marina aucamp, chief financial officer, cross border transport agency

Cross Border Road Transport InitiativesPresented at: Future Fuel Distribution Strategies

for Southern Africa Conference

Marina AucampChief Financial Officer

Cross Border Road Transport Agency3 November 2011

2

Aspects covered in this presentation

• The role of the Cross Border Road Transport Agency

• Will regional integration support the growth in Africa?

• What is the future of cross-border road transport?

Overview of the Cross Border Road Transport Agency

Mandate

Established ito of the Cross-Border Road Transport Act 4 of 1998.

To provide for co-operative and co-ordinated provision of advice, regulation, facilitation and law enforcement

pertaining to cross border road transport activities.

4

Mission

To spearhead social and economic development within the SADC region through facilitating unimpeded cross

border road transport movements.

5

Core functions

Facilitation and Industry Development: Ensures that consultations and partnerships with other key role players within South Africa and SADC are fostered and maintained.

Road Transport Inspectorate: Monitors the carriers through country-wide inspections and ensures that carriers operate within the prescribed legal parameters.

Regulatory: Responsible for the issuing and facilitation of all cross border permits.

Research and Advisory: Advises the Minister of Transport and the DoT on regional road transport imperatives and challenges.

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Changing Gears Strategy

To position the Agency as a facilitator of unimpeded flow of cross border road traffic and promoter of economic development and improvement within the SADC region.

Five key strategic projects:

1. Strategic Value Proposition Plan;

2. Industry Partnership Development Plan;

3. Operator Compliance Accreditation Scheme;

4. Business Model for Streamlining Border Management Practices; and

5. Market Access Regulation for passenger transport.

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Regional Integration in Africa

Definitions

• Regional integration: Co-operation between countries in trade, domestic regulations, policies, infrastructure and other cross-border initiatives, including public goods.

• Free Trade Area: Is a trade bloc whose countries have signed a free trade agreement (FTA), which eliminates tariffs, import quotas, and preferences on most goods and services traded between them.

• Customs union: Free trade area with a common trade tariff and policy.• Common market area: Expansion of the customs union to allow for the

free movement of labor, capital, goods and services.• Monetary Union: Where two or more states share the same currency. • COMESA: East and Southern Africa.• EAC: East Africa Community.• SADC: Southern African Development Community.

SOUTH AFRICA

NAMIBIA BOTSWANA

ZIMBABWE

SWAZILAND

LESOTHO

MOZAMBIQUE

MADAGASCAR

MAURITIUS

SEYCHELL ES

ZAMBIAANGOLA

CONGO, DRC

TANZANIA

MALAWI

SADC Countries

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Firstly, Africa

Africa’s Key Economic Indicators - 2011

African Population:Population: 1,031mGDP: US$ 1,703bnGDP per Capita: 2,941Growth Rate 2012: 5.8%1.8% of world GDP (2015 – 2.4%)

SADC:Population: 271m

(27%)GDP: US$ 590bn (35%)

GDP per Capita: $3,444

SOUTH AFRICAPopulation: 50m (5%)GDP: US$ 366bn (21%)GDP per Capita: $10,334Growth Rate 2012: 4.3%

Real GDP Growth in correlation with FDICountry GDP Growth

2008GDP Growth

2012Ranking –

GDP2008

Ranking – FDI

2008Angola 16.8 11.1 1 2Equatorial Guinea 16.3 7.5 2 8Ethiopia 11.4 8.6 3 20Chad 8.4 6.9 4 17Uganda 8.0 6.9 5 14Sudan 8.0 5.3 6 5Mozambique 7.8 7.9 7 24

Nigeria 6.3 6.7 15 1

South Africa 4.9 4.3 29 4

www.africaneconomicoutlook.com (2010)

http://www.africaneconomicoutlook.com/

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Africa - a fragmented continent (1)

• 47 out of 53 countries are small and least developed.• 15 countries are landlocked: Contributory factor to high cost of

doing business in Africa due to border barriers.• Most countries have a low per capita income and small

populations resulting in small markets.• Transport costs in Africa are still among the world’s highest.• Geography constraints: Disconnected air, rail and road transport

infrastructure, which in colonial times were designed to transport primary products to ports resulting in poorly developed cross-country connections.

• The unreliability of transport services and infrastructure.• Lack of sophisticated communication systems.

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• Trade between African countries and their emerging partners (BRICS) has grown significantly over the past decade.

• Africa's trade in 2011 has doubled with emerging countries, reaching 40% of its total trade volume.

• Ten years ago, this represented only half of the trade between Africa and the European Union. Now it is on par.

• In 2009, China overtook the USA as Africa's top trading partner.• So is Africa moving away from a post-colonial dependence

towards a Chinese one?

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• More than 80 % of Africa’s exports are still destined for outside markets.

• At the same time, Africa imports more than 90 % of goods from outside the continent.

• On average, only about 10-12 % of African trade takes place amongst African nations.

• Reliance is placed on few export commodities – primary commodities representing more than 80 % of Africa’s total exports in recent years.

• Such high dependence on commodities creates constraints on growth due to commodity price volatility.


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Key shaping forces in the future for SA?

South Africa’s future will be shaped by a number of internal and external forces over the period to 2030, which is the current focus of the NPC:

• Global economy• Energy transitions, food security, climate change and new

technologies• African development and regional integration• Demographic change

Diagnostic Overview Report by the National Planning Commission (2011)

Sources of employment growth in SA?

• Economic growth and industrialisation• From ‘70-’95 agriculture and mining employment shrank by

46%. • Raising global market share of value-add ito commodities• Expansion of SMME• Move from consumption-led to investment-led growth and

increased exports• Regional integration

Diagnostic Overview Report by the National Planning Commission (2011)

Key shaping forces in the future for Africa?

• African countries should adopt the following measures to improve their performance in the global arena:– Fast-track regional integration as a top priority;– Develop public institutions and financial markets;– Upgrade educational systems;– Diversify exports beyond reliance on traditional (mining)

commodities;– Improve ground transport infrastructure (quality of roads,

railway lines, ports of entry).

“It’s time for Africa”: Ernst & Young 2010 survey on Africa’s competitiveness

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Regional Integration?

Benefits of Regional Integration

• Increase market size in the region and allow for realisation of scale economies;

• Exploit opportunities and increase trade across regional borders;• Reduce trade, transactions and operating costs and enhance

regional competitiveness;• Attract foreign direct investment leading to improved transport

infrastructure and competition amongst firms;• Reduce inefficiencies and transport costs which will in turn

increase intra-regional and international trade.

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• The geo-political configuration of Africa has been largely determined by the continent’s European colonial powers.

• Small domestic markets and continental fragmentation translated into a lack of scale economies in the production and distribution of goods and services.

• There was a strong belief that development would be promoted by industrialization, in particular core manufacturing. The industrialisation-regional integration interface was clear. Larger, protected markets in the various sub-regions would support a policy of import-substituting industrialisation.

History of Regional Integration (1)

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• Strong political ambition (overlapping memberships).• The aim was to establish a broad range of industries across

different sectors. • First initiative for regional integration was called the Lagos

Plan of Action (1980) followed by the Abuja Treaty (1991) focusing on Africa’s self-reliance through industrialisation.

• The proposed framework for African integration and continental industrialization was the division of the continent into regional integration areas that would ultimately constitute a united African economy, the African Economic Community.

History of Regional Integration (2)

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History of Regional Integration (3)The African Economic Community is envisioned to be created in six stages:1. Creation of regional blocs (completed).2. Strengthening of intra-regional integration and inter-regional

harmonization (in progress, e.g. FTA in SADC and COMESA).3. Establishing of a free trade area and customs union in each

regional bloc (to be completed in 2017).4. Establishing of a continent-wide customs union and thus also

a free trade area (to be completed in 2019).5. Establishing of a continent-wide African Common Market (to

be completed in 2023).6. Establishing of a continent-wide economic and monetary

union and pan-African Parliament (to be completed in 2028).7. End of all transition periods by 2034.

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SADC Protocol• The Southern African Development Co-ordinating Conference

(SADCC) was established in 1980, by front line states with the specific aim of reducing economic dependence on apartheid South Africa.

• South Africa joined SADC in 1994.• SADC, however, adopted an explicit market integration

agenda (SADC Trade Protocol) and detail is provided in the Regional Indicative Strategic Development Plan of 2003.

• This strategic plan articulates the roadmap for SADC’s integration and provides for the establishment of a free trade area by 2008, a customs union in 2010, a common market in 2015, monetary union in Angola, Botswana, Lesotho, Malawi, Mozambique, Swaziland, Tanzania, Zambia and Zimbabwe by 2016 and the introduction of a single currency in 2018.

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Where are we with regional integration? (1)

• Commitment to SADC Protocol.• Recent commitment by the member states of the COMESA,

SADC and the EAC to establish a Tripartite Free Trade Area consisting of the 26 member states and is seen as an important step in addressing the problem of overlapping membership.

• Negotiations were officially launched at a summit, held in South Africa, in June 2011.

• The T-FTA will be anchored on three pillars; market integration, infrastructure development and industrialisation.

• These pillars do appear to capture the key challenges that prescribe the competitiveness of African businesses and integration into the global economy.

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Where are we with regional integration? (2)

• NTBs, including import bans, cumbersome customs procedures, restrictive technical regulations and many more, are well-documented impediments to intraregional trade.

• The private sector can play an important role in the elimination of NTBs.

• SADC, EAC and COMESA have established, through the Tripartite Coordination Mechanism, an online NTB reporting system (www.tradebarriers.org), which can be effectively used in conjunction with the existing legal instruments, and preferably a rules-based framework in the T-FTA.

General initiatives to facilitate regional trade

• DTI Trade Policy: Influence economic growth through its role in trade liberalization

• New Growth Plan: Influences economic growth through paving way for regional integration

• Nepad• Relaxed exchange controls by SARS• World Bank initiatives• Border Control Operational Coordinating Committee• Maputo Corridor Logistics Initiative• New Growth Plan• Industrial Development Policy

Is the current cross-border environment in Southern Africa conducive for regional integration?

A brief synopsis of movements at Lebombo and

Beit Bridge border posts

32

Lebombo – Imports (Tons)

Constructi

on & St

eel

Tobacco &

Grains

Paper & W

ood

Consumer

Minera

ls

Fuels

& Bevera

ges

Other

Equipment

Perishables

Chemicals

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

TOTAL = 5,484,302

3%

33

Lebombo – Exports (Tons)

Perishables

Constructi

on & St

eel

Consumer

Fuels

& Bevera

ges

Tobacco &

Grains

Chemicals

Other

Minera

ls

Paper & W

ood

Equipment -

50,000

100,000

150,000

200,000

250,000

TOTAL = 578,858

9%

Lebombo (Movements in Rand Value)SARS Data

35

Beit Bridge – Imports (Tons)

Tobacco &

Grains

Minera

ls

Constructi

on & St

eel

Paper & W

ood

Perishables

Other

Equipment

Consumer

Fuels

& Bevera

ges

Chemicals

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

TOTAL = 1,401,614

0.14%

36

Beit Bridge – Exports (Tons)

Consumer

Fuels

& Bevera

ges

Tobacco &

Grains

Minera

ls

Equipment

Perishables

Other

Constructi

on & St

eel

Chemicals

Paper & W

ood -

50,000

100,000

150,000

200,000

250,000

TOTAL = 487,017 20%

Beit Bridge (Movements in Rand Value) SARS Data

YEAR 2008 YEAR 2009 YEAR 20100

2,000,000,000

4,000,000,000

6,000,000,000

8,000,000,000

10,000,000,000

12,000,000,000

14,000,000,000

16,000,000,000

Total value of SA goods exported Total value of goods imported to SA

Rand

Val

ue o

f Goo

ds

38

Summary of activities at two major commercial border posts

Lebombo Imports 5,484,302 69%

Lebombo Exports 578,858 7%

Beit Bridge Imports 1,401,614 18%

Beit Bridge Exports 487,017 6%

TOTAL 7,951,791

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

1,600,000,000

1,800,000,000


Rand

Val

ue o

f Goo

dsLebombo – SA Export Months

SARS data

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

3,000,000,000


Months

Rand

Val

ue o

f Goo

dsBeit Bridge – SA Export Months

SARS Data

41

Cost Elements: Flows to and from Beit Bridge and Lebombo

• Transport Cost - R 3 487 M (52%)– Line Haul 54 %– Distribution 30 %– Externalities 16 %

• Inventory Carrying cost - R 1 135 M (17%)– In transit 13 %– Excl. In transit 87 %

• Warehousing - R 1 036 M (16%)– Storage 51 %– Handling 45 %– Overheads 4 %

• Management and Admin - R 992 M (15%)

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Border related freight flows in context (2009)

• Total SA freight = 728 million tons• Total imports = 56.6 million tons

– 10.3 million tons border related• Total exports = 146.9 million tons

– 5.1 million tons border related

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The most important SADC purchaser of South African petroleum products in 2010 is Zimbabwe (32.69%), followed by Zambia (24.42%), and DRC (13.47%)

Are the current business processes at Beit Bridge and Lebombo

conducive for regional integration?

BEIT BRIDGE – South African ExportsSOUTH AFRICA

Weighbridge

1

Clearance Agents(Truck Park)

Receive Docs

Security check

South African Border Precinct

ZIM

BABW

E BO

RDER

PRE

CIN

CT

Gate Pass

SA Customs

4

Truck Inspection

(Stop Notice or Random)

SA Customs (Cash Office)

2 3

SA Port Health Agriculture

SA Immigratio

nSA Police

Check

passport

Truck Leaves SA side

5 6 7 8 9

Stop Notice (inspection)

orClearance

Inspection Ramp

BEIT BRIDGE - Zimbabwe ImportsZIMBABWE

SA

BO

RDER

PRE

CIN

CT

Truck Inspection

Zimbabwe Border Precinct

Clearance Agents

Receive Docs

ZimbabweCustoms(ZIMRA)

14

Truck Inspection

Zim Customs

(Cash Office)

13

Zim Port Health Agriculture Zim

ImmigrationFinal Check

passport15 16 17 18Truck enters

Zimbabwe

19

Gate Pass

Bridge Toll Road

Ministry of Transport

Vehicle CheckLevies/Toll

Road Worthy

12

10

TollBooth

Weighbridge

11

BEITBRIDGE - Zimbabwe ExportsZIMBABWE

Zimbabwe Border Precinct

Clearance Agents

Receive Docs

ZimbabweCustoms

2

Truck Inspection

ZimCustoms

(Cash Office)

1

Zim Port Health – limited

interaction

Agriculture – limited

interaction

ZimbabweImmigration

Zim Police Check

passport3 4 5 6

SA B

ORD

ER P

RECI

NCT

Truck Leaves

Zimside

7

BEITBRIDGE - South African importsSOUTH AFRICA

Weighbridge

16

Clearance Agents

Receive Docs

SA Policecheck

South African Border Precinct

SA Customs

10

Truck Inspection


9

SA Port Health Agriculture SA

ImmigrationFinalCheck

passportTruck enters

SA11 13 13 14

15

ZIMBABW

E BORD

ER PRECINCT Truck Inspection

8

LEBOMBO - South African ExportsSOUTH AFRICA

BORD

ER P

OST

Weighbridge

Kilometre Seven

Traffic Monitoring Centre

1

Clearance Agents

Truck Stop

2

SA Port Health Limited interaction: focuses on imports

Agriculture Limited interaction:focuses on imports

SA Immigration

SA Police Check

Receive Docs

Land concession - SANRAL

Truck Inspection


5

passport

6

7 8Truck

leaves SA side

Airfield 9

South African Border Precinct(Commercial Bypass Road)

Inspection Ram

p

South Africa & Mozambique

Customs

3

MO

ZAM

BIQ

UE

BORD

ER P

RECI

NCT

Gate Pass

4

50

Preliminary Economic Impact of Delays

• Delay examples: 1 day at Lebombo, 1.5 days at Beitbridge• Translates into an additional R 488 Million logistics cost

Border post Beitbridge Lebombo Grand Total

Additional Inventory Carrying Cost R 40 M R 48 M R 88 M

Additional Road Transport Cost R 171 M R 226 M R 397 M

Total R 211 M R 274 M R 488 M

In this scenario road logistics costs increases between 15-20%

What is the future of border management?

52

Port check point

On-route checks

SA Border post checks

Neighbouring Border post checks

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• Concept of a virtual border encompassing the entire transport and supply chain.

• Goods and passengers are assessed for admissibility and clearance in advance of arriving at the physical border.

• All role-players gather, collate and share data.• Complete view of risks and opportunities.• Encouraging a knowledge sharing culture.• Built on proactive decision making.

Collaborative Border Management

Collaborative Border Management

Customer segmentation

Collaborative information portal

Intelligence driven risk

managementPre-clearance

Inte

r-ag

ency

app

roac

h

Reduced compliance verification

documentation required at the point

of border entry

Low risk persons and freight move

uninterrupted

Enforcement focuses on higher

risk individuals and freight

Customer centric view with compliance history

Freight Transport Business

Completes electronic registration of

business

Clearing Agent

Authorised

Becomes authorised /

accredited user

Department of Transport

Department of Agriculture

Department of Health

Department of Home Affairs SAPS SARS

Risk

Pro

file

Set-u

p pe

r enti

ty

Registration Process

Business

in

out

Electronic submission for

approval

1

Freight Transport Business

Submit freight clearance request

electronically

Each role player responds to the

consignment and communicates status

Department of Transport

Department of Agriculture

Department of Health

Department of Home Affairs SAPS SARS

Build

Ris

k Pr

ofile

per

en

tity

Pre-Clearance

in

out

Electronic submission of consignment details

for approval

2

Specific turn-around time

GO

STOP

Appl

y Ri

sk

Profi

le A

naly

sis

At border or on-route per entity

SARS Modernisation Process

• 3 September at Lebombo Border Post• 8 October 2011 at Beit Bridge Border Post

• Fast release of goods, lower costs, increased revenue, economic competitiveness, transparent, predictable, standardization & simplification of supporting documents.

• Simplified procedures, use of information technology, decreased customs control to ensure compliance, risk management & audit based controls, border agencies & partnerships formed.

2004: SARS signs agreement with WCO (Kyoto

• Customs standardization• To streamline the customs clearance process• Offer an improved experience & service to the trader Purpose of Modernisation

• Modern, electronic & integrated technology• New Legislation, Simplification & harmonisation of Customs procedures, • Automation of key processes, aautomated risk management & non-risk related goods will be fast-tracked for

release • Risk profiling

Requirements

• Redesign of Customs declaration process, Implementation of purpose codes for declarations, Implementation of procedure category (PCC) and customs procedure codes (CPC’s).

• Update trade systems & personnel training, Old MAS system decommissioned ( 6 May 2011 )and replaced with the new Automated Cargo Management (ACM) system.

• The new system ensures “clean” data , automated risk profiling & declaration to the SARS Customs Risk Engine (CRE)Phase1 – Nov 2010

• Change implementation of submission of supporting documents, no hand-delivery of clearance supporting documents to Customs, electronic supporting documents, a customs broker, importer or exporter submit trade documents electronically to SARS, declaration processing, case management, inspection procedures, 9 new Customs Procedure Code combinations,

• Amendments to both international and cross-border import and export clearances.• Electronic case management and inspection process and the elimination of manual customs stop and inspection process.• New Customs Act, e-filing payment system, SARS Single Registration system, coordination of important collaboration between importers,

exporters, customs brokers, release authorities, bonded warehouse operators, cargo reporters, and certain Other Government Agencies (OGA’s)

Phase 2 – Jun 2011

• New warehousing, home and inward processing systems• Holistic profile of traders, taxpayers and their interactions with SARS• Coordination with areas such as VAT, CIT and PAYE – & visa versa• Integrated cargo and clearance declaration management, integrated account & revenue management, increased 3rd party data usage,

integration of Other Government Agencies (OGAs), introduction of full Single Window

Phase 3 – 2011/2012

New Electronic Clearance Process Old Clearance Process

• 24 hour submission. Requested scanning only office hours • Custom hours

• The introduction of an electronic case management system, called Service Manager -

• Partial electronic system• SARS inputs the data received from Agents at the Border

• A new inspection process• As per the electronic system’s objective outcome Customs

informs Agent if the vehicle will be stopped. Two options. Customs may request inspection of documents (not submitted automatically), second phase Customs may require an inspection – have 4 days to request inspection)

• Risk evaluation done by custom official, subjective outcome• Customs official decides to stop vehicle or delay vehicle

• Electronic submission of supporting documents by Agents• Agents don’t need to go to Customs at the Border.• No hand-delivery of clearance supporting documents to

Customs• The introduction of electronic supporting documents• A customs broker, importer or exporter will be able to submit

trade documents electronically to SARS where such documents may be required to finalise a customs inspection

• Paper submission of supporting documents• SAD 500 etc• Agent prepares forms, copies, files and submit to SARS

• Mostly EFT • Duties paid by agents at Customs / EFT

• New Customs Status Codes • The Customs’ internal inspection process is redesigned with 9

new Customs Procedure Code combinations • n/a

• An electronic release system, reducing the need for paper and authorising stamps at branches which should result in reduced turnaround times,

• It also includes the introduction of an electronic case management and inspection process and the elimination of manual customs stop and inspection process.

• “release note” not handed to agent - issued at Customs back office – second check by case manager – issued electronically.

• Possible requested pre-inspection and release, at least 24 hours previously

• Random inspection possible

New Electronic Clearance Process (Assumed Exporting from SA) Old Clearance Process

• Driver parks truck • Driver parks truck

• Clearance note handed to driver – all processes may be completed before arrival if submitted

• Driver possibly hands in Documents for load to clearing Agents / may be prepared before depending on agent.

• Clearing agent/s check documents for accuracy and correct supporting documentation prior to the submission to both customs for clearance. Unlikely random stop. Internal risk matrix.

• Clearing agent checks documents for accuracy and correct supporting documentation prior to the submission to customs for clearance

• Driver clear immigration authorities and gets a gate pass • Driver clear immigration and gets a gate pass

• Duties paid upfront • Duties paid by agent mostly or EFT

• Prior issued release order – except if must stop • Customs issues release order and documents returned to agent for truck to be released.

• All accounting can be done by back office • Driver pays other charges

• Gate pass stamped by both custom authorities • Gate pass stamped by customs

• Truck proceeds • Truck proceeds

Closing remarks• Southern Africa should determine how the global recession can

benefit the region.• Government entities playing a role in cross-border road

transport movements should define the public value add.• The public value add should be agreed and negotiated between

the public and private sectors.• Government systems that are implemented to ensure the

consolidation of freight data should include a value add to the industry.

• Private sector should become more involved in driving regional integration and to realise the benefits.

• Alleviation of cross-border road transport impediments should be approached from an economic and social development approach by both sectors with a focus on job creation.

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Thank You