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Regional Experts Meeting On Reduction Of Transaction Cost For Commodity Export In Africa
Jan 27, 2009, 17:21
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The first regional Expert summit was held recently in Lagos, Nigeria. The Transaction Cost for commodity in Africa was the main issue discussed by Investment Experts, CEOs Exporters and other financial Experts and institutions.

Representing Sierra Leone was the Acting chief Executive Officer of the Sierra Leone Investment and Export Promotion Agency (SLIEPA) Henry Yamba Kamara.

The summit was sponsored by Common Fund for Commodities (CFC) . The Common Fund for Commodities is an inter-governmental Financial Institution established within the framework of the United Nations. The Funds specific mandate is to support developing countries that are commodity dependent to improve and diversify commodity production and trade. Most of CFCs projects and other commodity development initiatives are financed through grants, loans or a combination of both. The Funds projects typically have a market development and poverty alleviation orientation; and through a variety of project-based initiatives, the Fund places a high premium on development of Commodities based economies upon which the producers and exporters depend for their livelihoods.

The purpose of the meeting was to discuss the high level of transportation and other Transaction cost of commodity export which affect Africa economies, and how to determine the way forward in addressing it.

Below is the communiqu that was signed at the meeting.


1.0 The Regional Experts Meeting on Transaction Cost for Commodity Export in Africa was held in Calabar, Cross River State, Nigeria from Tuesday 9th to Thursday 11th December 2008, under the chairmanship of Ambassador H. Sona Ebai, Secretary-General of Cocoa Producers Alliance. The meeting was convened at the instance of Nigerian Shippers Council in collaboration with the Federal Ministry of Commerce and Industry and with the financial assistance of the Common Fund for Commodities (CFC); and it was attended by delegates from many countries in Africa and other parts of the world. The Meeting was declared open by the Deputy Governor, Barister Efiok Cobham (representing the Executive Governor); while keynote addresses were presented by the Director Maritime Services (representing the Honourable Minister of Transportation), Mr. Musa Tugga Karzam, and the Permanent Secretary of the Federal Ministry of Commerce and Industry (representing the Minister), Mrs. Elizabeth Imhoren, OON.

2.0. The need to convene the Expert Meeting was sequel to the previous CFC-sponsored Regional Roundtable Meeting on Commodity Development in Africa, held at Yaounde, Cameroon (18-21st September 2006), at which it was established that the high level of transportation and other transaction cost of commodity export on the continent hurt African economies considerably, and agreed that an Expert Meeting of all stakeholders on the continent should be convened to critically examine the issue further and determine the way forward in addressing it. The relatively high transaction cost translates into high prices that make similar products cheaper than what obtains elsewhere thereby tilting the terms of trade in disfavor of countries in the region. Hence the perennial non-competitiveness of the raw and processed commodities originating from Africa into the world market.

3.0. The agenda of the Regional Expert Meeting featured presentation of papers and break-out sessions leading to identification and prioritization of the causes and sources of high transaction costs on the continent. The group discussions adopted a participatory approach to analyzing and interrogating the issues with a view to proffering solutions and making a declaration in that regard. Afterwards the Farm and Infrastructure Foundation as consultants to the Expert Meeting helped in synthesizing the views and opinions expressed into a consolidated decision framework to be disseminated in the original form later.

4.0. The major decisions and recommendations emanating from the Regional Expert Meeting are highlighted below.


i. Examined the situation with the commodity export in Africa leading to the identification and prioritization of the several causes and sources of high transaction costs in two categories highlighted below:

Warehousing, Finance and Trade The main sources are Storage and warehousing; Quality assurance; Banking, Insurance and Tax. In this regard, the causes of high transaction costs category include excessive Tariff and Non-tariff barrier; high Finance and Banking charges; Inadequate and obsolete equipment; Cumbersome administrative procedures, among others.

Physical shipment The main sources of this cost category are Cargo handling; Terminal handling, etc. There are several causes high transaction costs in this category namely: Inadequate and obsolete equipment; inadequate vehicles; lack of technology and the use of manual labour; too many check points to the ports (Security checks); poor and inadequate storage facilities; lack of technical know-how; poor packaging; Excessive levies and charges; lack of consolidation points; Inadequate plants to hire; Absence of legislations on commissions and charges; Delay in the processing of claims; Lack of dedicated export handling terminals; lack of storage facilities; and lack of inter-connectivity between Agencies/operators.
ii. Interrogated the issues involved in past and present efforts of individual countries and regional economic communities on the continent in tackling the problems albeit with a low degree of success attained so far, leading to a number of solutions and recommendations as summarized below:

1. Tariff and Non-Tariff Barriers: that the ISRT provisions should be implemented and publicized; other solutions include adequate attention by regional bodies like ECOWAS; intensive sensitization of operators like chambers of commerce, shippers councils, exporter organization; to advocate commodity-specific regional transit agreements;
2. Insurance: that collaboration between the Shippers councils and Insurances organization should be facilitated and strengthened.
3. Finance and Banking : that Central Banks should ensure that every bank finances commodity trade with a good percentage of their lending; that commodity exchange should be set up; other solutions pertain to: Development of legal and regulatory framework; Promotion and support for innovation in structured finance of commodity; Setting up of a specialized commodity finance bank; Government Credit Guarantee Schemes; Establishment of Government Warehouse Receipt System that can provide collateral; Integration of Government schemes with commodity exchange so that banks can value their collateral in real time, hedge their exposure to changes in value and easily liquidate seized collateral in the event of borrowers default; Effective government regulations and policies; Formation of export banks; Subsidy on non-oil commodities.
4. Administrative procedures: Political will to implement regional and international treaties; Harmonization/consolidation of administrative procedures; Information and logistics for availability of Food.
5. Equipment: Provision of governments funds through capital projects; Encouragement of locally based leasing schemes;
6. Legislation: Strong legal and regulatory Agency to be legislated to monitor compliance with charges in operations.
7. Delay in processing of Claims: that Government should play facilitating role to handled settlement of claims promptly.
8. Bureaucracy: that attitudinal change on the part of Government Officials should be pursued.
9. Interconnectivity: that Government all the agencies, operators and relevant stakeholders should be linked through an electronic data Interchange Network connecting all exporters, regulatory agencies, ports and other service providers.
10. Documentation Procedure: Inter-connectivity between agencies/operators would lead to less human contacts.
11. Excessive levies and charges: Government should reduce the excessive levies and charges to make African goods more competitive; other solutions include effective road and other transportation networks, as well as market infrastructure; Government should encourage inter-modal transport operation by ensuring that all the modes of transportation are working effectively.
12. Check points: Revenue should be collected centrally by the federal government and shared; Poor and inadequate storage facilities should be rehabilitated in partnership with private investors.
13. Bribery and corruption: Government should introduce transparency in transactions by using the bifocal camera as in MAKIA Lagos;
14. Equipment: Relevant and adequate equipment should be provided;
15. Information on shipment procedure: the relevant agencies such as export promotion council, shippers council, customs, etc should mount exporters awareness campaign and organize educational clinics on export procedures

5.0. Resolved to chart a way forward by taking the following steps:
5.1. Give adequate media exposure to the outcomes of the meeting and prompt the policy authorities and other stakeholders in the individual countries to initiate remedial or mitigation actions within the short term;
5.2. Promote knowledge about the situation with commodity export in Africa and stimulate stakeholders into action in the medium to long term;
5.3. Follow up with selected sub-regional organizations and other bodies including development partners and private sector in Africa, with a view to informing the policy authorities about the solution measures emanating from the meeting and creating the need for practical actions.
5.4. Formulate an intervention project for determining and demonstrating suitable solution measures under the prevailing circumstances on the continent and how this will be disseminated for replication all over Africa.

6.0. Calabar Declaration:

6.1. Whereas: We, the official representatives of countries of Africa and stakeholders in the export trade in commodities with the rest of the world, gathered at Calabar Cross River State of Nigeria for three days (Tuesday 9th to Thursday 11th December 2008) have critically examined the issue at stake;
6.2. Therefore hereunto declare to:

(i) Affirm our commitment to address the issue of perennial high transaction costs of export commodities originating from the continent, which forms the objective of the Expert Meeting;
(ii) Express our confidence in the outcomes of the Calabar meeting of experts on the matter, as specified in the resolutions passed and listed above;
(iii) Confirm our commitment to work together for the proper implementation of these resolutions in our individual countries, with a view to developing the infrastructure and taking other actions towards reducing the high transaction cost of commodity exports along the corridor of Africa;
(iv) Recognize the need for effective monitoring of implementation progress using suitable indicators, and the need to formulate a project for demonstrating appropriate modes of reducing transaction costs of commodity export; and to
(v) Appreciate the initiative of the Nigerian Shippers Council, Common Fund for Commodities, Federal Ministry of Commerce and Industry, and the Government of Cross River State for organizing the Regional Expert Meeting on Transaction Cost of Commodity Export in Africa at Calabar, Cross River State, Nigeria.



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