Malawi’s transportation cost is the highest in the Southern Africa Development Community (Sadc), a study conducted by the regional trade bloc has shown.
Sadc secretariat assessed competition in the road freight sector in 2014 and used fertiliser transportation and trading in Zambia, Tanzania and Malawi as case study.
Director of enforcement and compliance at the Competition and Fair Trading Commission (CFTC) Martha Kaukonde, who revealed contents of the study, said the retail price of Urea in Malawi was 25 percent higher than in Zambia despite both countries being landlocked.
“In Zambia, the average retail price of Urea was $816 [K391 860] per tonne compared to $ 1 014 [K486 720] per tonne in Malawi. Zambia and Malawi are both landlocked and have comparable distances to sea ports,” she said in a paper titled, ‘Analysis of state of competition in the transport sector: Emerging issues,’ presented at the recent joint transport sector annual review in Lilongwe.
According to official literature, about 60 percent of the cost of production in Malawi is taken up by transportation cost.
Kaukonde said such a rate is much higher than the average for other least developed countries (LCDs), adding that the mark-up on a tonne of Urea fertiliser in Malawi was found to be $674 (K323 520) compared to $476 (K228 480) in Zambia.
“The markup was calculated as the difference between retail price in Malawi and the International FOB [Free On Board], which means that the seller pays for transportation of goods to the port of shipment, plus loading costs. Price of fertiliser minus transport and handling expenses,” she said.
The study attributes the high mark-up in Malawi to limited competition and inefficiencies in the transportation and trading of fertiliser.
Kaukonde said the study established that if the price of Urea in Malawi were to be the same as in Zambia, Malawi would have been saving about $36 million (K17.2 billion) on Urea alone.
She said it was also observed that local transport rates in Malawi were much higher than cross-border rates.
“Rates for international shipments to and from are estimated at $0.06-0.09 per tonne per kilometre [km] while average rate for domestic transport is estimated at $1.63 (K782) per tonne per km,” said Kaukonde.
It is estimated that the combined share of the three largest road freight operators, namely Combine Cargo, SDV Bolloré and Manica is between 55 percent and 70 percent.