fast-track the construction of the dry port in Kisarawe, Coast region that is meant to ease cargo congestion at the port ... and to improve the country’s general railway infrastructure to attract regional trade,” Prof Sigalla added.

The government has announced plans to invest around $14 billion in the construction by 2021 of a new standard gauge rail system that will link the Dar es Salaam port to land-locked neighbouring countries, and thus provide a boost to regional trade.

One of the planned new railway lines is set to run some 2,561 kilometres from Dar to Rwanda and Burundi.

Due to its strategic location, the port of Dar es Salaam is the gateway for 90 per cent of Tanzanian trade, clearing $15 billion worth of goods each year, a sum equivalent to around 60 per cent of the country’s gross domestic product (GDP).

Land-locked countries such as Malawi, Zambia, Burundi, Rwanda, and Uganda, as well as the Democratic Republic of the Congo (DRC), all rely heavily on the Dar port for their imports and export trade.

The port handled 12.54 million tonnes of cargo in the 2012/13 financial year, and 14.7 million tonnes in 2014/15. The government plans to increase this volume to 18 million tonnes in 2016/17, but there is concern that target might not be reached due to ongoing cargo declines.

TPA has announced its own plans to spend $585 million to improve efficiency at the port, a mover that , according to a recent World Bank report, could boost the region annual GDP by up to $1.8 billion.

According to the WB report, in mid-2012 ships were waiting up to 10 days on average just to berth and an additional 10 days to be able to unload and move their merchandise from the port.

The excessive delays in anchorage alone translated into an additional cost of 22 per cent on container imports and about 5 per cent of bulk imports.

But recent years have seen a marked improvement in the port’s efficiency and reduction in the number of days it tales to clear cargo.

Corruption has also often been cited as a key factor contributing to the poor performance of the port, as both a source of and a direct result of inefficiency.

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